Governor awaits delivery of engrossed FY19 budget

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Gov. Eddie Calvo delivers his Weekly Address for Monday, August 13, 2018.

Adelup ready to review three budgetary bills passed by senators on Saturday

Guam – It remains unclear whether Gov. Calvo will approve a $956 million FY19 budget partially reliant on $10 million more in Section 30 money than might be available on time for expenditure, due to pending war claims payouts spearheaded by Guam Congresswoman Madeleine Bordallo (D).

By Monday evening, the Office of the Governor was still uncertain when it would receive a copy of Bill No. 323-34 (COR), the General Appropriations Act of Fiscal Year 2019. By 5:28 p.m., Adelup spokeswoman Oyaol Ngirairikl told island news media, “’You know, as of 4:30 p.m. we still hadn’t received the bills, but, in any case, when they do come in, they’ll be reviewed by all.” (Senators also approved a pair of supplemental FY18 budgetary measures over the weekend.)

Narrow passage

Saved by a close vote of 8-7, the budget act finally passed the Legislature on Saturday night. Passage followed a 9-6 defeat of an earlier version of the legislation on Friday, when it became clear that too few senators believed that up to $20 million in pass-due taxes could be relied upon as an adequate ‘Supplemental Appropriations Revenue’ funding source.

Caution advised

“Senators today want to use an increased amount in Section 30 for the budget,” the Office of the Governor stated in a news release on Saturday. “The Governor’s fiscal team reminds them that the $78 million discussed during session [Friday] night was a request sent…days ago.

“To be clear, the fiscal team did not confirm that the monies would be received as requested. Adding the $10 million to Section 30 could create a deficit. In the past, Guam didn’t have to deal with the possibility of Section 30 being offset by war claims.”

“We sent out a notice of caution on Saturday, simply because—and we discussed this on the floor Friday night—because of the war claims,” Lester Carlson said to Newstalk K57’s Patti Arroyo on Monday morning. Carlson is Director of the Bureau of Budget and Management Research.

“I think the filing period is ended, and you remember the mechanism, it was supposed to take some Section 30 money, even though the Congresswoman has adamantly stated that she’s looking for an alternate funding source,” Carlson said.

Section 30 funding is the revenue derived from federal taxes and duties paid on island and retained by the Government of Guam.

Relative to Section 30 funding, the Organic Act of Guam states in part that “the Secretary of the Treasury, prior to the commencement of any fiscal year, shall remit to the government of Guam the amount of duties, taxes and fees which the Governor of Guam, with the concurrence of the government comptroller of Guam, has estimated will be collected in or derived from Guam under this section during the next fiscal year, except for those sums covered directly upon collection into the Treasury of Guam.”

Then the US Treasury Secretary deducts or adds to the amount remitted based on what is actually collected. (See Organic Act of Guam, Paragraph 1421h.)

FY19 Budget Vote / Total Yeas: 08 / Total Nays: 07

Veto-vulnerable

With such a close vote in the Legislature over the weekend, no override can be expected if the Governor vetoes the current budget bill. A veto would, therefore, summon lawmakers back to the drawing board for yet another round of amendment-making after two weeks of emergency session. During the preceding fortnight senators hammered out two different closed drafts and responded to two rounds of voting, the first budget failing, 9-6, the second passing by the hairs of their chinny-chin-chins.

Voting yea, in favor of the budget on Saturday night, were Democrats Tom Ada, Speaker BJ Cruz, Telena Nelson, and Joe San Agustin, plus Republicans Jim Espaldon, Tommy Morrison, Louise Muna, and Mary Camacho Torres.

Voting nay, against the budget, were Democrats Frank Aguon, Jr., Regine Biscoe Lee, Dennis Rodriguez, Jr., Michael San Nicolas, and Vice Speaker Therese Terlaje; plus Republicans Wil Castro and Fernando Esteves.

Whatever the Calvo Administration’s immediate reactions to the budget act’s thin passage by lawmakers, Appropriations Chairman and Speaker BJ Cruz was singing his colleagues praises on Saturday.

“This clearly wasn’t easy. But tonight, a bipartisan group of senators acted courageously to keep government working for the People of Guam,” the Chairman wrote. “I thank them for their tireless effort and hard work. I ask Governor Calvo to recognize this as the hard-earned compromise it was, and let this bill become law.”

Had budgeteers found a way to cut more and tax less, they may have found veto-proof support from the likes of Sen. Esteves (R), who sensed what was coming as far back as Friday morning, the day the first closed version would die in chamber.

“So, really, the budget should be coming out with ten guaranteed votes, because if those ten votes don’t happen, then I think the repercussion of that is that once the budget comes back, if it’s vetoed by the governor, all the  vote is, is whether to override the veto or not to,” Esteves told PNC that morning.

“There’s gonna be no ability to make adjustments to try to change the vote. So that’s something I think we need to be mindful of before rising from Committee of the Whole.”

Nail-biter

So while a slim majority of senators may have since turned the proverbial corner on the budgeting process, they’ve yet to breathe a collective sigh of relief. And they won’t be able to, unless the Governor signs the spending plan after he and his team have had a judicious look at every one of its 185 pages.

Gov. Calvo, the Dept. of Administration, Bureau of Budget and Management Research, and key staffers have their work cut out for them in making certain that the dozens of amendments that finally made it into the senate budget also pass Adelup’s mathematical muster.

The budget’s arrival will follow two weeks of nonstop legislative tweaking that was so intricate and time-consuming that the Offices of Speaker and Appropriations Chairman BJ Cruz and Sen. Regine Biscoe Lee’s Committee on Rules forewent public updates and left the governor, his staff, and island news organizations scrambling to keep up with appropriations rewrites, despite repeated requests for summaries.

It has been said that skipping the publication of detailed legislative updates during fast-changing appropriations sessions is a common practice for the Committee on Rules. But the FY19 budget cycle is considered exceptional for the $145 million in estimated revenue losses projected as a result of the federal Tax Cuts and Jobs Act.

Thankfully, over the weekend, the Committee on Rules published a report detailing bills that had passed the legislature on Saturday night.

Three new revenue producers the administration can count on quantifying in the senate-passed version of the budget act are as follows:

  • A sustained five percent business privilege tax,
  • A real property tax increase from 7/18 percent to 7/9 percent on improved lands worth $1 million or more, and
  • A tobacco tax increase that will raise cigarette prices by a dollar a pack.

FY18 appropriations

Senators unanimously passed two dedicated funding measures on Saturday. Bill No. 329-34 (COR) sends $6.8 million from the general fund to help Guam Memorial Hospital Authority cover Fiscal Year 2018 operations and correct deficiencies identified in a Centers for Medicare  and Medicaid Services report. Bill No. 330-34 (COR), dedicates $1.5 million from Tax Amnesty Program collections to help procure architectural and engineering services for reconstruction of the Simon Sanchez High School campus, as soon as possible.