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New Senate Passes Governor's Budget Bill Without Changes

Jan. 13, 2009 — The territory's newly sworn-in senators spent about seven hours Tuesday grilling members of the governor's financial team, but at the end of the day they banded together and unanimously passed Gov. John deJongh Jr.'s revised $844 million budget bill.
The revised fiscal year 2009 budget deJongh submitted recently is only about $100,000 less than the spending plan signed into law by the governor last October. It's only slightly different than the document submitted to the 27th Legislature the same day that senators decided to adjourn sine die in a final session held in December. The revised bill seeks to fill a number of funding holes left open in September when the final document emerged from the Senate's budget-markup process. (See "DeJongh Submits Revised 2009 Budget.")
Senators peppered the governor's representatives about issues ranging from the collection of property taxes to the status of outstanding capital-improvement projects, but ultimately passed the budget without any amendments, attachments or additional appropriations.
The budgets have increased for most departments and agencies, except the Governor's Office, Lieutenant Governor's Office and the Legislature, whose budgets remain the same. The larger budgets include more money for salary increases implemented during FY 2008 and health-insurance costs for government employees, retirees and their dependents.
Continuing to leave out the salary increases would have added to the government's retroactive-wage debt, which has been estimated around $400 million, financial team members said during Tuesday's full Senate session.
The budget factors in a three-percent increase in employer contributions to the Government Employees' Retirement System, along with funding for two outstanding court settlements; rent owed to GERS by the Justice Department and Division of Personnel; the administrative expenses of the territorial hospital board; additional tourism promotions; and debt services or financing costs associated with the territory's 911 communications system.
To fund the increases and other critical items, financial team members said Tuesday that a 10-percent cut was applied to most items in the miscellaneous section, which contains funding for a variety of items ranging from community programs to third-party fiduciary costs. Also cut were the budgets of the V.I. Superior Court (down $5 million), University of the Virgin Islands (down about $500,000), V.I. Waste Management Authority (down about $1.8 million), WTJX Public Television (down nearly $400,000), Office of Management and Budget (down $307,745), and Department of Finance (down $1.1 million).
The multi-million dollar drop in the Superior Court's budget will hamper its ability to continue setting up the newly created Magistrate Division, which is supposed to be up and running by the end of March, according to a letter submitted Tuesday by V.I. Superior Court Presiding Judge Darryl Donohue.
"In support of this reduction, the governor specifically targeted the implementation of the Magistrate Division, and has implied that the division will not be operational by March 31, 2009," Donohue wrote. "However, my staff and I have been diligently working to meet the … implementation date, as mandated by law, and the Magistrate Division is on track to become operational on or before that date."
Despite the cut, the court still has one of the biggest budget increases in the FY 2009 budget — $7 million, Gottlieb said.
In an attempt to free up more money, funding was either reduced or eliminated for various vacant positions within the government, and additional cuts in categories such as supplies, fringe benefits or public-utility services were applied to different departments and agencies, such as the Office of the Lieutenant Governor, the Internal Revenue Bureau, Board of Education, V.I. Police Department, Education and the Department of Property and Procurement.
All in all, the government is working with less money due to the harsh economic climate, and the budget senators passed last year needed to be readjusted to accommodate critical projects and costs, financial team members said.
"General Fund revenues are now projected to be $70.2 million less than previously projected in September 2008," according to OMB Director Debra Gottlieb. "Due to adjustments in Internal Revenue Matching Fund contributions, utilization of our Budget Stabilization or Rainy Day Fund, and adjustments in our projected debt service, income tax refunds and transfers out to other funds, we were able to reduce the shortfall to $36.8 million, which we have made up through budget cuts."
About $10 million was transferred out of the government's Budget Stabilization Fund and into the General Fund to help makeup the shortfall, along with an extra $1 million contribution from the Caribbean Basin Initiative Fund, $1 million from the Interest Revenue Fund, and $18 million from the Internal Revenue Matching Fund, or rum revenues.
These additional transfers — which were included in the revised budget bill and had to be approved by the Senate — have already made their way onto the government's revenue sheet and into the budget, Gottlieb said later.
The territory has begun to feel the effects of the economic recession on the mainland, and is suffering from a drop in revenues, consumer spending, hotel occupancies and unemployment rates, which are expected to increase as businesses continue to lay off employees, financial team members said.
While senators said they didn't need to hold the vote on the budget, many still hit financial team members with a number of concerns — in particular, what the government plans to do if it loses its pending property-tax appeal and can't collect property taxes for fiscal years 2006 and 2007.
The latest twist in the government's property-tax saga — which has been ongoing for the past eight years — has officials appearing before the U.S. Third Circuit Court of Appeals at the end of the month to contest a recent contempt-of-court decision handed down by District Court Judge Curtis Gomez. (See "V.I Government Re-Issuing 2006 Property Tax Bills.")
Meanwhile, property-tax collections are in limbo, even though $105 million in property-tax revenues is projected for FY 2009. Sections of a recent opinion issued by the Third Circuit indicates that the government, while not able to collect the money in this case, is still able to tax, according to Sen. Wayne James.
"I think we can use that as an indication of what the court will and will not allow," he said during the session. "Maybe the government could do something else, like collect the money another way and apply it to the property-tax category later on."
The government is going to hold off on doing anything else until it gets some "definitive language" from the court, said Nathan Simmonds, the governor's senior policy advisor.
"We're going through the appeal process so that when the Third Circuit makes its ruling, then we'll know what our options are," he said. Meanwhile, the government is developing a contingency plan in case it's not able to collect any of the money, Simmonds said. The plan may include cutting some chunks out of its overall personnel costs.
As financial team members discussed the local government's proposed economic-stimulus plan — which includes a long-term capital-improvement proposal and a $400 million bonding bill — Sen. Carlton "Ital" Dowe called for officials to move forward with some $13 million worth of long-standing projects passed by previous legislatures.
"These things have to move quicker, Ms. Gottlieb — point blank," he said, making mention of money already appropriated for w
ork at Ulla F. Muller Elementary School, Addelita Cancryn Junior High School, and Ivanna Eudora Kean and Charlotte Amalie high schools.
Oftentimes when the money gets appropriated, architectural and engineering work for the project has not been completed, which holds up construction, Gottlieb said. As the project languishes, construction costs continue to increase, and money passed by the Senate becomes insufficient, she explained.
The bill was approved a little after 6 p.m. Tuesday.
DeJongh heralded the Senate's decision to pass the budget in a statement released Tuesday evening.
"The decisive action by the members of the Legislature sends a clear signal that, as lawmakers, they understand the importance of this issue," the governor said. "Additionally, I view the action of the Senate as an important first step in our working together to face the economic challenges we now face as a territory."
All senators were present during Tuesday's session.
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