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GEORGE CONCERNED ABOUT ECONOMY, LEADERSHIP

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Former Office of Management and Budget director Jose George told League of Women Voters members Monday he is "really concerned" about the state of the V.I. economy, in part because of a lack of political courage on the part of its leaders.
George, who was OMB director for eight years, mainly in the Farrelly administration, and is now a vice president of Chase Manhattan Bank, addressed the monthly meeting of the League on St. Thomas Monday.
He had been asked to comment on recent fiscal activity, including adoption of the Financial Accountability Act, the $300 million bond issue and the memorandum of understanding between the Interior Department and Gov. Charles W. Turnbull.
"That we are in a severe financial crunch is obvious," he said.
While the accountability bill imposes some good restrictions, he said, it also has loopholes. On the upside, George said, it requires a pre-established appropriation level based on "average revenues," a figure that must itself be determined.
But he questioned whether the 23rd Legislature was realistic in counting on the payout of past-due income tax refunds to stimulate spending and thereby boost gross receipts and other business-related taxes as part of the "average revenues."
He urged the League to monitor whether such refunds, to be paid out of the recent bond issue proceeds, significantly and immediately generate such a cash flow as projected in the FY 2000 budget. This is important, he said, because it will determine whether the recently approved budget is indeed balanced.
Also key, George said, is a mandated government employee attrition program. He hailed the provision to terminate employees whose salaries are funded under federal projects once the projects end, instead of leaving such individuals "feverishly working to save the programs by other means."
One loophole in the accountability act, he said, is that the balanced budget requirement can be changed by a two-thirds majority vote in cases of natural disasters and "other emergencies." Such "emergencies," he said, could mean anything, including pressure by organized labor.
The memorandum of understanding, George said, has no teeth. "We shouldn't have to rely on that to do what has to be done," he said.
The problem, he maintained, is that lawmakers lack the political courage to make hard decisions and implement the recommendations.
"All the decisions are going to be unpleasant," he said, and it's a matter of determining which ones will hurt the fewest people.
George agreed with League member Norma Levin that in sending the $450 million budget – $18 million in excess of the memorandum's mandate – up to the governor for signature, lawmakers were "passing the buck," in effect forcing Turnbull to decide what, if anything, must be cut. Handing unbalanced budgets to Government House is something legislatures have been doing for 20 years, he noted.
The former OMB director said the 50-50 split between government and employees in retirement fund and health insurance payments and the elimination of some government holidays are moves in the right direction. But, he added, "My fear is that political pressure will force us backward."
George said he had reviewed 175 recommendations made during the legislature's February financial summit. Now, he said, the proposals should be categorized so that they can start to be implemented.
Like many others, he sees the private sector as the key to financial recovery, since the government doesn't generate revenues. And he's worried, because "We have a lot of things working against us."
He predicted, for example, that the opening of Cuba to U.S. tourists "will affect us a lot faster than we think."
During the question period that followed his address, George said his remarks about the possibility of increased revenues were expressions of hope, not predictions.

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