Cruz Kontra Calvo Put Salape'
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September 10, 2016
The Honorable Edward J.B. Calvo
Governor of Guam
Ricardo J. Bordallo Governor’s Complex
Hagåtña, Guam 96910
Re: Response to Lapse Message on Substitute Bill No. 250-33 (COR)
Dear Governor Calvo:
Håfa adai! On September 1, 2016, I delivered a letter to you relative to the concerns you identified regarding Substitute Bill No. 250-33 (SB250), now the Annual Appropriations Act of FY 2017. I had hoped my clarifications would have prompted you to direct your fiscal team to reconsider its initial findings on SB250. Unfortunately, based on your lapse message to Speaker Judith T. Won Pat, you have disregarded the facts raised in my letter. Instead, you remain committed to a misguided temper-tantrum against the overwhelming bipartisan majority of senators who crafted the budget, which is now law.
Put simply Governor, fourteen senators built a budget that made sense because you transmitted a budget that made things up. As I have said before, the General Fund revenues you provided to the Committee on Appropriations and Adjudication (Committee) were inflated, overly aggressive, reckless, and irresponsible.
As such—and for the second consecutive fiscal year—both the Committee and the Office of Finance and Budget (OFB) worked diligently to correct General Fund Revenue Projections to a more conservative level. Because of this work, your General Fund revenues (which presumed a 10.7% increase in the General Fund as compared to FY 2016’s adopted levels) were reduced by $55 million.
Notwithstanding this reduction in General Fund revenues, there continues to be $18 million more appropriated from General Fund revenues in SB250 than in Public Law 33-66 (Annual Appropriations Act of FY 2016).
In light of the glaring contradictions and misunderstandings perpetuated by your fiscal team, I will take the time here to address every “concern” raised in your recent letter to the Speaker:
SAFETY
1. Department of Corrections (DOC): You claim that there is a $2.8 million shortfall for the DOC-Guam Memorial Hospital Authority consolidated cooperative agreement.
Fact: Section 1(n)(3), Chapter V of SB250 allocates $1.1 million toward this agreement. This is the same figure provided in DOC’s FY2017 detailed budget request. This request was certified by the Bureau of Budget and Management Research (BBMR) and provided to the Committee.
2. Guam Police Department (GPD) and Guam Fire Department (GFD): You claim that there was a $3.7 million cut from GPD which would have gone to hiring more police officers, promoting officers, and covering anticipated overtime and utilities. You also claim that there was a $1.8 million shortfall for GFD that would have gone to hiring vacant positions.
Fact: I would like to direct you to the OFB Website at ofbguam.org, which can provide you and your fiscal team with comparative appropriation levels from FYs 2015 to 2017. There you will discover that GPD and GFD have consistently received an increase in appropriation levels over the past three (3) fiscal years.
Over the past two (2) fiscal years, the Guam Legislature has appropriated to, and prioritized the recruitment and hiring of, additional public safety officers for DOC, GPD, and the GFD, providing nearly $9.5 million ($6.2 million in FY 2015 and $3.3 million in FY 2016). You have not utilized this funding source to the full benefit of our people.
In the original version of SB250, the Committee wanted to truly prioritize funding to DOC, GPD, and GFD by restricting your ability to both transfer funds out of and reserve spending authority from these agencies. Yet, at the request of certain senior Adelup officials, an amendment was made to delete the transfer authority restriction—providing you with the authority to take money from agencies you say are so shortchanged.
HEALTH
1. Guam Behavioral Health and Wellness Center (GBHWC): You claim that there was no funding for the GBHWC Drug & Alcohol Prevention and the Focus on Life Suicide Prevention Programs.
Fact: Sections 2 and 3, Part III, Chapter III of SB250 clearly allocate funding in the amount of $1.57 million and $86,000 to these programs, respectively.
2. Retirees Medical, Dental, and Life Insurance Premiums: You haphazardly claim that there is a $4 million shortfall in Retiree MDL Insurance Premiums.
