Public Auditor:”We Get Debt And We Wipe It Out And It Starts All Over Again”

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During her budget hearing yesterday(Mon) the Public Auditor pointed out that Governor Calvo has borrowed on the bond market to wipe GovGuam’s deficit clean before.

Guam – Yesterday(Mon) Vice-Speaker B.J. Cruz said the Governor’s latest proposal to borrow money on the bond market for GMH is nothing more than an excuse to borrow money to wipe GovGuam’s $120 million dollar deficit clean. During her budget hearing yesterday(Mon) the Public Auditor pointed out that Governor Calvo has borrowed on the bond market to wipe GovGuam’s deficit clean before.

 

“Six years ago we had a $300 million dollar deficit and I didn’t bring my schedule but I always see it every time we have the deficit and we climb up we get debt and we wipe it out and it starts all over again,” said Public Auditor Doris Flores Brooks.

Back in 2011 Governor Eddie Calvo pushed for and got legislative authorization to borrow about $200 million dollars to pay out tax refunds. Then in 2012 another $100 million was borrowed for tax refunds. The idea was that this would give GovGuam a blank slate to start over. However, the deficit has crept back up.

In fact GovGuam’s cumulative deficit for the last two fiscal years is about $120 million dollars. Coincidentally the Governor is now pushing to borrow $160 million dollars on the bond market for GMH. $30 million will go towards vendors however Vice-Speaker Cruz points out that with the ten million that GMH paid to withholding taxes the amount should be $20 million for vendors. This would leave $130 million that is supposed to go towards capital improvement projects at GMH but in theory could be used to wipe out the $120 million dollar deficit for the last two fiscal years as well as whatever deficit GovGuam is tracking for this fiscal year.

Let’s just say for the sake of discussion $10 million dollars so that’s $120 plus $10 that’s $130(million). So to wipe that number clean you need a bond of $130(million) to wipe that number clean,” said the Public Auditor.

This is because GovGuam bonds are recorded as a positive meaning they offset the negatives on a balance sheet. If this all sounds familiar that’s because it is. In fact this is not the first time GovGuam has needed to borrow money for GMH. According to PNC files in 2014 just two years ago Governor Eddie Calvo called the legislature into special session to deliberate on bill 250. The Governor called it a critical piece of legislation for the island’s only civilian hospital.

The bill was introduced by Senator Dennis Rodriguez Jr. to help the hospital get a loan needed to pay off vendors. “Every time we do a bond we wipe the slate clean and we’ve just pushed the deficit to a bond. We haven’t addressed the fundamental problem of living within your means,” said the Public Auditor.

 

The Public Auditor also noted that although it does make sense to lower the interest rate in the long run you always end up paying more because you have to amortize the loan over a longer period.