In a letter to Vice Speaker Cruz, Senator Michael F.Q. San Nicolas firmly opposed the change in contribution rates proposed by the Retirement Fund to pay for the Hybrid Plan as introduced by Vice Speaker Cruz’s Bill 2-33. In a letter to the Vice Speaker, Senator San Nicolas describes the change in contribution rates as a tax, stating “The contribution rate changes you propose in the Hybrid Retirement System at the urging of the GovGuam Retirement Fund Board is nothing less than a tax on GovGuam employees, to bailout bad policy choices of the Fund.”
The Hybrid Plan, according to San Nicolas, would reduce government contribution rates from 5% to 1.6%, while ballooning employee contribution rates from 5% to 10.5%. According to retirement fund estimates presented at the public hearing on Bill 2-33, these changes in contribution rates will take out $100 every two weeks from an employee making $26,000 a year, $200 every two weeks from an employee making $52,000 a year, and $300 every two weeks from an employee making $78,000 a year. “As with any tax, this reduction in take home pay for over 8,000 government workers will have a serious economic impact on businesses that rely on their rate of consumption, and financial institutions which base their lending on that cash flow.” San Nicolas warns. “Bill 2-33 would cause direct disruption on middle class taxpayers who are already overburdened by a tax system that disregards their role as the bedrock of our economic sustainability.” San Nicolas added.
In his letter, Senator San Nicolas further points out that additional “hidden middle class taxes” were voted on in the recent legislative session with the passage of Senator Dennis Rodriguez’s Bill 189-33, which raises GMH fees up to 2000%. According to testimony on the recently passed legislation from TakeCare Insurance CEO Jeffrey Larsen, these fee increases will see insurance premiums go up by $1,000 a year for individuals, and $3,000-$4,000 a year for families. Senator San Nicolas and Vice Speaker Cruz voted “No” on Bill 189-33.
“The hidden middle class taxes in the passage of GMH fee increases in Bill 189-33 and its increase in insurance premiums, coupled with the hidden middle class taxes as proposed in your Hybrid Retirement System Bill 2-33 , unfairly place the cost burdens of poor policy decisions within this government squarely on the backs of middle class taxpayers. This is unacceptable, and an alternative course that focuses savings, future revenue growth, and the restructuring of existing debt must first be exhausted before moving these types of hidden middle class taxes forward.” San Nicolas concluded.
Vice Speaker Cruz has committed to passing a version of the Hybrid Retirement System in March of 2016. Round table discussions on the Hybrid Retirement System are scheduled to take place between now and then to finalize the version that will be brought to the legislative floor./Office of Sen. San Nicolas