FROM THE PUBLISHER ’ S DESK
“ We have a lot to learn from Puerto Rico ,” Gov . Eddie Calvo said following the sister territory ’ s recent referendum , which yielded an overwhelming vote in favor of statehood .
It ’ s not just from Puerto Rico ’ s self-rule exercise that Guam is expected to learn a lesson . Puerto Rico is beset by an incredible crisis . The commonwealth government is buried in $ 73-billion debt that it does not have the capacity to repay . Its infrastructure is crumbling and its health care system is ailing . Almost 70 percent of Puerto Ricans rely on either Medicare or Medicaid .
Rather than blaming the feds or pleading its colonial status to justify its failures , — which , incidentally , is Guam ’ s favorite political balderdash when things go wrong — Puerto Rico Governor Ricardo Rosselló bravely accepts responsibility for his government ’ s overspending and borrowing its way into bankruptcy . Statehood is Puerto Rico ’ s salvation .
From an economic standpoint , Governor Calvo said , Guam is in a much better position than Puerto Rico . In which case , he added , Guam voters can make decisions without duress .
But whether the governor is taking a cue from Puerto Rico ’ s cautionary tale is open to question . Now on his last term in office , Governor Calvo is making his new pitch for a $ 125-million bond borrowing and gross receipts tax raise to bankroll the Guam Memorial Hospital Authority capital improvement projects . He is proposing to raise the GRT from 4 percent to 4.75 percent , which we all know will be passed on by business owners to consumers .
In its Dec . 22 , 2016 report , Fitch Ratings highlighted GovGuam ’ s binge borrowing legacy . The agency characterized Guam ’ s long-term liabilities as “ exceptionally high ”— a red flag that contributed to Fitch Ratings ’ decision to demote the government of Guam ’ s $ 763.3-million business privilege bonds from A-minus to BB . “ Guam has limited gap closing capacity and would likely experience fiscal distress in a moderate downturn . It has had difficulty reaching budgetary balance even during this extended period of
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Lessons from Puerto Rico
Rather than blaming the feds or pleading its colonial status to justify its failures , — which , incidentally , is Guam ’ s favorite political balderdash when things go wrong — Puerto Rico Governor Ricardo Rosselló bravely accepts responsibility for his government ’ s overspending and borrowing its way into bankruptcy . Statehood is Puerto Rico ’ s salvation .
economic expansion ,” the rating agency said .
Governor Calvo may continue to swagger about Guam ’ s strong economic growth but Fitch Ratings has warned that such blessing is negated by the government ’ s inability to sustain a structurally balanced budget due to a “ very long trend of weak financial operations and high debt levels .”
Based on Guam Economic Development Authority ’ s September 2016 debt abstract , Guam ’ s total debt was pegged at $ 2.7 billion in all categories . Revenue bonds total $ 1.58 billion and a total of $ 1.119 billion in limited and general obligations bonds are subject to debt ceiling , which is equivalent to 10 percent of aggregate tax valuation of property in Guam .
Besides the limited and general bonds obligation , GovGuam has $ 148.5 million in debt not subject to debt ceiling , $ 87.1 million in principal toward the Tiyan lease agreement , and $ 171.1 million in previously approved financing that has yet to be borrowed — pushing the public debt to over $ 1.525 billion . The amount translates to approximately more than $ 9,500 debt per person on Guam .
Meanwhile , the Office of Public Accountability repeatedly reports Gov- Guam loses an average of $ 30 million a year to delinquent tax accounts . In its most recent audit , OPA noted that the Department of Revenue and Taxation lost out on $ 2.3 million in revenue simply because of its failure to act on bounced checks .
While making frequent trips to the bond market , the government overlooks the existing funding sources that it can tap to meet its needs . Given these well known uncollected tax funds , Rev and Tax needs to find the competence and diligence to plug the holes through which that public money is leaking .
The ordinary taxpayer who has no background in economics has the simplest quick-fix to government deficit : quit spending money that you don ’ t have , dammit .
In its December report , Fitch Rating had two words for Guam : Puerto Rico .
Publisher Mar-Vic Cagurangan publisher @ pacificislandtimes . com
Editor-in-Chief Bruce Lloyd editor @ pacificislandtimes . com
Associate Editor ( Pacific Note / Palau ) Ongerung Kambes Kesolei okkesolei @ gmail . com
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