Guam hails cashflow model as answer to recent solvency

Transcript

Guam's government is hailing the introduction of a cashflow model as one of the main reasons it has been able to clear the territory's US$300 million short-term deficit.

The director of communications for the government says about $230 million worth of people's tax refunds have been paid and the deficit retired through being turned into long-term debt.

Troy Torres says the government used its operating budget to pay the remainder of the deficit, which was also largely people's tax refunds.

He says pay and hiring freezes across the public sector are some of the measures that have been used to control government spending.

Mr Torres told Annell Husband future budgets should remain in the black for the foreseeable future.

TROY TORRES: When we came to office in the fiscal year 2011, the first thing we did was establish a cashflow model which we discovered hadn't existed in the government before we came to office. And we thought that was a common-sense thing to do. We need to know how much money is coming in and how much cash is going out. That really helped to make wise spending decisions. And then, right after that, we suspended what's known as the Hay Plan, which is a study conducted which gave about $13 million in pay raises throughout the government of Guam. After we developed a cashflow projection we saw that the government could not, at the time, sustain the pay increases at the time. Then a series of decisions that led to a massive curb of spending happened, which included a freeze on salary increments, a hiring freeze, except for critical positions, attrition went through the roof, there were several employees who retired or resigned, and most of those positions were not filled, which was a substantial savings. But I think, by far, what helped to retire the deficit was the financing of the deficit in the fiscal year 2012, when we turned the short-term accumulative deficit into long-term debt. So by the end of fiscal year 2012, the first surplus in 20 years was recorded.

ANNELL HUSBAND: And can you tell me why the government was not operating before with a cashflow model?

TT: That's a great question. We don't know.

AH: So, now, will pay increases be considered again, and will there be more people hired, or will you be sticking with what you're doing at the moment so as not to incur another short-term deficit?

TT: It's sort of a combination of both. We're not turning the spigot on full-blast with hiring. We're still being conservative with the GovGuam workforce, in that we're allowing for the hiring of teachers, nurses, doctors - critical positions or positions that are needed for the core function of an agency.