BY PAULY SUBA
Journal Staff
Senators sparred over the Fiscal Year 2026 budget bill on Aug. 11, with disagreements centering on a proposed rollback of the Business Privilege Tax, funding for major construction projects, and the governor’s transfer authority.
The substitute version of Bill 44-38, presented by the committee on Finance and Government Operations, proposes reducing the Business Privilege Tax from 5% to 4.5%, an adjustment projected to cost the government about $41 million in revenue.
The bill projects $1.35 billion in total funding for Fiscal Year 2026, including $942.4 million in the general fund, $210.3 million in special funds, and $198.3 million in federal grants and aid, according to the Office of Finance and Budget (OFB).
Income taxes are projected at $527 million, BPT collections at $376 million, down about $41 million from the proposed 0.5% rate rollback, and Section 30 funds at $79 million. The budget allocates $50 million in general fund subsidies, including $143 million for tax refunds and $22 million for the GMH Pharmaceutical Fund.
Public education would receive $327 million, protection of life and property $160 million, general government $133 million, public health $100 million, and debt service $83 million.
Steven Guerrero, director of OFB outlined the methods used to project FY2026 revenues, citing historical data, economic trends, tourism recovery, and military contracts.
For FY2025, revenues are projected to exceed adopted levels by $56.7 million, a 62% drop from FY2024’s $149.4 million surplus. Guerrero said the BPT rollback would reduce revenue by $41 million but expressed confidence the projections are “attainable” based on current conditions.
“Big Beautiful Compromise”
Sen. Chris Duenas called the budget “a disciplined plan… grounded in conservative revenue projections, not guesswork,” funding “the big three — health, education, and safety” with increases for GMH, schools, and law enforcement.
He said the BPT rollback is “a signal that Guam is open for business. We’re serious about growth. We’re not going to tax it out of existence.” On Simon Sanchez High School, he said, “If the governor is telling us she cannot fund it from her generous transfer authority, then… using Simon Sanchez as a red herring… is completely unacceptable.”
Sen. Therese Terlaje said the bill “gives nothing to a new hospital, zero to a new prison, zero to Simon Sanchez (Highschool)… and it gives less than the status quo to the GMH.” She criticized $10 million for the Guam Visitors Bureau without a public hearing.
Sen. Chris Barnett called the rollback “backwards Robin Hood,” benefiting large corporations while failing to fund the $16.5 million debt service for Sanchez’s reconstruction. He said the 50% transfer authority lets the governor move money from agencies “cut to the bone.”
Duenas said those claims were “blatantly false on their face,” citing finance agency confirmation that SSHS funding is included.
Sen. William Parkinson called the bill “a non-starter” that “abdicates responsibility” and “cuts our legs out from under us” before the extent of federal cuts is known.
Sen. Sabina Flores Perez called the rollback “physically irresponsible” and warned of furloughs, job cuts, and underfunding of hospitals, DOC, and Sanchez.
Tax cut benefits few, Rainy Day Fund not capped
Lester Carlson, director of BBMR opposed the rollback, saying “87%… are currently BPT exempt or only paying 3%,” so only 13% of taxpayers — mostly businesses making over $2 million — would benefit. Of the $39.6 million revenue loss, $34.7 million would go to those high-revenue companies.
Carlson said the Rainy Day Fund has not reached the statutory cap. Using FY2023, FY2024, and FY2025 averages, he calculated the cap at $95 million, with about $65 million currently deposited. “If we had one more year, yeah, we would have hit it,” he said.
Different method meets cap
Guerrero said OFB’s calculation, based on FY2022–2024 gross revenues, produced a cap of $80.8 million and that deposits of $44 million in FY2023, plus $16.5 million and $18.4 million in subsequent years, bring the total to about $79 million, “probably short about $900,000 to meet that cap.”
Edward Birn, director of DOA said his calculation from quarterly fund reports came to $96 million.
Refund provision dispute
Speaker of the 38th Guam legislature, Frank Blas Jr. questioned the drop in the gross provision for tax refunds from $175 million to $143.6 million. Guerrero said actual payouts have averaged $132–$143 million in recent years, making higher appropriations excessive.
Carlson agreed with the lower average but said OFB’s figure doesn’t account for increased payouts from the “big beautiful bill,” estimating a $12 million adjustment is needed to reach $155 million. Birn added that reducing refunds also reduces federal reimbursements for the Earned Income and Child Tax Credits.
Federal funding in flux
Stephanie Flores, Guam State Clearinghouse administrator warned that H.R. 1 “the big, beautiful bill” has already cut core grants. PBS lost $978,271, Guam EPA lost $3.55 million in operating grants and $9 million in emerging contaminant funding, and the Historic Preservation Office was zeroed out.
“If they are not funded, you will not be able to have permits processed… we’re not going to do any of the things that we normally need Guam EPA to do,” she said. Flores also cautioned that $100 million in GDOE COVID-related contracts could be denied if deemed deferred maintenance.
The legislature recessed until Aug. 12 at 10:30 a.m. to continue deliberations in the Committee of the Whole. Senators who spoke during session remain split between those calling the budget a “big, beautiful compromise” and those warning it will benefit a small share of large businesses, drain reserves, and leave Guam unprepared for unpredictable federal funding.
“Every day, we worry about whether or not funds are going to continue to be available,” Flores said, citing the loss of a $60 million Solar for All award. “If we reduce the BPT this year, are we going to be able to increase it next year when we need to?” mbj
