Guam
Starting from Scratch
Gov. Camacho Grapples With “Total Deterioration of Public Services”
A Pacific Magazine Interview by Frank Whitman
Pacific Magazine: You’ve inherited a very serious financial situation. Were there any surprises once you took over?
Gov. Felix Camacho: I knew coming in that it was a very dismal state. But, when we actually started getting into the books and saw the true picture it became very alarming. There has been just a very fundamental breakdown in the way the government has been handled. There was just a total breakdown in basic critical financial information. Millions of dollars have been spent on hardware and software and they’re total failures. We have to reconstruct and start from scratch.
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That, coupled with the natural disasters: Chataan in July, then Pongsona in December. Along with 9/11 the previous year, with the continuous Japanese recession for more than a decade, then the war in Iraq and SARS now. You ask about surprises, not necessarily surprises, but there have been a series of events prior to our stepping in that have made the situation more difficult.
PM: Are you getting a handle on the record keeping?
FC: I believe we are. Our current situation is this: Our gross island product dropped 12 percent in the last eight years. Our gross receipts tax has dropped 38 percent in the period from 1996 to 2002. Hotel occupancy taxes dropped about 40 percent. Really, the only improvement is the federal/military expenditure which is up by about 9 percent. We stepped into a real cash shortfall, a deficit of over $300 million. That’s the hole that the previous administration had left us with. So as a result it’s been just a continuous deterioration of our public services, our infrastructure and quality of life.
Let me tell you what we’re doing about it. We’ve identified 10 strategic initiatives that we believe will reverse this declining trend in Guam’s economy, stabilize it and lay the foundation for expansion and growth over the next decade. Our challenges are to invigorate tourism receipts. That’s the quickest rebound that we can see happening anywhere. Then we need to diversify employment opportunities.
We’re also maximizing federal entitlements and receipts of any grants and aid that we’ve not availed ourselves of. We now have a state clearinghouse coordinating with the Bureau of Statistics and Planning.
We will produce a balanced budget by 2006. Once we take care of the business of government—correcting the deficiencies, reducing its size by reorganization, by outsourcing, by privatizing services, by selling some of our utilities—we will begin to see a different government of Guam. We want to reorganize down to about 12 departments and agencies. We’ve got to look at the retirement fund; that’s a 300-pound gorilla on our necks that must be resolved.
There is much resistance, specifically within the government of Guam, because things have been so good for so long. Many government workers that may be affected are fearful. But we feel that by going the route of the private sector there is even greater opportunity for these individuals in the way of jobs.
PM: Are you happy with the cooperation of the Legislature?
FC: It’s been good for the most part. There have been a few surprises. A couple of Republican senators are playing more of an oppositional role rather than a support role. But, we’ve had good cooperation so far from a majority of the senators.
PM: There is resistance, particularly in the business community, to raising the Gross Receipts Tax from 4 percent to 6 percent. Are you concerned about the negative feedback and the efforts to undo some of the things that have been done?
FC: Yes, I am concerned about some of the reservations brought up by several senators. As a majority, most of them voted for the changes. The budget bill was an all-inclusive omnibus type of legislation. Some sections of it we liked, others we didn’t. But it’s typical of some to respond to lobbying efforts of groups of government employees or the private sector. They bend to the pressure and react to it.
We must be very careful in what we do, of course. If you must make changes to the revenue enhancement, you need to provide something of equal or greater value. If you want to revert the GRT back to 4 percent then what are you going to introduce in place of it?
PM: What are some of the suggestions?
FC: We’ve talked about the total elimination of the Dave Santos Act (which exempts small businesses from the GRT). We’ve talked about certain fees that could be raised and many other measures. I put together a tax commission to look at the current tax structure and take a look at a tax policy that makes sense for Guam.
PM: What is the prospect for assistance from the federal government? Particularly since you are a Republican governor with a Republican administration in Washington.
FC:There’s a struggle financially in all 50 states and Guam is no exception. What we must do is fight for our fair share, which is why we have gone the route of getting a presence in Washington with a lobbyist group with a clear agenda of what we’re going after. I believe we will be able to get assistance beyond where we were before. For example, we just got $1 million or so for the election commission. Through HRD we were able to get $10 million to help displaced workers that were affected by Pongsona. We continue to work on getting $230 million or so for our recovery efforts through FEMA. We had a discussion with the Deputy Assistant Secretary of Interior David Cohen regarding a priority list of projects that we’re looking at.
PM: Do you see anything promising?
FC: Absolutely. I’m really impressed with the interest that’s been shown by foreign investors looking into Guam. Number one, they feel that now is the right time to come in, when real estate prices are low. They can wait for things to improve, but they feel they can bring in different types of light industry, different types of services. They see Guam as playing a critical role by the mere fact that it is American and the mere fact that it is so close to Asia. Guam can certainly serve as a regional hub.
At the Port Authority, right now they’re down to one crane, we can’t afford $14 million for two new cranes, I say privatize the thing. We can either do that in whole or incrementally, but it would certainly open up a lot of development down there. We’ve got $1.2 million set aside right now, for a study on how to develop the port. I’m looking at the Guam Shipyard to see what’s going on there. There’s one dominant player.
Over the next four years we are going to explore every possible opportunity to relieve this government of services that can be assumed by the private sector.
Although things appear bleak right now, in due time there’s going to be a real turnaround in this economy and in a few years we’ll look back and say, My God, how did we ever get out of it?
PM: How much of that has to do with transparency?
FC: We are doing everything we can to communicate. I have to say it’s been a bit strained in how the media has presented some of our approaches. I think unfortunately there’s been so much mistrust built over the years with regard to government, with regard to the front office, it’s going to take a lot of work to turn it around.