Fact: Both you and Lieutenant Governor Tenorio were completely aware of the appropriation level in SB250 prior to the signing of the FY 2017 Health Insurance Contract. In that contract, Lieutenant Governor Tenorio selected a non-exclusive contract and that “choice” will now cost the taxpayers of Guam $21.6 million more than the alternative. I will admit: it takes a lot of brass to blame me for a shortfall your administration has chosen to create.
I should not have to remind you that, as of the end of FY 2015, the government of Guam is facing a $120 million General Fund deficit because of what the Public Auditor has called “overspending.”
The memo sent to you by the Health Insurance Negotiations Committee states, that with the selection of an exclusive health insurance carrier—in other words, one (1) carrier which was TakeCare Insurance—the government of Guam would have saved $20 million. Yet, despite this information, Lieutenant Governor Tenorio still decided to choose the non-exclusive option which included Calvo’s SelectCare, Netcare, and TakeCare Insurance at a $1.6 million increase over what was spent in 2016.
Governor Calvo, it is decisions like these that make so many people wonder how you can continue to complain about shortfalls when your administration has had such a large hand in creating them.
Your administration had the opportunity to save $21.6 million, money that could have met any of the alleged shortfalls you are now lamenting. How many policemen could $21 million support? How many lifesaving pharmaceuticals could it buy? Your administration had all of the information and the power to save millions, and it said “no.” Sadly, the consequences of that poor decision will not belong to you alone.
3. Residential Treatment Fund (RTF): You claim that the RTF appropriation is short by $1.6 million.
Fact: As I explained to you in my previous letter, this was the exact same amount that you requested in your Executive Budget Request for FY17.
4. Department of Public Health and Social Services (DPHSS): You claim that DPHSS was cut by $2.6 million, of which $2 million is from the Medically Indigent Program (MIP) and $600,000 is from the Medicaid local match program.
Fact: For MIP, the amount of $15.8 million appropriated in Section 2(a) and $1 million in Section 2(b), Part II, Chapter III of SB250 was more than what was requested in the DPHSS detailed budget requests as certified by BBMR. It was only after the DPHSS Budget Hearing that its Director provided a correction to the BBMR’s certified DPHSS detailed budget request, wherein $15.8 million was requested for MIP.
For Medicaid, $14.3 million was requested by you and appropriated by the Guam Legislature in Section 3, Part II, Chapter III of SB250.
In FYs 2014 and 2015, you transferred a total of over $3 million from both DPHSS and GBHWC to other agencies. If you continue to believe that there are any shortfalls in DPHSS or GBHWC, it would be prudent for you to discontinue your practice of taking funds from these agencies and actually provide them every single cent the Guam Legislature had appropriated.
EDUCATION
Guam Department of Education (GDOE): You claim that $11.5 million was cut from the GDOE that would have helped pay for personnel, utilities, and operating expenses as well as $2 million for the Universal Pre-Kindergarten Program.
Fact: The total GDOE appropriation was increased by over $3 million compared to FY16. What concerns me are how highly disingenuous your actions are regarding our three (3) education agencies this fiscal year. You continue to withhold nearly $10 million from the GDOE, $20 million from the University of Guam, and $10 million from the Guam Community College. You claim that we shortchanged education on spending authority, but you won’t release cash for the spending authority they already have.
Instead of the division, scare tactics, and temper-tantrums to which the Administration now seems accustomed, I hope that with the enactment of SB250 you can truly prioritize Education, Health, and Public Safety in a manner commensurate with the tone of your recent message.
Si Yu’os ma’åse’,
Benjamin J.F. Cruz
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Cruz slashes $55 million from Calvo's budget
by Robert Tupaz
Guam Daily Post
August 18, 2016
Before the budget battle even began, the administration yesterday sent out its initial reaction expressing concern with a $55 million cut from the governor’s 2017 fiscal year budget appropriations request.
Lawmakers convened at 9 a.m. yesterday morning to begin fiscal year 2017 budget hearings, but recessed before discussing a substitute version of the budget so that lawmakers could review the new proposal versus the one proposed by Gov. Eddie Calvo in February. Lawmakers are scheduled to reconvene today at 9 a.m.
