Each resident carries $21,000 burden
THE government of Guam is running a cumulative deficit of $368.2 million, according to Department of Administration Director Benita Manglona, who attributed the red ink to the Legislature’s over-projection of revenues in the past three years.
Because GovGuam is operating on a deficit level, Manglona said setting aside cash reserves for tax refund payments would not be possible without further running up a shortfall of $81.34 million this fiscal year.
“The deficit is not simply wiped clean at the start of the new fiscal year. The government must use current year cash receipts to pay for prior year obligation and fund current year operation,” Manglona said in her declaration submitted to federal court.
“Because of over-projection of revenues adopted by the Legislature for the past three years, there are expenditures that were left unpaid in prior years which had to be carried forward to 2012,” the DOA director said in support of the Attorney General Office’s opposition to the motion for summary judgment sought by Rea Paeste, the lead plaintiff in the class action seeking immediate payment of tax refunds.
GovGuam’s deficit went up by $114.2 million in two years, from the $254 million level inherited by the Calvo administration from its predecessor.
Former Gov. Felix Camacho ran a $524 million deficit, which he partly retired by issuing bonds that settled outstanding obligations including corporate and income tax refunds, the court-mandated payment of Cost of Living Allowance for government retirees and retirement remittances for employees of the Guam Memorial Hospital and Guam Department of Education.
Based on the current deficit of $368.2 million, each Guam citizen’s share of the burden is roughly $21,000.
In a separate declaration, Lawrence Terlaje, supervisor of the Department of Revenue and Taxation’s income tax processing branch, said GovGuam owes $36 million in tax refunds as of July, excluding the $8 million returns that have yet to be processed. He said the tax office has been writing checks for a total of $400,000 every week.
Manglona said the owed tax refund is on top of the $40 million outstanding obligations from prior years that the administration is paying with current year revenues. “General Fund deficit is the major reason why the government has been unable to comply with the requirement of the reserve fund,” she said.
By law, GovGuam is required to set aside 26 percent of each income tax payment.
Manglona said the adopted amount of income tax payments for July 2012 was $402.7 million, with a corresponding tax refund of $105 million.
“Given the deficit, if we were to set aside for tax refund, we would have to cut $81.34 million in government services,” Manglona said.
Meanwhile, the AGO said GovGuam “cannot be compelled to pay a tax refund until it is two to three years due. While GovGuam still owes refunds to taxpayers, these taxpayers do not have the right to receive payment of refunds until at least 2014.”
In an audit released last month, the Office of Public Accountability reported that GovGuam had an operational deficit of $46.9 million in 2011 due “primarily to an overestimation of budget to actual revenues.”
OPA said GovGuam ran red ink despite posting the highest recorded revenue in 14 years – a revenue collection of $522.4 million, which is an increase of at least $56.2 million from figures posted in 2010.