Economic Outlook Bleak in the US Colonies

Report paints bleak picture of Guam's financial condition

by Clynt Ridgell, KUAM News
Thursday, December 21, 2006


Guam faces serious economic, fiscal and financial accountability challenges, according to a report from the United States Government Accountability Office. Joining Guam in the report is the U.S. insular areas of American Samoa, the Commonwealth of the Northern Mariana Islands, and the U.S. Virgin Islands. Chairman of the Legislative Committee on Finance & Taxation, Senator Eddie Baza Calvo (R), told KUAM News, "There is a common thread linking Guam and other insular areas other territories, as well as the Commonwealth, and that is that all of the U.S. flag territories are under some financial duress."

Senator Calvo says this shared pressure is not a coincidence, and may actually be tied in with the fact that we are all not full fledged members of the American political family. "There must be something to that when you have unincorporated territories that do not have full representation," he continued, "and when it comes to the economic treaties that the United States signs with other countries and some of the laws dealing with economic activity that we're not in or a part of the bargaining table." Calvo says one example of this is with restrictive laws like the Jones Act and cabotage laws that make it difficult for Guam to create other industries. In fact, the report points to problems that all insular areas face with having a narrow economic base.

Several factors have been attributed to constraining the economic potential of all four insular areas namely a lack of diversification, scarce natural resources, small domestic markets, limited infrastructure, and shortages of skilled labor. The report also discussed Guam's weakened fiscal condition stating that in CNMI and Guam the fund balance of total governmental funds declined, as government spending rose faster than revenues. Admitting that this is a disappointing revelation, Senator Calvo said, "Obviously we have been spending more than we have been taking in, and this is all that important even now."

The report also takes a look at the poverty level of the insular areas. Although Guam has the lowest percentage of individuals in poverty out of the insular areas at 23%. 23% is still almost double the rate of the Continental U.S. Senator Judi Won Pat (D) says that most of the findings of the report are not new to her, telling KUAM News, "The way I see things is it's something we've known and maybe now I think we need to be very serious if we want to make the changes if we're serious also in the sense that we are saying that we want the military to come to Guam, then we need to do something."

And finally, one of the most important findings of the report is that the governments of all four insular areas, Guam included, have had longstanding financial accountability problems. These issues include the late issuance of single audit reports, the inability to achieve clean audit opinions on their financial statements, and numerous weaknesses in internal controls over financial operations and compliance with federal grant awards.

Read the GAO report by clicking here