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Treasurer: ASG payroll deductions have led people to live beyond their means

ASG Treasurer Dr. Falema’o ‘Phil’ M. Pili told House members yesterday that the American Samoa Government is not a collection agency, neither is it a bank to be carrying out payroll deductions, which has cost some $156,000 annually in taxpayer money.


Pili along with ASG Tax Office manager Melvin Joseph, appeared late yesterday morning before the House Budget and Appropriations Committee to testify on a non-binding House resolution, which calls on the governor to direct the Treasurer to resume payroll deductions for ASG employees so that they may better manage their personal finances, and provide a system that will assist in the collection efforts of creditors and businesses.


“ASG is not a debt collection agency, financial institution or a bank,” Pili told the committee, adding that ASG does not have the resources necessary to continue to provide direct deposit services, which are growing daily.


He said the cost to ASG for providing this service, which is not a budgeted expense is over $156,000 annually, involving employees in four divisions of the Treasury Department to process payroll deductions — such as payroll, accounts payable, computer and his office — and he expected the cost to continue towards the $200,000 mark over the next few years — if it continues.


He emphasized that vendors do not pay a fee to ASG for this service and there may have been some discussion to assess fees to vendors but it was never carried out. He says that it is now impossible to impose fees with the impending closure of Bank of Hawai’i.


“Even if fees were assessed it would not change the fact that it is not appropriate for the government to perform services that should be carried out by the business sector,” he said and pointed out that there are no other state or territorial governments — including the federal government — that provides this service to a small percentage of individuals at the expense of all taxpayers.


Lawmakers pointed out that eliminating this service will impact ASG employees, who need to make payments to their creditors and pay other bills, but Pili pointed out that only 17% of the ASG workforce uses this service and this is a small number of employees. (Pili told a news conference earlier this month that ASG has a workforce of 6,000)


Rep. Florence Saulo said this action by Treasury will have a negative impact on small, locally owned businesses, especially those that have been in the territory for many years. She asserted that there is a big contribution by local businesses to the government and wanted to know if this has been taken into consideration by the Treasury Department.


However, Pili said that payroll deductions have “no bearing” on local business contributions to the territory, while agreeing that businesses are the driving force in the local economy.


In response to another faipule’s question, Pili said payroll deduction “has nothing to do” with the amount of revenues ASG collects from the private sector.


As a matter of fact, Pili said this change should have “a positive ripple affect on our economy” for the following reasons:


•            a substantial savings to the taxpayers — who had to pay for the $156,000 to process payroll deduction;


•            employees will be able to manage their own financial affairs, instead of being controlled by ASG and the vendors; and


•            an increase of disposable dollars.


He also gave the committee some very interesting information. He said many ASG employees have so many deductions, that they are receiving nearly “zero” take home pay — and many ASG employees are actually taking home very little or no money.


“The economy is stifled due to the lack of expendable dollars. This system of payroll deductions has inadvertently encouraged a practice of living beyond their means by living off of borrowed money, a huge contributor to the cycle of poverty,” he said in his prepared statement given to the committee.


In his Samoan comments during the hearing, Pili said people are getting loans left and right and they are living on borrowed money. “Our people need to control their own destiny. Living on borrowed money leads to poverty,” he told lawmakers.


He also said that what has never been considered, but is beginning to be a serious issue, is that some ASG employees have so many deductions — so many more than their check can cover — which has not only caused additional confusion and paperwork on the part of Treasury (which means additional fees and costs) but the vendor runs a large risk, with the current practice  of making a financial commitment to an ASG employee that is not a suitable candidate and is not financially able to meet those commitments.


“In good conscience I cannot support a program that contributes to the cycle of poverty so pervasive in this territory,” he said.


Responding to committee questions, Pili said the only payroll deductions not terminated by Treasury are those that go to the LBJ Medical Center, ASPA, ASTCA and the Development Bank of American Samoa. He said these are ASG entities and keeping them on helps with those entities cash flow.


But under questioning from Rep. Fetu Fetui Jr., about the unfairness of keeping DBAS on as well as other ASG entities, Pili said he is “thinking very seriously” about also cutting off these entities from payroll deduction. He noted that all payroll deductions for loans with the two private banks have already been terminated.


Fetui believes that there should be sufficient time — at least 90-days — given to employees, prior to the termination of payroll deductions.


Pili said there has been a lot in the news media about the termination of the payroll deduction and people have written to the governor asking him to reinstate this service. He said the termination decision was not made lightly by the administration.


Towards the end the hearing there was a call on Pili to revisit the payroll deduction for ASG employees residing in Manu’a because there are no banks there and that it costs around $100 plus in air-fare for the employee to travel from Fitiuta Airport to Tutuila to pay his/her bills.


In his closing remarks, Pili quoted U.S. President Thomas Jefferson: “I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.”


More from the hearing in future editions of Samoa News.