New budget underfunds tax refunds, nixes Rainy Day Fund

By Johnnie Rosario

johnnie@kanditnews.com

Sen. Joe San Agustin's budget committee has replaced the governor's budget proposal with a bill that sets aside less in tax refunds than what historically is needed, and gets rid of the annual Rainy Day Fund that in the past provided the cushion needed to pay all the refunds.

Tax refunds have not been paid this late in nearly a decade - since 2011 - adding to the concern that the underfunding of tax refunds in the budget will push back payments even further. According to substituted Bill No. 282-35, Mr. San Agustin wants to set aside only $125 million for the payment of tax refunds for the upcoming Fiscal Year 2021, which begins October 1, 2020.

Tax refunds reports by the Department of Revenue and Taxation show that the last time annual total tax refunds payments dipped below $125 million was in 2011, when GovGuam paid out $121 million in refunds. The amount increased the following year to $127 million and has since climbed. In 2018, GovGuam paid out $135 million in tax refunds, or $10 million more than what Mr. San Agustin is proposing should be paid out next year.

Gov. Lou Leon Guerrero's original budget submission also pegged the tax refunds set aside at $125 million, which has been the standard set aside for refunds over the past decade. The difference that needed to be paid always was made up via the two percent set aside reserved to the Rainy Day Fund.

According to Guam law (§22436, Chapter 22, Title 5 Guam Code Annotated), the Legislature must set aside two percent of all revenue projected from the General Fund at the start of each fiscal year, or what has been between $10 million and $15 million the past several years. The money saved from appropriation "shall be used to liquidate obligations for refunds, earned income tax credits and prior years’ vendor payables."

But Mr. San Agustin's proposal does away with this Rainy Day Fund, and instead he is proposing the appropriation of 100 percent of projected General Fund revenues.

There is no leeway for the full payment of tax refunds next year, according to his proposal.

Whether the government of Guam will even collect what the Legislature is projecting the General Fund will collect over the past year is another question both Sen. Therese Terlaje and the Republican Party of Guam are asking.

In a letter to Mr. San Agustin last week, Ms. Terlaje has asked for more information from the budget chairman, along with the formula his committee is using to project revenues.

The Guam GOP has all but said it does not trust the figures coming out of Adelup, and believes hard decisions on spending authorizations need to be made.