July 31, 2004 – The Senate Finance Committee and administration fiscal officers met Friday for an overview of the month's budget hearings. Nothing, to speak of, has changed since the July 1 meeting to inaugurate the hearings.
The $565 million budget remains the same; projections remain basically the same, though Louis Willis, Internal Revenue Bureau director, had good news about this year's collections; the administration's opposition to the Senate's override of $9 million in government employees' pay raises remains the same; the administration's quest for a lump-sum budget and the Legislature adamant refusal to grant it remain unchanged; and some senators objection to new taxes proposed remain intact.
Another thing that remains unchanged concerning the upcoming fiscal year is the administration's assessment that its revenue projections can only be sustained by three new taxes and the repeal of the Infrastructure Maintenance Act. The Maintenance Act allows 6 percent of property taxes be set aside for street lighting, water lines and road repair. Ira Mills, Office of Management and Budget director, said it cuts into property taxes by $18 million annually.
The new revenue enhancement measures, or taxes, are: a $3 per month telephone user tax on cellular phones projected to generate $1.8 million annually; a $3 per night hotel room tax, projected to bring in $3 million annually; and a personal property tax on vehicles, motorcycles and water craft estimated to bring in $4 million annually.
To date, not one senator spoken out in support of the taxes, and in an election year, it appears unlikely that any would. Several senators, in fact, have told the Source that they are adamantly against the taxes.
Mills said if the Senate doesn't implement these initiatives, it would have to come up with new revenue sources. And that doesn't take into account Senate's July override of the governor's veto of $9 million in raises for about 1,000 government employees. See Senate Says Workers Will Get Raises ).
Mills again stressed the need for a lump-sum budget, as has almost every department head in the past month of hearings. He emphasized the added fiscal flexibility gives departments and agencies room to function within budget restraints. Donastorg, and other senators, remained unconvinced. They say that by approving lump-sum budgets, the Legislature would be ignoring the need for checks and balances in spending.
Though the administration has said it approves the raises in theory, it disapproves them without funding in place. Mills said sustainable funding is not in place.
"Further," Mills said Friday, "if this body does not intend to create two different classes of classified government employees, then it would also fund the salary increments of $164,000 for the non-union classified employees within the General Fund, and $77,000 for non-union classified employees funded by other local funds."
The meeting was well attended with several non-committee senator present to quiz the administrations officers – Bernice Turnbull, Finance Commissioner, Mills, Office of Management and Budget director, Roy Martin, Tax Assessor, and Laurtiz Mills, Economic Research Bureau director.
Mills proposed two technical amendments. One transfers $264,000 from the Health Department to the Department of Human Services for residential care services. He said both commissioners are in agreement with this change.
The other amendment increases funding of $15,000 to the rescue units on St. Thomas and on St. Croix, and $5,000 to St. John. This is offset, he said, by a $35,000 reduction from the disaster contingency item. All items are in the miscellaneous section of the budget.
The senators couldn't crowd all their questions into the ten-minute each they were allotted in a first round. The meeting continued until after 6 p.m.
Mills told the lawmakers that the administration had the $30 million in the Insurance Guaranty Fund that could be used if revenues do not meet projections. Last December, the Senate passed a bill – one of the very few that Gov. Charles W. Turnbull didn't veto in the FY2004 budget – taking the $30 million from the fund to be used as collateral.
"Depending on the cash flow," Mills said Friday, "it could be triggered, but right now we are being cautious."
One senator said the caution may not be necessary. "Based on the figures I see," said Sen. Louis Hill, " there's no way you need to use the $30 million."
Though Willis gave some encouraging fiscal news, he told Hill, that it still "depends on the market." Hill said the market this year has been excellent. He also asked Willis what sort of program he has in place to check all the construction going on in the territory, all the contractors and the workers.
"Do you have inspectors checking out these people at the sites?" Hill asked. Willis explained that he didn't have inspectors specifically for that purpose. He said, as far as priorities, grocery stores bring in the most taxes. "K-Mart and Hess Oil are our first priority," he said.
Sen. Adlah "Foncie" Donastorg asked Turnbull if she had implemented the Infra-Structure Act, which is now law. Turnbull said she had not implemented the act. She said she already had had to take money out of the $18 million to cover government paydays. Donastorg chided Turnbull, "That is not according to law."
"So is not paying the employees," Turnbull replied.
And there was a little good news. Turnbull told the lawmakers that property tax payments had increase even before the recent list of delinquent taxpayers was printed in the media. She said she projected about $80 million, "but we're not quite there yet." Willis said excise and gross receipts taxes were up 14 percent; individual income taxes 20 percent; corporate income taxes 34 percent and property taxes 103 percent.
Willis said his department has collected $513 million in income taxes so far, and expects to collect $3.4 million more in the next three months, the final quarter. However, he was not optimistic when senators asked him about the money attracted by Economic Development Commission beneficiaries.
"With what the feds said last about the program, I doubt many more are coming in right now," he said. One firm, in fact, closed its doors as the hearing was continuing Friday. (See EDC Firm Closes its Doors Citing Tax Rules Ambiguity)
Sen. Shawn-Michael Malone came up with a potentially revenue-generating proposal. He suggested government workers get in shape. "We could implement a program that would subsidize government workers' gym fees," he said. Malone said he had been talking with insurance company representative to see if a program could be covered by health insurance.
"Cardow Jewelers has such a program, and it has saved the company money in health costs, and the employee's production is up," he said. Malone said the programs could save the territory millions of dollars over a couple years.
Malone also made a pitch for consolidating government housing in government-owned buildings, a project he has been working on. He had a startling figure. "The government spends $18 million a year in rent," he said, noting there is no rent reduction program in the new budget.
Sen. Usie Richards, minority leader, had reservations. First, about the productivity of Friday's meeting, which he noted simply echoed the meeting held July 1. He is also skeptical about the wisdom of the Senate's $9 million raise override. Richards and Donastorg cast the two negative votes on the measure.
Richards said the override "frightens me, because of how it might affect the outcome of the delegate's CFO bill."
Delegate Donna M. Christiansen's bill for a Chief Financial Officer for the territory is in Congress now. "The actions of the majority of this body make a clear case for a CFO," Richards said, "and that frightens me. Nobody has done anything we can take to the delegate and tell her that we are doing something fiscally responsible."
Donastorg agreed. He said, "If history is accurate, with Congress, any time that it passes the first committee, the bill sails through all the way through Congress to become a reality. I'm hopeful we can sit with the administration in a round-table discussion and find a middle ground, a kind of five-year plan, with the blessings of the union," to work out the raises."
The senator said he believes the CFO bill might not pass until January when Congress returns from vacation. He said he hoped "We can come up with a balanced budget before then, and demonstrate we can unite in a common goal."
The budget now goes into what's normally referred to as the "mark-up" period, a term Donastorg objected to. "It sends a negative signal," he said. "Mark-up means increasing. Lets call it a budget adjustment practice."
All committee members – Sens. Roosevelt David, Donastorg, Hill, Norman Jn Baptiste, Malone, Luther Renee and Ronald Russell – attended the meeting. Non-members Sen. Lorraine Berry, Almando "Rocky" Liburd and Richards also were present.
Speaking after the meeting, Mills said, "O&B handled six fund transfers in May and another 27 in June, covering such departments as education, police, labor, property and procurement. The question is, could the Finance Committee have met and executed the transfers as efficiently as O&B did overnight?"
He added, "The senators talk about control, that's the main issue. But they already control the amount we spend. We are just asking about spending it within that control level."
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