Speaker warns of budget shortfall

The historic war claims act introduced by Guam Delegate Madeleine Bordallo as part of last year's defense spending bill will lead to an executive budget shortfall and complicate efforts by Gov. Eddie Calvo to pay off tax refunds sooner, according to Speaker Benjamin Cruz.

The Guam World War II Loyalty Recognition Act, tucked into the fiscal year 2017 National Defense Authorization Act, sets the framework for administering reparations for the island's World War II survivors and heirs of the victims who were killed. The law identifies Section 30 funding that's in excess of 2014 levels, as a source of war reparations payments.

Section 30 money – essentially federal income tax payments from military personnel stationed in Guam, immigration fees and miscellaneous duties – is already used as a regular funding source for GovGuam obligations, such as tax refunds and other debt.

Guam has regularly received between $70 million and $80 million in Section 30 funding throughout the last few years. Gov. Calvo introduced legislation in April that proposes to set up a line of credit against Section 30 funds in order to borrow an initial $75 million for tax refunds. This would get refunds out sooner and save the government on interest on late refund payments, according to the governor's fiscal team.

But Bordallo's war reparations law will not only take funding priority for Section 30, it has already compromised the governor's fiscal 2018 budget, according to Cruz.

The speaker stated in a release only $63 million in Section 30 funding will be available to GovGuam before the excess is used for war reparations, leading to a $15 million shortfall in the executive budget proposal.

Cruz calculated the $63 million threshold based on information from the Office of Public Accountability and recent correspondence with Bordallo. In an April 28 letter to Cruz, Bordallo stated that it was Congress' intent that Section 30 funds collected by the U.S. Treasury, above levels attributable to fiscal year 2014, be used for war reparations.

Cruz said the OPA reported that out of approximately $87 million in Section 30 collected in fiscal 2014, only about $63 million was attributable to that year, while the rest was a one-time adjustment for prior years.

However, when The Guam Daily Post inquired about the funding source for war claims in December 2016, Bordallo's office pointed to a U.S. Department of the Interior Office of Insular Affairs report that cited $120 million in Section 30 funds received in fiscal 2014, leading to questions of whether war reparations could be paid at all, as the threshold would have been far above what is normally received.

Carlo Branch, the speaker's chief policy analyst, confirmed only about $63 million would be attributable to fiscal 2014.

"I will continue to work with the Department of the Treasury and OIA to get the specific levels of funding," Bordallo said. "I also continue to work to find an alternative funding source to hold Guam's treasury harmless in carrying out this law."

Meanwhile, a public hearing for the governor's tax refund borrowing bill will take place on Friday.