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2% wage tax for LBJ funding still repaying ASG Workmen's Comp loan

Only $800,000 has been repaid on the $3 million loan from the ASG Workmen’s Compensation Account for the LBJ Medical Center as the Treasury Department is putting together data on how much the government has collected so far on the 2% wage tax, which was put in place to repay the loan, says Treasurer Dr. Falema’o ‘Phil’ M. Pili.


The wage tax, which is to be paid by every wage earner in the territory, was meant to first pay off the $3 million loan and thereafter the proceeds will go to the hospital: 50% for hospital operations and 50% to fund the off-island medical referral program.


ASG officials testified last year, when questioned by lawmakers, that they were forecasting about $3 million to $4 million to be collected from wages annually and this was based on the previous 2% wage tax which was terminated at the end of 2011.


They also testified that they had expected the loan to be paid off by Dec. 31, 2012 — based on their projection.


“I would say that they were a bit overly optimistic,” Pili told Samoa News when asked for comments about this projection.


Asked how much ASG has paid on the loan and when ASG expects to pay it off, Pili said $800,000 has been paid off to date, and Dec. 31, 2014 is when the government plans to pay off the loan for LBJ.


LBJ’s FY 2013 first quarter performance report — covering the period of Oct. 1- Dec. 31, 2012 — states that LBJ “has been advised that although ASG was receiving the [wage] tax payments, no payments had yet to be made to the Workmen’s Compensation Account.”


“This is not true,” said Pili, but concurred with the report that no money has been given to LBJ under the 2% wage tax agreement.


“We are waiting for the numbers flowing in from the Tax Office to accurately report additional wage taxes [collected] from tax returns filed,” said Pili. “We should have a fair assessment by the end of this week.”


In the LBJ performance report, the hospital’s chief executive officer Mike Gerstenberger said the management had taken the $1.25 million it was forecasting from the wage tax out of its FY 2013 budget, due to the uncertainty of this funding source — based on information from the Executive Branch.


The hospital is already faced with another round of financial constraints, not only due to no money from the wage tax, but also the loss of $1.35 million annually in federal Medicaid funding and the $2.9 million in outstanding vendor payments from previous years carried over to the current fiscal year, according to the performance report.


Gerstenberger says the hospital has implemented steps to address the shortfall this fiscal year. Among the steps are freezing 71 vacant positions; reducing overtime by 20 percent; reducing utility expenses by 20 percent; and eliminating capital improvement expenditures.


Meanwhile, the House Budget and Appropriations Committee will hold a hearing this morning on the status of the 2% wage tax and why no money has yet been paid to LBJ. The hearing followed concerns voiced Monday on the House floor by Rep. Faimealelei Anthony Allen, one of the five appointed members of the LBJ board of directors.


Witness called to testify include officials of Treasury Department, Budget Office and LBJ.


On Monday this week  Rep. Larry Sanitoa wrote to the Legislative Financial Office seeking a financial report on the wage tax and on how much has been collected up to Mar. 31, including total payments made so far to the Workmen’s Compensation account.


He is also seeking a financial report as of Mar. 31, 2013 on the Workmen’s Compensation as well as the account’s annual report due to the Fono, in accordance with local law.