Guam Legislature debates FY2026 budget substitute; panel warns tax rollback risks services and federal match

Senator Masi, chair of the Committee on Government Finance and Operations, opened floor debate on bill 44‑38 COR — the proposed fiscal year 2026 budget substitute — saying, “we are here today to decide how this government will spend the people's money for the next fiscal year.”

The Office of Finance and Budget (OFB) and fiscal partners presented revenue forecasts and recommended allocations. OFB Director Steven Joseph Guerrero told the committee the package relies on historical trends, current collections and tourism and military activity; OFB put the general‑fund amount available for appropriation at $942,376,702 and the grand total (general fund + special funds + federal matching) at $1,350,915,550. Guerrero noted recent years’ excess collections and that FY2026 projections reduce a long historic spike in refunds and other one‑time amounts.

Guam Bureau of Budget and Management Research Director Lester Carlson and administration staff urged caution about two central changes in the substitute: (1) a proposed half‑percentage rollback of the business privilege tax (from 5.0% to 4.5%), which OFB estimated would reduce revenue by about $41 million, and (2) a lower provisioning level for the gross provision for tax refunds. Carlson said the administration opposes the BPT rollback, presenting an analysis showing roughly 88% of the BPT revenue loss would benefit businesses with more than $2 million in gross receipts. He also recommended increasing OFB’s proposed tax‑refund provision modestly above OFB’s $143.7 million to reflect changes from recently enacted tax legislation.

Officials and several senators raised specific program‑level concerns about cuts or reductions in the substitute. Carlson and administration witnesses flagged: reduced local matches that would cut federal matching dollars for Public Health programs; a smaller GMH (Guam Memorial Hospital) pharmaceutical fund because of the BPT change; removal of the DOC modernization appropriation; and a reduction in retiree medical/dental/life funding compared with the executive request. Guam State Clearing House Administrator Stephanie Flores told senators that changes in federal grant availability tied to recent federal legislation (referred to in testimony as HR 1 / “big beautiful bill”) have already reduced or canceled several federal awards for agencies such as Guam EPA and Public Broadcasting and said those shifts increase the risk to programs if local funds are reduced.

Multiple senators objected to parts of the substitute on policy and equity grounds. Several speakers said the BPT rollback would primarily aid large contractors and not small local businesses, and that reducing reserves — including not funding the statutory 2% rainy‑day set‑aside in OFB’s proposal — carries risk amid federal funding uncertainty. Senators pressed for more time to review changes and for written spreadsheets and backup, and the committee paused briefly to distribute OFB materials.

The committee heard detailed line‑item numbers from OFB’s presentation: OFB listed gross provision for tax refunds at $143,690,874 for FY2026, a GMH pharmaceutical fund estimate of $22,000,000 (reduced in the substitute because a share of BPT is automatically allocated to that fund), and highlighted that the proposed half‑percent BPT reduction was modeled to lower BPT receipts by roughly $39–41 million. OFB said general‑fund categories (income, corporate, withholding) account for roughly 97% of general revenues and proposed modest adjustments to several categories compared with the executive request.

Procedurally, the chamber accepted the substitute on the floor and then resolved into the Committee of the Whole to conduct deliberations and take testimony from OFB, BBMR, DOA and other fiscal staff. OFB and administration staff answered senators’ questions about assumptions (including the three‑year averages used for the rainy‑day calculation), federal match consequences, and the timing/impact of recently enacted tax provisions.

Where legislators or witnesses identified gaps, they asked for follow‑up or written detail: senators requested spreadsheets comparing the substitute to the executive request and asked the fiscal team to document which federal grants have been reduced or canceled and the precise federal‑match implications of local reductions.

The Committee of the Whole proceeded to the detailed chapter review and set rules for two rounds of questioning of the fiscal panel followed by a third round for amendments. The committee chair instructed senators that amendments must be filed in writing and uploaded before the chapter closes and explained the bookmarking process to return to specific sections during the amendment round.

The session closed the paneled presentation portion with committee members and the fiscal team continuing to exchange data requests and clarifications; formal votes on final passage or amendment outcomes were not recorded in the provided transcript segment.

Looking ahead, senators and administration witnesses signaled further amendments and follow‑up: the administration urged restoration of several local matches and program funds to preserve federal matching dollars and program continuity; multiple senators said they would file or consider amendments to restore or protect funding for GMH, the rainy‑day fund, Simon Sanchez construction debt service, and public‑health matching dollars.

Ending note: OFB, BBMR and the administration remained in the room to respond to senators’ third‑round amendment filings and to provide written spreadsheets and lists of affected federal grants per senators’ requests.