Discussion of changes proposed to the recently enacted borrowing bill turned into an all-day affair Tuesday at the Earle B. Ottley Legislative Hall on St. Thomas, as senators spent hours grilling members of the governor’s financial team only to wonder at the end of the day what they were arguing about.
The $250 million bill — which allows the government to plug funding gaps anticipated for fiscal years 2009 and 2010 with money borrowed from public fund accounts and the bank — was signed into law by Gov. John deJongh Jr. a couple of months ago. At that time, the governor pointed out some language that needed to be changed in the bill and recently submitted amendments that would allow the government to use some of the money to cover prior year obligations and give the government more time to pay off the debt.
In recent Senate hearings, financial team members have most specifically discussed using a portion of the funds to cover payments owed to vendors that have already completed their work but haven’t yet received full payment. During Tuesday’s special session, which started off as a Committee of the Whole hearing and eventually switched over to full session, Office of Management and Budget Director Debra Gottlieb said the government would only begin paying off those outstanding amounts once all current expenses are covered.
The government has about $44.2 million in outstanding prior year obligations, she added Tuesday.
The current law also requires the government to pay off its borrowed debt at the end of the same fiscal year in which it was incurred — a mandate that financial team members have said is pretty much impossible, given the government’s current fiscal situation. Projected revenues for FY 2009 are now $807 million, but appropriations are at $846 million, and the anticipated budget shortfall has topped $200 million, Gottlieb said Tuesday.
Meanwhile, there’s about $111 million in outstanding FY 2009 obligations, added Finance Commissioner Angel Dawson Jr., who said later that the department has, as of Tuesday, paid out all the tax refunds that have already been processed by the Bureau of Internal Revenue.
BIR head Claudette Watson-Anderson said about $10 million to $12 million in returns — or about 3,700 units — still have to be processed.
Since the inception of the bill, financial team members have made their intentions clear — both about where the $250 million would be coming from and how it will be repaid. The details have filled in over the last few months: close to $50 million would be coming from the Insurance Guaranty Fund, which will be repaid through a $250 million line of credit obtained through the banking syndicate formed by FirstBank and Banco Popular.
Over the next three years, gross receipts taxes will be used to cover the interest payments, and after that, local rum revenues would be used to pay off what’s remaining, financial team members have said.
Patricia Goins, the government’s bond counsel, said Tuesday that a similar repayment structure was included in the proposals received from the banks. Financial team members suggested that timeframe in the law could be changed to reflect those recommendations.
Both sections of the governor’s proposed amendments generated concerns for senators. On one hand, some — such as Sen. Usie R. Richards — said the government’s prior year obligations should be taken care of in a separate bill, since there probably won’t be any money left after all current expenses are paid. On the other hand, some — such as Senate President Louis P. Hill, who co-sponsored the original borrowing bill — said they had intended that the debt be repaid quickly, instead of carrying forward for years and years.
After nearly eight hours, there emerged something of a compromise. In an amendment to the governor’s amendment, senators gave the government until Oct. 31, 2012 to pay off the debt — a deadline that can be extended until Oct. 1, 2017 if the government shows the Legislature that it needs more time and has set up an agreement with the banks to refinance or restructure the debt.
But the section dealing with prior years’ obligations was axed since senators will be addressing those appropriations during the upcoming FY 2010 budget markup process, Hill said.
A section of the governor’s amendment that cuts in half the number of days required for documents relating to the loan process to be submitted to the Legislature for review was also cut. Most senators said the 14-day notice was necessary for the Legislature to conduct its "due diligence" and "oversight responsibilities."
Meanwhile, the government had anticipated closing on the line of credit next week, but now has to wait the required 14 days before it can begin to draw down on the money.
The Senate’s amendment to the amendment passed on a 12-to-three vote, with Sens. Adlah "Foncie" Donastorg, Terrence "Positive" Nelson and Nereida Rivera-O’Reilly voting against it.
The remaining senators all took time at the end of the session to explain why they voted for the amendment, and some even stood up to question why, in the midst of a national economic slowdown, there was even a hesitation to pass it.
"The amendment’s three lines — allow me to use some of the money for prior year obligations. And from that, we put into it that the sky is falling," said Sen. Celestino A. White Sr., who pointed out that the government wasn’t asking for another $250 million authorization but simply some changes to the law.
Not passing the amendment would be to hold up the entire borrowing process, added Hill, who pointed out that revenues are down by more than $100 million and that more cuts could soon be made to departments’ and agencies’ FY 2009 budget allotments.
"I really don’t know where we’re going to cut any more, except to say to our government employees that you’re going to be fired, going to have unpaid holidays and payless pay days. Those are the only other options on the table," he said.
All senators were present during Tuesday’s session.