Vice Speaker Benjamin Cruz, legislative appropriations chairman, on Tuesday said he cut, capped and balanced the budget. He introduced a substitute version yesterday in Bill 255-33. Cruz explained that the substitute budget “responsibly cuts $55 million in newly proposed spending without jeopardizing current operations, lowers the ‘cap’ on GovGuam’s debt ceiling, and commits to a balanced budget based on conservative revenue estimates and expenditures.”
Thus, instead of utilizing a projected $736.4 million that the administration pegged would be derived from the general fund, Cruz provided $681.2 million for government operations. Cruz in his Tuesday statement said, “conservatism is necessary.”
“In response, the governor’s office expressed several concerns. Among the most glaring, said the administration, is what they view as an “abdication of responsibility in the actual creation of the budget.”
In a statement from Adelup, Gov. Eddie Calvo expressed five areas of immediate concern.
“The Legislature’s duty is to appropriate funds to agencies and offices to support the functions of the government and the services provided to the people of Guam,” Calvo said. “This substitute bill is a stack of papers with a bunch of numbers, and with it the Legislature is essentially telling me and my administration to find the money for essential services without a valid revenue source.”
In a bulleted statement, the administration contended the substitute budget:
• Cuts about $60 million in General Fund revenues and increases or adds Special Fund Revenues (i.e. Section 2718 Funds), which are phantom revenues.
• A $60 million cut of departments’ budget will trigger draconian measures to include furloughs of current staff.
• Despite being advised of the current appropriation shortfall for retirees' medical, dental and life insurance, nothing has been done to fully fund such need. An additional $10 million is needed.
• The vice speaker continues to insist Section 2718 Funds (health insurance reimbursements) be used as fund source, but history shows that GovGuam rarely receives a reimbursement because it is not overpaying. $5 million was appropriated from this fund for retirees' medical, dental and life insurance.
• Inadequate appropriations and expanding the governor’s budget authority does NOT make a budget.
Cruz, alluding to an audited deficit of $120 million from the past two fiscal years, said he wouldn’t put forward a budget bill full of false expectations.
“Any budget that plans to spend more money than we can actually collect makes a promise we can’t keep, and I think we all have had enough of that,” Cruz said.
In the committee report on Bill 250-33, Cruz noted that the committee on appropriations was “at a crossroad.” The report stated that on one hand, Calvo’s fiscal team maintained a bullish outlook on the economy with projections based on “aggressive assumptions.” On the other hand, the report noted that though optimistic, “eminent economists on island … foresee moderate growth for the upcoming fiscal year.”
Cruz reasoned that any shortfall in anticipated revenue will add to an audited $120 million cumulative deficit dating back two fiscal years. Cruz said the appropriations committee thereby “invokes the accounting principle of conservatism.”
The budget proposed by Cruz sets the following for the executive branch: line agencies, $389.7 million; semi-autonomous agencies, $337.16 million; debt service, $79.3 million; and miscellaneous expenditures, $55.5 million.
The legislative branch will be appropriated $8.97 million and the judicial branch $34.3 million.
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Guam Governor Raises Concerns Over Fiscal 2017 Budget
9/1/16
Radio New Zealand International
WELLINGTON, New Zealand (Radio New Zealand International, September 1, 2016) – Displeased with the fiscal 2017 budget act lawmakers passed earlier this week, Gov. Eddie Calvo said the Legislature failed to adequately appropriate funds to necessary services, such as government of Guam retirees' health insurance premiums.
In a 14-1 decision, the legislative body on Monday passed the annual spending bill, which cut spending and lowered revenue projections by about $55 million. Calvo said such savings come at a cost to GovGuam retirees and the Guam Behavioral Health and Wellness Center.
“We all want to save money, but we also have a responsibility to fulfill,” Calvo said in a press release. “And this budget bill falls short of providing for those services. That’s just the beginning of what my team has found so far.”
Sen. Mike San Nicolas, D-Dededo, opposed the bill, saying it did not do enough to ensure the speedy payment of tax refunds.
