OFB director: 'I hope I'm wrong and we collect more'

TREASURER: The entrance to the Treasurer of Guam payment windows as seen Sept. 14 at the ITC Building in Tamuning. The Office of Finance and Budget director is hopeful that the government of Guam collects more than is projected in the fiscal 2022 budget law. David Castro/The Guam Daily Post

"I keep telling people I hope I'm wrong," said Stephen Guerrero, director of the Office of Finance and Budget. He and Sen. Joe San Agustin discussed the fiscal 2022 budget with The Guam Daily Post at the senator's office.

"For the good of Guam, I really hope I'm wrong and we collect more," Guerrero said. "But if we don't, what are we going to do?"

Combined revenue projections for the General Fund and special revenue funds - the island's local revenue sources - in the fiscal year 2022 budget are about $80 million less compared to the fiscal 2021 budget act. The most significant impact falls on the business privilege tax, or BPT, which fell from more than $304 million to just below $239 million in what is now the fiscal 2022 budget law. 

The governor's finance officials also anticipated a reduction in BPT, but not as sharp a decline. They had recommended adopting a projection between $280 million and $285 million.

The BPT in fiscal 2021 is tracking to end at around that amount, based on the July General Fund report. And while the BPT is falling behind the fiscal 2021 projections, income tax categories are exceeding expectations. This fiscal year, the Pandemic Unemployment Assistance, as well as Economic Impact Payment and other federal funds, boosted tax collections. 

Department of Administration Director Edward Birn stated during budget talks in August that there wasn't a good reason to believe that indirect taxes resulting from spending that income would be too different.

PUA ending and other variables  

But Guerrero said there is too much unknown.

"Since day one, I've been asking people - economist, professors, everybody - just give me some insight on what you guys feel is going to happen ... nobody wanted to say anything. So we went ahead and took the conservative approach," Guerrero said.

At the end of fiscal 2019, as tourist arrivals peaked at around 1.6 million, BPT collections were around $308 million. In 2020, as tourism fell due to the pandemic, so did the BPT, according to Guerrero.

For the first 11 months of fiscal 2021, Guam's arrivals reached only 52,784, a 93% decline from last year. Flights to Guam remain limited as the demand for travel from Korea and Japan is still low. And even optimistic estimates from the Guam Visitors Bureau place visitor arrivals at just 130,000 for fiscal 2022.

Early September also marks the end of the federal PUA program, although payments are still being made and qualified individuals have until Oct. 4 to apply. Fiscal 2022 begins in October and according to Guerrero, that loss in PUA also has a corresponding reduction in people's buying power.

PUA claims are down as of late, and while that's expected as the program winds down, the Guam Department of Labor director also said that may be due to more people getting back to work.

Sen. San Agustin stated they believe $238 million in BPT is doable for fiscal 2022, but not $285 million as the governor's finance heads suggested.

"If we do, then I guess COVID's gone ... because the businesses are generating revenue, right? But the way it's moving now, we're not going anywhere," the senator said.  

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$553M or $604M 

Gov. Lou Leon Guerrero allowed the fiscal 2022 budget bill to lapse into law despite several concerns, including issues with appropriations for certain agencies, which she said should have been enhanced given BPT projections. 

The government of Guam received about $553 million from the American Rescue Plan in Coronavirus State and Local Fiscal Recovery Funds. This funding is under the purview of the governor and was not factored into the fiscal 2022 budget, but a spending plan was a point of concern for some lawmakers during budget talks. 

A last-minute amendment to the budget law mandates monthly reporting of ARP allocations made by the governor. There have been some authorized expenditures of the ARP funding communicated verbally by the governor and through orders, such as payments under the All RISE program and for quarantine facilities, but there is no public official written plan for all of the funding. 

The Post requested expenditures and encumbrances of ARP money from DOA and the Bureau of Budget and Management Research but was told by BBMR Director Lester Carlson that all reporting on ARP allocations will be done through fiscal 2022 mandated reports.

The same was said of a status update on county and non-entitlement funding, including whether Guam received the funding. 

The $553 million reported so far is for state and local recovery funds but the Post was told by Adelup in May that there are still county and non-entitlement elements that are estimated to add up to $604 million.

Guam was allocated $17.5 million in non-entitlement funding and $32.6 million in county funding, according to the U.S. Department of the Treasury.

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