By Gerardo R. Partido
Variety News Staff

SENATORS yesterday probed deeper into the details of Gov. Felix P. Camacho’s new fiscal year 2007 budget proposal, questioning among other things the methodology used by the administration in coming up with its revenue forecast.
Vice Speaker Eddie Calvo, R-Maite and chairman of the finance committee, expressed concern that the administration’s revenue tracking may be off because of the “aberrations” caused by the effects of Supertyphoon Pongsona.
In response, administration officials acknowledged that past revenue forecasts were a bit overstated.
“There’s always a degree of subjectivity when making projections. But we tried to smooth out abnormalities and our model takes this into consideration when revenues are actually received,” Department of Administration director Lourdes Perez said.
For his part, Sen. Ben Pangelinan, D-Barrigada, questioned the lack of a provision for income tax refunds in the revised budget.
“We are not seeing a structural change to address a structural deficit. Before, GovGuam just had an operational deficit but now we have a structural deficit that needs to be changed. There is no provision for income tax refunds and we just can’t let people wait,” Pangelinan said.
But Perez said that if the administration secures a line of credit, funds can again be allotted for income tax refunds because the fresh funds would “relieve the pressure” on GovGuam’s monthly operations.
Sen. Judith Guthertz, D-Mangilao, who earlier came out with recommendations to solve GovGuam’s financial crisis, pointed out that a 38 percent increase in income tax revenue being projected by the administration is much too high.
Department of Revenue and Taxation director Art Ilagan said the administration expects more income taxes at the end of the year because more people have postponed paying their income taxes until the last minute.
“Because they are not getting their refunds on time, many people are opting to postpone paying their income taxes,” Ilagan said.
Still, Guthertz described the administration’s revenue projections as too optimistic. “We really need to verify the numbers so that we can reach the same conclusions and have realistic projections,” Guthertz said.
The administration justified the adjusted revenue forecast based on five months worth of actual cash collections for fiscal year 2007. The adjusted revenue is critical as the Legislature prepares to discuss enhancements to the revenue base in order to maintain government operations through the remainder of the year without the need to furlough employees.
“We’ve presented revenue estimates more in line with a growth rate of 4 percent in revenues for this year, along with our spending adjustments. We’re working with the Legislature to enhance revenues so that we can get past this fiscal year and make the structural adjustments we need in the next budget cycle,” Ilagan said.
The governor had proposed a balanced budget that must be adopted by the Legislature before April 1. Otherwise, the process of furloughing as many as 2,222 employees will begin. The government of Guam workforce is composed of teachers, police officers, nurses and other civil servants who provide the current level of government services.
According to the administration, it has done what it can to reduce the GovGuam workforce through attrition. Although the number of government employees has gone down, the administration said it has prioritized the hiring of law enforcement officers and doctors, and raising teachers’ and health professionals’ pay.
Guam Department of Labor chief economist Gary Hiles said government employment has gone down from 13,860 employees a decade ago in 1997 to 11,740 workers in the latest report.
He warned that if a furlough occurs, cutting such a large number of jobs abruptly would create disruptive shocks to the labor market, government services, and the economy.
“We’re cutting spending in the Executive Branch and we’re proposing to cut more of our operations to get us through this fiscal year. Any further cuts will affect personnel,” Perez added.
To avoid such drastic measures, the governor has submitted what he says is “a balanced budget” that senators continue to examine and discuss.
Bill No. 74 brings the overall spending authority down from $489 million to $477 million through cuts to all agencies except the Guam Public School System. This amounts to an overall $12 million cut to the budget.
Proposals for revenue enhancements include a temporary increase in the Gross Receipts Tax by 1 percent, which will sustain critical operations in education, health care and public safety agencies. The Department of Revenue and Taxation is also implementing an aggressive tax amnesty program to collect past due gross receipts, property and income taxes.