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Governor against Senate 'fix' for LBJ financial woes

fili@samoanews.com

Gov. Togiola Tulafono has responded to the Senate’s proposed measures to provide immediate and long term financial solutions for LBJ Medical Center, saying his administration is not supportive of the proposals.

Togiola’s response was made in a two-page Dec. 22 letter to Senate President Gaoteote Tofau Palaie, who provided potential solutions to help the hospital, saying the Senate will act on them as soon as the Fono returns.

WORKMEN’S COMPENSATION

Gaoteote had informed the governor early last month that a $3 million appropriation bill would be introduced using excess funds in the Workmen’s Compensation Account as the funding source. He said a balance of $4 million has built up in this account, which can be tapped into to provide immediate cash infusion for the hospital.

In his reply, Togiola says that according to current law, the money that is in the Workmen’s Compensation fund “is not available for appropriation” and the specific language contemplates that funds are to be made available to carry out the fund as legislated.

“There is no specific amount that is specified in the law, nor is there any authority to expend the money contained in the fund except through orders of the commission,” Togiola explained. “Additionally, the fund exists for compensation of our employees should they be injured in the course of their employment duties.”

He also said that there have been times in the past when the fund has been at risk due to claims made upon the account for “catastrophic injuries”.

While the $4 million in the fund is a considerable amount of money, “if you consider the number of employees that are covered by this fund, that amount becomes much less impressive,” said Togiola.

The governor also disagrees with Gaoteote’s recommendation of a bill that will reduce the rate of contribution to this fund.

FY 2011 SURPLUS

Gaoteote also said the Senate would introduce a bill to appropriate the $4.9 million surplus from fiscal year 2011 — as reported by ASG Treasurer Magalei Logovi’i in the 4th quarter performance report — for the hospital.

However, Togiola says that as of Dec. 16, the actual surplus is projected to be just $1.6 million. He said this proposal fails to take into consideration the “considerable deficit” of FY 2010, which leaves the fund balance in the negative.

(Samoa News notes that under law, deficits of previous years cannot be paid with 'current'  funds — an issue that has come up repeatedly in the Fono.)

RETIREMENT FUND CONTRIBUTION

The governor also disagrees with a proposal by Gaoteote that seeks to reduce the American Samoa Government contribution rate to the ASG Employees Retirement fund (ASGERF) from 8% to at least 6.71% of total payroll — if not lower.  Gaoteote says this measure  will provide a sustained income stream for the hospital and will not require a tax increase.

In his reply, Togiola says the Retirement fund is of the strong conviction that the current contribution rate of 8% should remain at the current level and the required contribution rate would be 8.18% over the next five years.

“...with international and domestic market volatility being what they are, I am of the opinion that to lower the contribution at this time could invite potential harm to our fund,” he said.

$1 MILLION SUPPLEMENTAL

Gaoteote had also proposed to introduce a $1 million supplemental appropriation with the $1.9 million in the off-island insurance proceeds account as the funding source. He says this will be another avenue of quick cash infusion for the hospital.

However, Togiola said this money was already appropriated by the Fono as a match for the FEMA tsunami assistance to the territory following the 2009 earthquake and tsunami. He said this money remains in the custody of the Territorial Office of Fiscal Reform for matching funds.

CLOSING

In closing the governor says that his administration is “not in a position to support” Gaoteote’s proposals and reminded the Senate president that there are three revenue measures pending in the Fono from the Executive Branch that would greatly assist ASG in meeting its financial obligations.

The pending measures are the $2,000 corporate franchise tax, the increase of business licenses fees and the hike in the import tax for beer, alcohol and tobacco.

GAOTEOTE’S RESPONSE

At yesterday official opening of the 3rd regulation session of the Fono where the governor delivered this State of the Territory Address, Togiola mentioned the “financial crisis” faced by the hospital.

“In order to alleviate their situation, we will be working with their management and board in order to determine an appropriate permanent solution to their funding problems,” said Togiola.

As part of his reply to the governor’s address, Gaoteote reminded Togiola of the proposed measures the Senate plans to introduce this month to assist the hospital — such as the funding from the Workmen’s Compensation and the off-island insurance account. He said these two measures have available funds to quickly address cash flow problems at the hospital.

He also asked, that if there was a surplus from FY 2011, why didn’t the government provide the required subsidy payment to the hospital, which didn’t get more than $1 million in subsidy for FY 2011?

According to the Senate President, the Fono met with the administration to discuss solutions to help the hospital and the Fono has provided both short-term and long term solutions.



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