Sept. 2, 2003 – In an abrupt reversal of his behavior in the past, Gov. Charles W. Turnbull has included in his proposed Fiscal Year 2004 budget an appropriation of $8 million from the Insurance Guaranty Fund to the General Fund to help balance the budget.
Turnbull has a record of assiduously protecting the insurance fund. Twice just this year, and on many occasions in the past, he has item-vetoed Senate appropriations to tap the fund.
Ira Mills, director of the Office of Management and Budget, defended the administration's move on Tuesday morning. He called the "A.M.V.I." program on WVWI to say "I want to clarify the issue of raiding the Insurance Guaranty Fund."
In response to questions about dipping into the fund, he said: "This does not concern a raid. This is nothing illegal; it is legal."
Mills said the V.I. Code allows the administration to make use of any amount in excess of $50 million in the fund. He did not confirm that the fund now has at least $58 million. According to Finance Department figures, the fund contained $55.8 million as of last March 28. Finance Commissioner Bernice Turnbull did not return a call about the current balance on Tuesday.
Mills also made it clear that the appropriation is "not a loan." "Nowhere in that section of the budget does it mention anything about loans," he said.
Money is paid into the Insurance Guaranty Fund by insurance carriers and is to be used only in the event a carrier should be unable to pay claims after a major catastrophe, which happened in 1995 after Hurricane Marilyn.
Lt. Gov. Vargrave Richards heads the government's Insurance and Banking Divisions. Speaking before a Rotary group last week, Richards said he had spoken with the governor on three occasions expressing his opposition to using guaranty fund money. However, Mills said on Tuesday that the governor and the lieutenant governor had on several occasions discussed using the excess fund money.
Mills also defended what are viewed by many in the community and by at least two senators as unacceptable tax increases. In response to Jean Greaux's questioning on Tuesday morning, he disputed charges that the budget is being balanced on the backs of those who can least afford it.
Impact of a 10 percent surcharge
He said the governor's proposed 10 percent income tax surcharge would essentially affect those in higher wage brackets. The proposed gross receipts tax increase to 4.25 percent from the current 4 percent would affect both "those who live here and those who don't," he said.
Mills said he would be glad for anyone in the private sector or the unions with a better plan to submit it. "If this isn't the best plan, let us hear from you," he said. Noting time is crucial, he added: "We can't wait; every time we wait we are losing revenues."
And he said, on a rueful note, that "it seems there is a move afoot to discredit this administration."
Louis Willis, Internal Revenue Bureau director, also called in to the program, to talk about the governor's proposed 10 percent income tax surcharge. He backed up what Mills had said. "It addresses the higher-income individuals," he stressed.
Willis emphasized that the surcharge only affects those with a tax liability and that it is calculated on a person's net liability after all exemptions, deductions and tax credits, such as the child-tax credit, have been factored in. He said the average government employee is paid $26,000 and that most employees have at least two dependent children. Therefore, he said, most employees making that much or less should not anticipate owing anything as a surcharge.
There has been considerable public outcry, especially on radio talk shows, about the governor's proposing the tax surcharge when 2002 tax refunds have not yet been sent out. Calls to Willis for comment on when the refunds will be mailed, how many there are and how much they add up to were not returned. The bill authorizing the governor to borrow another $235 million on the bond market specifies that $100 million of the proceeds go for tax refunds and vendor payments.
Sen. Lorraine Berry, an adamant foe of the $235 bond bill, minced no words about the governor now sending the Legislature a tax bill almost identical to the one the Senate Finance Committee rejected in June.
"The problem is not the governor now, because he has shown he cannot fix the problem," Berry said. "The problem is the Legislature."
Administration officials "have maxed out on their ideas," she said. "What's happening now is repeating what they submitted to the Legislature." (See "Turnbull plan: Try anew on taxes, cut work week".) Thus, she said, the fiscal dilemma is being put back in the senators' hands.
Berry was one of five senators attending a Government House 2004 budget overview meeting that Turnbull called last Friday morning. "I went out of courtesy, in respect for the office of the governor," she said. But she wasn't swayed by Turnbull's tax proposals.
Nor was Sen. Roosevelt David, who also attended the overview meeting, convinced. In an Open Forum letter e-mailed to the Source on Tuesday, he said: "We cannot reduce the income of the people of the Virgin Islands through increased taxes or a reduced work week." He added: "Although I will not support any new taxes, I am far more adamant that not one government worker in this territory can afford to have his or her income slashed by even four hours per week."
Nonetheless, David said that "the answer to our fiscal problem is and continues to be a reduction of expenditures in all three branches of government."
Control board might recommend taxes
Berry is pushing for a financial control board. "I told him [the governor] I am for a board," she said. "If I can't get that vote, then I don't have any responsibility to support the taxes." She said she has drafted legislation creating such a board and that she is hoping for the support of her colleagues.
"I'm not convinced I'll support any new taxes, because I would await the recommendation of a board," Berry said. She said her position on Delegate Donna Christensen's proposal to ask Congress to appoint an independent chief financial officer for the territory is that such a move would be putting the cart before the horse.
"The first step is the board would develop the financial plan, and after that has been done, the CFO would move in place of the board, which would be dissolved," Berry explained. "He or she would be the person to keep track of the two elected branches of government so we don't go into deficit spending. You shouldn't have a deficit if you follow the law."
Berry said the financial control board should be composed of a neutral group of Virgin Islanders nominated by the governor and approved by the Legislature for a five-year term extending beyond that of a sitting governor. "The board would be a temporary entity," she said.
"I think it is unfair to continue to tax the people of the Virgin Islands when they are not even getting the required services," Berry said, citing the unmanned Dorothea fire station on St. Thomas's North Side and roads which "are not fixed." She added, "Here it is hurricane season, and we are going to tax more."
The Finance Committee chair, Sen. Adlah "Foncie" Donastorg, has rescheduled overview hearings for Sept. 23 and 24 with the administration's top financial officials. After the committee marks up the budget, it will to go the full Senate before the end of the fiscal year on Sept. 30.
The overview hearings had been set for last week, but Donastorg agreed to Turnbull's request to delay them until after
Aug. 31, by which time, the governor then said, the Senate would have his budget.
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