Government officials had hoped to sell and close on $250 million worth of bonds by June in hopes of getting some quick cash to plug the deficit, but senators decided Thursday to hold off on giving the go-ahead until they’ve had some more time to think about it.
Early last month, the government submitted three financing proposals meant to help cover the current $170 million budget shortfall and free up more funds for fiscal year 2011. Senators have already moved on one, allowing property tax bills to go out at the 1998 levels, but have since held back on the others, including a proposal that initially added $150 million to the $250 million borrowing authorization that senators had passed last year.
When the governor’s financial team appeared before the Senate Wednesday, the proposed borrowing authorization had jumped by another $100 million, which officials said would allow the government to capitalize on some low interest rates at the bond market. The government already has a $250 million line of credit with the banking syndicate formed by Banco Popular and FirstBank; and with the new proceeds, they would be able to pay down $100 million and use the rest to cover expenses, officials said.
The bottom line, according to the Public Finance Authority advisor David Paul, is that the government doesn’t know how the economy or its revenue picture is going to look in the next couple of years, so it’s better to do this now and put some money aside in case things get worse. Meanwhile, the government is already set to run out of money by June/July, so the Senate has to act soon, he added.
Speaking after Thursday’s full session on St. Thomas, Senate President Louis P. Hill said the government’s newest request — which would bring the total borrowing authorization up to $500 million — came down at the last minute and that senators need more time to "digest" what the governor’s financial team had explained the day before.
Senators had decided early Thursday to hold off voting on the request until the next session, which Hill said would be "scheduled in the very near future." In the meantime, senators will be taking a look at the government’s revenue figures for April, which should be higher now that taxes have been paid, Hill added.
Voting in favor of holding the proposal Thursday were Sens. Craig W. Barshinger, Carlton "Ital" Dowe, Hill, Neville James, Wayne James, Shawn-Michael Malone, Terrence "Positive" Nelson, Nereida Rivera-O’Reilly, Usie R. Richards, Sammuel Sanes, Patrick Simeon Sprauve, Michael Thurland and White.
Sen. Alvin L. Williams voted against holding the bill, while Sen. Adlah "Foncie" Donastorg abstained.
Before the session ended, Gov. John deJongh Jr. sent down a letter urging senators to "immediately reconsider" their decision, which he described as "nothing less than a vote to send our government workers home, curtail government services and close facilities." The governor said borrowing more money wasn’t his first choice, but is the only option presently available if senators don’t want to start laying off employees.
"We do not have the luxury of time," deJongh wrote, adding that his financial experts have met with the Senate time and again to discuss how the territory has been adversely affected by the global economic recession.
"During these discussions, we reviewed numerous strategies that would have a substantial impact on operating costs, including furloughs, unpaid holidays and the like, but the Senate has repeatedly rebuffed those suggestions," deJongh wrote. "And as you and your colleagues will recall, when we last met at Government House … all present argued strenuously to me that we must at all cost avoid laying off our government workers."
DeJongh’s point was underscored Wednesday, when Sen. Celestino A. White Sr. asked his colleagues to raise their hands if they supported cutting the government workforce during an election year. Silence followed his request.
"That’s what I thought — and neither do I," White said.
Over the last two days, senators seemed to be split on the bill, with many opposing borrowing more money but conceding that it may be necessary to keep the government from collapsing. Most, however, said they would be more inclined to support the bill if they thought the government had a comprehensive plan in place for cutting costs.
"I think we should all take a few days to digest the information," Hill said Thursday. "I think a lot of members felt at the time that they couldn’t make a decision, so a few days will help."
Hill added that while there might be other items on the agenda, the next session will be specifically scheduled so that senators can act on the bill.
All senators were present during Thursday’s session.
