PHOENIX - Guam's executive branch is intensifying its push to pay tax refunds with short-term debt, while local lawmakers worry about the potential impact on the heavily-indebted island territory.

The administration of Guam Gov. Eddie Baza Calvo called a special session beginning Friday to consider legislation authorizing the issuance of tax and revenue anticipation notes to pay tax refunds to Guam’s residents. The governor and his fiscal team have argued that using the TRAN plan will save the island money because it has to pay late penalties when it can’t pay the refunds on time.

Guam Gov. Eddie Baza Calvo
Guam Governor's Office

But lawmakers have expressed hesitation at adding more debt to the island’s portfolio, and some have expressed worry that Baza Calvo’s plan could endanger government operations. Guam, a Pacific island with a population of about 160,000, has the most debt of any U.S. territory after Puerto Rico and has had its revenue bonds cut to junk status in recent months. Baza Calvo has stepped up his efforts to win over both the Guam Senate and the public to his plan following doubtful comments by an influential legislative leader.

Speaker B.J. Cruz, a Democrat, said in a letter to colleagues before the start of the special session that he is concerned that the TRANs could cost government jobs because the debt — up to $75 million outstanding at any one time — would be secured by a lien on the Section 30 funds that Guam uses to pay many of its obligations and that may impair its ability to meet those debts.

But Baza Calvo’s fiscal team fired back, issuing a release Friday to counter the speaker’s worries.

“The TRAN doesn’t affect the fiscal budget whatsoever," the governor’s office said. “All the TRAN does is provide cash to pay tax refunds right away. It really doesn’t get more complicated than that, unless you want to look at how this TRAN will even SAVE GovGuam money on interest. Whatever cash that comes in for the balance of the fiscal year that would have paid those refunds will instead pay back the TRAN.”

“With or without the TRAN, a chunk of that cash from the Section 30 is going to pay for tax refunds,” the release went on. “As a matter of fact, the administration has used Section 30 money to pay large chunks of the refund liability since the Legislature rejected the Governor’s spending cuts bill in 2012. No layoff or so much as a threat of a Payless payday has occurred as a result of using this money. No layoff or any sort of financial calamity will occur by using Section 30 money this year to pay for people getting their refunds faster.”

The governor’s office also released some testimony from a public hearing in support of Baza Calvo’s plan, emphasizing the impact timely tax refunds would have for the people.

“The people who testified tonight all shared the same sentiment," acting Governor Ray Tenorio said in a statement. “They have seen things improve in the last few years. But the work isn’t done. Tonight, the message is clear, while we’ve taken our government from years of tax refunds to paying them in months — the next step is to take it from months to weeks and take our government from good to great!”

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