Government of Guam tax revenue fell short by $25 million in the first four months of fiscal year 2021, even as Guam awaits more federal pandemic relief funds and the impact of a gradually reopening economy.
GovGuam anticipated collecting more than $293.7 million from October 2020 to January 2021, but ended up collecting around $268.5 million.
January’s revenue alone missed the mark by $12.8 million.
If the performance during the first four months of the fiscal year continues, GovGuam could wrap up 2021 with a $25 million shortfall, based on the latest projections.
These are based on the Bureau of Budget and Management Research’s latest consolidated revenue and expenditure report, or CRER, sent to the Legislature.
Sen. Joe San Agustin, chairman of the appropriations committee, on Monday said there’s always room for optimism but that depends mainly on how well GovGuam has been planning for the anticipated $661 million in new direct pandemic relief and how soon it can distribute and circulate that amount into the economy.
“We see what the CRER contains. The question is, what’s GovGuam planning to mitigate the impact of revenue shortfall?” the senator said, adding that it should be much more than just waiting for more pandemic relief funds to come in.
San Agustin said knowing that GovGuam stands to receive a new direct relief package, it should already have plans ready to execute once the money gets here.
He gave kudos to the Department of Revenue and Taxation, for example, which didn’t waste time and already made contact with federal agencies in anticipation of the next round of economic impact or relief checks.
“The slower the money goes out to the people or the agencies, the slower we feel the benefits of the federal money,” San Agustin said.
While the pandemic displaced more than 30,000 workers, the Guam Department of Labor was able to distribute $557 million in federal Pandemic Unemployment Assistance and related aid.
That PUA generated tax revenue for GovGuam, which saw its withholding tax collection exceeding its target by $9.46 million from October to January, while most taxes saw a decline.
GovGuam projected to collect $76.4 million but actually collected $85.9 million in withholding taxes.
However, the gains were offset by a significant drop in individual and corporate taxes collected.
San Agustin also said Guam’s return to Pandemic Condition of Readiness 3 and the easing of more business restrictions bode well for the Guam economy and therefore the GovGuam tax revenue.
Under PCOR3, retail stores, hardware stores and wholesalers can operate up to 75% occupancy, up from the 50% limit.
Bars and taverns, which have been closed since March except for a few weeks, are allowed to reopen on Wednesday.
Fiscal realignment plan
San Agustin said while the economy is slowly reopening, he acknowledges that without additional federal funds, GovGuam would have much more difficulty meeting its revenue targets.
In the event no additional pandemic aid comes in and actual collections continue to plummet to dangerous levels, Adelup will have to submit a fiscal realignment plan.
“When that happens, you also have to adjust the fiscal year 2022 budget request. If you adjust 2021, you also have to adjust 2022,” he said.
The prior CRER showed an $11.25 million tax revenue shortfall in the first quarter of fiscal 2021, or from October to December 2020.