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Government Looking at Budget Shortfall of $30 Million or More

April 22, 2008 — As General Fund appropriations continue to exceed revenue projections by nearly $50 million, government departments and agencies will have to take a hard look at their operating budgets and see where they can trim the fat.
Though the government's revenue projections have not been revised in about a month, it is clear that there is going to be at least a $30 million budget shortfall, according to Office of Management and Budget Director Debra Gottlieb.
Revenue projections so far for FY 2008 total about $805 million. That figure should increase once tax collections for the month of April — including individual income and corporate tax collections — get factored in. Fiscal year 2008 appropriation levels have already topped $850 million, not counting the nearly $484,000 in new appropriations made by senators during Monday's full session, Gottlieb said.
The projected shortfall will result in a budget cut of two to five percent for government departments and agencies, Gottlieb said during a recent meeting of the governor's cabinet.
"This cut is not straight across the board," she explained Tuesday. "We've written to the departments and agencies and asked them to look at where they can accommodate a two-percent cut. We've gotten most of the information we need, and expect to have everything together by the beginning of next month."
Meanwhile, OMB is also looking at withholding some of the funds appropriated in the miscellaneous section of the FY 2008 budget, and is allotting funds to departments and agencies on a monthly instead of quarterly basis in an effort to control spending better.
Whether the government will be able to rake in some property-tax revenues before the end of September is also an issue, Gottlieb said. At recent Senate hearings, members of the government's financial team explained that this year's budget factored in about $123 million in property-tax collections, which would have come in through the issuance of two property-tax bills at new millage-rate levels proposed last year by Gov. John deJongh Jr.
DeJongh's property-tax bill failed to make it through the Senate on the first round, and was only signed into law in mid March after the bill had been revised, with the number of billing cycles cut down to one. The change eliminated more than $50 million in projected property-tax revenues, and was exacerbated by the fact that new property-tax values recently assessed by the Lieutenant Governor's Office first had to be approved by a federal court judge before bills reflecting the new rates could be issued.
A District Court hearing to deal with the property-tax matter is scheduled for May 16. (See "V.I. Property Tax Reform System OKd by Court Expert.")
"Should we be able to get those bills out sometime this summer, the question is, how much can we collect before the end of the fiscal year?" Gottlieb said Tuesday. "We usually have an 80 to 85 percent collection rate, but the problem now is that we're in a state of flux, ever since the responsibility for the actual collection of property taxes was transferred from the Department of Finance to the Lieutenant Governor's Office. So we're still trying to work that system out."
This is not the first year that the government has suffered from a cash-flow problem — in FY 2007, the government ended the year with "$48 million in appropriations that we weren't able to allot," Gottlieb said.
She stayed positive, however, saying that revised projections could yield higher revenues than anticipated. Two amendments recently passed by senators to the property-tax bill could also help boost the numbers. One set up an amnesty program for delinquent taxpayers and another requires local landowners to pay a minimum of $300 in property taxes each year.
"If the revenue comes in higher than anticipated, then we will do our best to allot as much as possible," she said. "If not, then we have to be cautious in how we continue with our appropriations over the next few months. Either way, I really believe that we can all get through this together — we have in previous years, and this year is no exception."
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