July 1, 2004 – Ira Mills, Office of Management and Budget director, told the Senate Finance Committee on Thursday that he is "guardedly optimistic" about the state of the territory's finances. There has been improvement in some sectors of the local economy over the last year, he said.
"The U.S. economic expansion, gains from federal tax cuts and lower interest rates resulted in increased tourism and business and financial activity," Mills said.
However, he added, gains from tourism and local consumer spending, business activity and mortgage refinancing were not strong enough to offset declines in other service sectors such as construction, trade, transportation and utilities.
Mills' assessment came in the administration's overview presented Thursday in the opening round of the Finance Committee's hearings on the administration's proposed fiscal year 2005 budget.
Gov. Charles W. Turnbull's proposed FY 2005 budget totals $565.4 million, about $25 million less than the budget he initially requested for FY 2004.
The Senate ended up rejecting the governor's proposed FY 2004 budget and passing its own last November; Turnbull vetoed that budget in its entirety in December, announcing that the FY 2003 budget would carry over instead.
He sent the Senate a proposed supplemental budget in April; the lawmakers approved a heavily amended version in May, and the governor sent it back again in June with his vetoes, including rejection of appropriations to cover negotiated pay raises other than those for teachers. (See "Turnbull Nixes Pay Hikes Again; Jones Vows Override".)
In the budget now proposed for FY 2005, a total of $40.6 million is allocated to the judicial and legislative branches of government, with the remaining $524.8 million allocated to the executive branch, the University of the Virgin Islands and miscellaneous expenditures. As has typically been the case, The Education Department would receive the largest appropriation, $181.3 million.
Mills urged the committee to approve the governor's proposed moratorium for two more years on paying union raises negotiated as much as two years ago and to repeal the Infrastructure Maintenance Act of 2003 as a means of helping to balance the budget.
He also encouraged the senators to pass the budget in a lump-sum format, saying it offers the advantage of flexibility for department heads to move their appropriate funds around as needed. "When issues come up, we have to be in a position to deal with that," he said, adding that departments have been better able to deal with crises because of lump-sum budgets.
The legislators did not see eye to eye with him, however.
"I will never be convinced that the lump-sum budget is the way to go," Sen. Usie Richards said.
Sen. Shawn-Michael Malone said he would not support the lump-sum budget, but would consider a modified version.
"I think that the budget before us is unrealistic," Sen. Lorraine Berry said, adding that she has concerns with the appropriations to the various departments.
Berry said the proposed $25 million reduction in spending calls for cuts to Education and Health Departments and the Fire Service, while the Human Services, Police and Public Works Departments would receive increases.
"There is no way we can cut health, fire and hospitals," Berry said.
Sen. Almando "Rocky" Liburd asked whether the government could pay for the negotiated union raises if the Legislature were to override the governor's recent veto of the Senate's amended version of the FY 2004 supplemental budget. Mills said it would be necessary to identify a funding source that could sustain the raises.
Mills said if the Legislature does not approve the moratorium on implementing raises or does not repeal the Infrastructure Maintenance Act, it will have to find another way to balance the budget. The infrastructure act, passed by veto override last September, calls for earmarking 6 percent of the various islands' property taxes to pay for their respective road repairs, street lighting and potable water distribution.
Committee members present at the hearing were the chair, Sen. Adlah "Foncie" Donastorg; and Sens. Roosevelt David, Norman Jn Baptiste, Malone, Luther Renee and Ronald Russell. Sen. Louis Hill was absent. Non-committee members attending were Sens. Berry, Carlton Dowe and Richards.
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