GDOE identifies spending cuts; proposes tax hike to offset shortfall

Guam Department of Education (PNC file photo)

Guam – Guam Department of Education Superintendent Jon Fernandez is proposing a .5 percent increase in the business privilege tax to partially offset the $19.6 million in spending cuts his department’s been tasked with accomplishing for the remainder of the fiscal year as a result of the Trump tax cuts.

Superintendent Jon Fernandez sent out a memo to all GDOE employees today, identifying several cost-cutting measures, including conservation of energy and water, hiring freezes, procurement contract freezes, limitation of overtime, delaying the start of their pre-k program, leasing of certain properties to other GovGuam agencies, budget cuts to charter schools and redirecting real property tax collections from the renovation of Simon Sanchez High School  and other schools to the central GDOE offices.

Fernandez is also proposing a tax hike of .5 percent in the business privilege tax also known as the gross receipts tax, pointing out that businesses will see relief as a result of the Trump tax cuts. The current GRT rate is 4 percent.

This isn’t the first time Fernandez has made such a proposal. In his last State of Public Education address, Fernandez also called for an increase in the GRT.

“I am amending that address to focus solely on the needs of GDOE,” Fernandez said in his memo, adding that his tax hike proposal would generate $150 million for school facilities “and ensure that we have safe and modern schools for our kids.”

As a result of the tax cuts, corporations stand to benefit from a 14 percent tax reduction while pass-through businesses will be able to deduct up to 20 percent of their income. Fernandez’s is proposing the BPT tax hike only remain in effect for a period of five years.

“This is great for business, and hopefully, it will lead to more jobs and better income for employees,” Fernandez said, adding, “but given this, it appears that a .5 percent increase in the business privilege tax–especially one that expires in 5 years!–is a modest proposal that would pay great dividends for our school children and their families.”

Fernandez says the Calvo Administration will be reducing the weekly cash disbursements to GDOE by $100,000 to $200,00 a week, from $3.8 million down to $3.7 million or $3.6 million starting this month.