Aug. 20, 2003 – Coming as a surprise to no one, the director of the Office of Management and Budget told the Senate Finance Committee on Tuesday that the V.I. government's finances are becoming more dire by the day.
"We have to take drastic measures," Ira Mills said in presenting his office's proposed Fiscal Year 2004 budget at the continuing budget hearings. "We are either going to increase revenue or cut expenses, or both," he said, "but, in short, we have to approach FY 2004 in a balanced way from the beginning."
Sen. Adlah "Foncie" Donastorg, the committee chair, and his colleagues tried to pin Mills down on what Gov. Charles W. Turnbull and his financial team, of which Mills is a key figure, have in mind for the FY2004 budget. By law, the administration's proposed budget was due May 30. However, the governor announced that he would not submit it until after the Legislature acted on his fiscal recovery plan, including his proposal to borrow another $235 million on the bond market.
The Senate gave its authorization for the bond issue on July 16. An aide in Donastorg's office said the current date by which the governor has pledged to get his budget to the Senate is Aug. 30. The 2003 Fiscal Year ends on Sept. 30.
Mills told Donastorg he could not reveal what is being discussed at Government House, since those discussions have not been finalized. However, he said, "One thing is very clear: There is going to be a much leaner budget in FY 2004." This also came as no surprise to anyone.
Mills told the committee that, based on projections and $100 million that the government is about to borrow in a short-term loan that will be repaid with bond proceeds, the administration expects "to end up with a $20 million shortfall" for FY 2003.
The figure was the same that he had used a week earlier in an appearance before the committee. (See "OMB says fiscal year deficit looks like $20m, in a way".) Until then, the most recent administration projections had placed the deficit at $152 million — a number announced after District Judge Thomas K. Moore imposed a moratorium on collecting property taxes until the government brings its property assessment process into compliance with federal law.
However, Moore lifted that moratorium last week, giving the go-ahead for tax billings and collections to resume on the basis of recent legislation providing for taxpayers to get refunds or to be billed retroactively if their assessments are ultimately overturned. The government has collected some $60 million in property taxes in recent years.
The $100 million to be borrowed will reduce the 2003 deficit by that amount, as Mills pointed out; however, it also will increase the territory's debt by the same amount, plus interest.
Responding to Sen. Roosevelt David, Mills said the government is "expecting to collect more money next year." If the Internal Revenue Bureau can get owed income-tax refunds out, "we will be able to see some economic activity," he said.
Of the $235 million to be borrowed, the Legislature earmarked $100 to be used for such refunds and for paying money owed vendors.
Mills asked for an OMB operating budget for FY 2004 of $2.8 million — $1.4 from the General Fund and $1.4 million from the Indirect Cost Fund. He also said his office is expecting $1.1 million in federal funds contingent on 10 percent, or $110,000, in local matching funds.
The FY 2003 appropriation for OMB was $1.4 million from the General Fund and $1.1 million from the Indirect Cost Fund.
St. Thomas, St. John carnival groups
The Finance Committee also heard from the V.I. Carnival Committee and the St. John Festival and Cultural Organization, which produces the July 4th Celebration.
Both organizations requested bigger budgets in 2004, despite this year's meager available funds to any agency or committee. Kenneth Blake, V.I. Carnival Committee chair, asked for $550,000, and Leona Smith, head of the St. John group, asked for $500,000, according to the release. The funds come from the Tourism Advertising Fund generated by hotel room taxes.
The V.I. Carnival Committee received $325,000 in FY 2003, and the St. John group received $50,000.
Blake told the committee: "Carnival is the largest single tourist attraction and the most significant cultural activity in the V.I."
Smith said the July 4th Celebration events "give St. John's tourism industry a much-needed economic boost during the slow season."
Vocational Education Board
Wilbert Gomez, chair of the Vocational Education Board, also asked for a dramatic increase in funding — to $565,000 for FY 2004 from the $200,000 appropriated for the current fiscal year.
Gomez told the committee his board's FY 2003 budget was cut by 20 percent, "which could be cut back even further." He said the board just received its allotment for the third quarter, which ended June 30, and that its fourth-quarter allotment may be in jeopardy.
The West Indian Co.
Edward E. Thomas Sr., chief executive officer of The West Indian Co., presented an overview of WICO's financial expectations for the coming fiscal year. WICO, a quasi-independent government instrumentality, does not receive any funding from the V.I. central government and sets its own budget based on revenues.
Thomas gave the Finance Committee good news: For the coming season, he said, there will be 152 more port calls in FY 2004 than in the 2002-03 year ending Sept. 30, even though no ships are scheduled to make regular calls on St. Croix. At the start of August, WICO stated in a release that St. Thomas would see an increase of seven more than that. (See "New cruise season has numerous St. john calls".)
Committee members present were Sens. Donastorg, David, Louis Hill, Shawn-Michael Malone and Norman Jn Baptiste. Sens. Luther Renee and Ronald Russell were absent. Sen. Almando "Rocky" Liburd, a non-member, also attended the day's hearings.
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