A little more than a week’s worth of financial discussions came to a head Tuesday when Lt. Gov. Gregory R. Francis submitted three bills to the Senate designed to pull the government through fiscal year 2010—and a $170 million budget shortfall. (Francis is currently the acting governor while Gov. John deJongh Jr. is out of the territory.)
A couple of the proposals were aired last week during the kick-off of mid-year budget review hearings at the Senate. At the time, Office of Management and Budget Director Debra Gottlieb said this fiscal year is looking better than the last, but that helping the local economy and job market out of its slump depends heavily on the government’s "policy actions and the pace and implementation of those measures."
Much like last year, the government is proposing budget cuts, hiring freezes and using federal funding to push through capital projects that can create jobs and stimulate the economy. But to bring in some quick cash for operations and outstanding bills, senators are being asked to allow the government to borrow an extra $150 million from the bank, send out property tax bills at the 1998 levels and shuffle around some unused funds to pad the budgets of departments and agencies that Francis said Tuesday need help making it through the next few months.
Last year, senators authorized the government to borrow up to $250 million from government fund accounts and the bank, but a couple months later, shot down a proposal submitted by Gov. John deJongh Jr. for an extra $100 million, saying that they wanted to see how the revenues came in before making a decision.
The government spent the first $100 million in FY 2009, and officials have said the remainder was earmarked for FY 2010, intended to be supplemented by bond proceeds and federal economic stimulus funds.
But Gottlieb testified last week that while revenue projections have not dropped as much as last year’s, tax collections are still lower than expected while expenses have gone up, with the government expecting to spend a little more than $1 billion in FY 2010 on "fixed mandatory costs," such as personnel, utilities and rent.
Gottlieb also said that any more cuts will further eat into departments’ and agencies’ operations, which now needed to be helped along with the extra cash. Her point was supported this week by testimony from Justice, Labor, Health and court officials who told senators that their bare-bones staff and budget — which senators pared down during last year’s budget markup — is beginning to take its toll.
While most said the senators’ approval of lump-sum budget appropriations has made it easy to shift around money to fill the departments’ funding holes, many also said they might not be able to survive the year on what they were given. Only Finance said it would be able to tow the line until November, with Commissioner Angel Dawson adding that the department has been "skimpy" on most of its expenses.
The only sticking point seemed to be tax refunds, for which Dawson said the department has already saved about $21 million, but needs about $80 million to fully cover. Finance plans on shelling out the money as soon as it can, but getting that kind of cash all at once might not be realistic in the current economic climate, he said during Monday’s hearing.
Senators didn’t really say during this week’s hearings that they were in favor of borrowing more money — in fact, some said they didn’t want to continue to build the territory’s debt and offered to work with the departments to re-align some of their funding.
And while others took exception to some of the agencies’ requests for extra money — judicial branch representatives said funding gaps were left after personnel expenses (including money for pay raises) ate up much of the budget — most senators said the public had to be aware that the territory was in a "precarious financial position."
"While we are meeting payroll, that does not negate the fact that we’re still on shaky ground," Senate President Louis P. Hill said during Monday’s meeting.
Speaking after this week’s hearings, Budget and Appropriations Committee Chairman Sen. Carlton "Ital" Dowe said the mid-year review is a good way to gauge what the next step in the process will be.
"We don’t want to wait until May when the budget is sent down to see where we’re at," he said recently. "These hearings should give us an indication of what we need to do — whether we need to make some adjustments, additions or cuts along the way."
These sentiments might work out well for the government since administrators are hoping that the Senate will include the extra borrowing, property tax and reprogramming bills on its Monday and Tuesday full-session agenda.
Francis wrote Wednesday in a letter to Hill, "As surely you and your colleagues understand, the swift implementation of this legislation is of paramount importance to all in the Virgin Islands."
The letter makes clear that senators’ approval of the bills will "significantly" reduce the projected $170 million shortfall, prevent a "financial catastrophe" and help the government continue to avoid laying off its employees or cutting salaries.