Like a householder who keeps dipping into savings to pay the grocery bill, the V.I. government keeps borrowing from "special funds" to augment the General Fund and pay ongoing operating expenses, according to the Five Year Operating and Strategic Financial Plan.
Matching Fund revenues – the federal excise tax on rum exports which is turned over to the territory and is supposed to be used for capital projects – has actually become "the single largest infusion of cash to the General Fund" other than taxes in the last five years.
The Transportation Trust Fund, money collected through the road tax, motor vehicle licensing fees and traffic fines, has been a consistently large contributor to the General Fund, leaving it "with no available resources" for road maintenance projects.
And the Interest Revenue Fund, the interest earned on cash balances, has been gobbled up for operating expenses rather than forming a hedge against debt.
In a similar manner, the government has routinely siphoned off money from the Tourism Revolving Fund, the hotel tax collections earmarked for tourism advertising, and poured them into pseudo-tourism efforts such as Carnival and other special events.
The transfers are sometimes made with legislative approval and sometimes by executive fiat. Whatever the method, "there has been a general practice for the government to routinely transfer funds from the various special funds to the General Fund which, in some cases, may have technically violated U.S. Virgin Islands laws."
The practice is so pronounced that "the General Fund will very likely never be in a position to make restitution to the special funds." Therefore, the Economic Recovery Task Force recommended writing off all past intergovernmental loans – once the government can determine just how much it owes itself.
This will "provide the General Fund with a fresh start with a substantially reduced cumulative deficit."