Vice Speaker Benjamin Cruz, D-Piti, whose finance committee worked on the bill, reduced spending levels to create a balanced and conservative budget without adding to the local government’s $120 million deficit, according to lawmakers. Anticipated revenue levels were also lowered because the governor’s fiscal team had overprojected certain revenue collections, according to lawmakers.
Adelup noted the government’s current shortfall of about $13.8 million for this fiscal year’s Retiree Medical, Dental and Life Insurance plan. The administration criticized the Legislature in the press release, stating the governor’s office brought the shortfall to lawmakers’ attention months ago, “but nothing has been done.”
The current fiscal year budget appropriated a total of $24.2 million for such costs.
When the governor submitted his budget request to the Legislature earlier this year, he had set the retirees’ health care appropriation at $34.86 million, but that appropriation level was reduced in the Legislature’s final version of the fiscal 2017 budget bill to $24.86 million.
Oyaol Ngirairikl, Adelup’s communications director, said the issue is that the retiree health insurance plan is a contractual obligation that needs to get paid, regardless of whether the Legislature adequately funds it or not.
“When you have the shortfall, then the governor has to use his transfer authority to pay for this,” she said.
Another example the governor’s office noted was the appropriation to the Department of Administration for the residential treatment fund. The treatment fund pays for the residential care of individuals under the Superior Court’s jurisdiction who have physical, mental or emotional disabilities.
The treatment fund is set to receive an appropriation of $1.6 million, however, Health and Wellness directors told lawmakers that there are more clients to take care of and is expected to cost $3.2 million.
The current budget bill increased funding to several agencies, including the public safety entities like the Guam Police Department and Guam Fire Department.
When asked if the governor would be on board with lawmakers re-appropriating funding from other GovGuam agencies like GPD and GFD to pay for the retirees’ health insurance plan, Troy Torres, Adelup’s policy advisor, said the Legislature would be well within their right to do so as it comes down to priority spending.
Torres, however, continued to state that the administration’s response to such an action would questions Cruz’s decision “to arbitrarily reduce revenue projections.”
For the last two budgets, Cruz has lowered the revenue projections Calvo and his financial team have submitted to the Legislature in the annual executive budget request. Cruz has stated that Calvo’s financial team has overprojected revenue in areas such as business privilege taxes.
For the current fiscal year, Calvo’s budget request had General Fund revenue projected at $848.6 million, but Cruz lowered it to $825 million. The administration’s latest budget report for July states General Fund revenue is tracking at $827.5 million — $21.1 million short of what the Calvo administration projected.
The government first ended fiscal 2014 with a $60 million deficit, and it was announced earlier this summer that that deficit doubled at the end of fiscal 2015. DOA Director Christine Baleto told lawmakers that the deficit was the result expenditures the government is obligated to pay for as well as a $10 million shortage in revenue.
Public Auditor Doris Flores Brooks further explained that the government’s spending has been outpacing its revenue.
The governor blamed the Legislature for the $120 million deficit GovGuam is currently in, stating that lawmakers have shortchanged government agencies their necessary budgets to operate.
“In these last few months, the vice speaker has criticized the administration for having a deficit,” Calvo said in the release. “Yet, it is precisely this type of legislative financial wizardry that got us into a deficit; they are once again making false and empty promises because they didn’t appropriate from viable fund sources.”
When lawmakers passed the fiscal 2014 budget act, Calvo chastised the Legislature by calling the spending bill “the worst exercise of political gamesmanship over the pst two years.”
“It is so painfully obvious some senators had just one thought in mind: ‘Where can the Legislature appropriated all this money for the greatest number of votes?’”
However, upon signing the fiscal 2015 budget, Calvo stated “for the fourth year in a row, GovGuam has passed a budget that reflects the priorities of our community,” going on to note that they had increased funding to public schools, health care services and public safety. He also said that “for the most part” the Legislature used the administration’s revenue projections.”
Ngirairikl said that although the governor supported the fiscal 2015 bill at the time, what Calvo is stating now is that the Legislature then and now have failed to appropriate for certain services that need an adequate appropriation level.
Radio New Zealand International
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