To raise or not to raise taxes? That is the $9 million question this weekend, just before the incoming Leon Guerrero-Tenorio Administration is sworn into office and is immediately faced with managing an underfunded GovGuam spending plan on Monday.
The obvious quick fix was to amend the so-called flawed FY19 budget law to trigger the property tax increase that was otherwise set to take effect this fiscal year, but for a so-called “error” deemed too egregious to be left to mere interpretation. Senators tried but failed when Gov. Calvo vetoed their amendment a week ago Friday.
In this exclusive analysis, PNC probes the question of whether Lou and Josh can force the Department of Revenue and Taxation to interpret the new property tax law according to its plain and intended meaning and pave over an $8 or $9 million dollar gap in education funding.
But the budget’s author indicates that the fix has already come and gone, and that this fiscal year’s budget remains too ‘broke’ to plug.
Guam – “There’s really nothing that can be done at this point,” Public Auditor BJ Cruz told PNC on Thursday. “This year…there will be an $8 million hole in this budget. There’s no way they’ll be able to save it.”
According to Cruz, for the moment, retiring Attorney General Elizabeth Barrett Anderson’s opinion stands. The new property tax law must state unequivocally that all improvements—or buildings—on real estate properties worth a million dollars “or more” are to be taxed double what they are now, because without the words “or more,” improved properties worth a million and a penny would not be subject to the incremental tax hike.
As crazy as that interpretation may sound to some, elected leaders have appeared to follow Barrett Anderson’s lead—hook, line and sinker!
And Cruz asserts that elected leaders have come up short in the race against time to beat property tax assessments to the punch.
“The bills for the property taxes should be going out within the next couple of days,” Cruz said. “They all go out in January in order to be paid, the first payment being made [in] February…”
But leaving no stone unturned in the spirit of the hunt to secure the millions in education funding tied to the attempted property tax increase, we pressed Cruz further.
After all, this is the same guy who wrote the FY19 budget law and cautioned timely passage and execution of tax assessments while he was still serving as speaker and appropriations chairman of the legislature, at a time when he and others publicly opined that AG Barrett Anderson’s opinion was absurd and that the law should stand, as originally written.
“It shouldn’t have happened,” Cruz said Thursday. “At that point, she should have reconsidered her opinion when Mr. Stake, Mr. Klitizkie, and myself said her opinion was absurd!”
Charles D. Stake is a former federal attorney; Robert Klitzkie has served as a pro tem judge and senator; and Cruz is a former Guam Supreme Court Justice. All of their opinions are what informed observers might call qualified.
So why didn’t lawmakers, Gov. Calvo, and their attorneys just accept the property tax-hike law on its face, ignore Barrett Anderson’s opinion, and collect the new tax, anyway? If there were truly a problem with interpretation of the obvious intent of the law, incoming elected Attorney General Leevin Camacho could have just challenged the tax hike in court for FY20, and $8-to-9 million in revenues could have been saved in an already exceedingly tight Fiscal Year 2019.
Pacific News Center pressed Cruz for answers.
“Technically, that law could just be honored by the incoming administration, could it not?” PNC asked.
“No, because it’s now been vetoed,” Cruz said.
“But it’s an amendment that’s been vetoed, not that aspect of the budget law. So if the incoming administration wants to recognize it — against the attorney general’s recommendation — possible?” PNC asked.
“That would really be strange, because…everybody’s spoken and it’s been vetoed and the body’s decided not to override it,” Cruz insisted.
Pressing further still, PNC asked Cruz whether outgoing Attorney General Elizabeth Barrett Anderson’s opinion has the force and effect of law, such that Gov. Calvo and the 34th Legislature were bound by the retiring AG’s views.
“Not that it has the effect of law, but it’s the interpretation of the law, so…” Cruz shrugged.
Underscoring the pronounced need for “fiscal discipline” that Governor-Elect Lou Leon Guerrero has been emphasizing since the campaign trail, news from Washington, DC has just spelled out how deep the island’s financial hole really is.
By late Friday afternoon, the Department of Interior was releasing figures showing that the Government of Guam’s deficit has sunken from $248 million in 2011 to $889.5 million by the end of 2017.
This means that GovGuam’s deficit is nearly as high as its FY19 budget, in a trend showing no immediate signs of retreat.