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Government, Legislature Work on Addressing Fiscal Crisis

With the V.I. government projecting a $75 million shortfall this year and more to follow, senators, union leaders and members of the government’s financial team traded money-saving ideas during Finance Committee hearings Tuesday.

Nathan Simmonds, senior policy advisor to Gov. John deJongh Jr., testified the government’s fiscal situation is dire, with revenues down and serious projected shortfalls in coming years, but that a slow economic recovery seemed under way.

Meanwhile, drastic measures need to be taken to address the shortfall, or else the lack of cash will ultimately force even more draconian actions not too far down the road, he and other members of the government’s financial team said.

Echoing the points and proposals deJongh made in his recent State of the Territory address, the government’s team offered details of where projected revenues have fallen short and offered up an itemized plan to try to bring revenues and expenditures in line. A formal legislative proposal should be coming from Government House in the next week or two, Simmonds said.

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If a vigorous and effective plan is not implemented, said Debra Gottlieb, director of the Office of Management and Budget, then "it will probably be brutal for all of us."

According to the government’s latest projections, there should be $813.9 million in net General Fund revenues available for the fiscal year (FY) 2011 budget, Simmonds said. But there are already $845.7 million in appropriations, plus $43.3 million in retroactive salary payments, for a shortfall of $75.1 million.

And this year there is no windfall of federal stimulus funding, nor any further likelihood of a new large borrowing package such as filled the gaps last year and indeed part of this year, too.

In fact, the 2011 shortfall would have been much higher but for $125.7 million in borrowed funds from last year’s bond package.

According to Simmonds, those seeking to see the details of the government’s finances, or "the books," as it were, can go to the Finance Department’s website: www.usvifinance.info. The 2008 financial statements and single audit were recently completed and are available to the general public.

Results from FY 2009 are expected to be completed by March. Also posted on www.usvipfa.com are the Public Finance Authority’s financial statements, as well as the government’s financial statements and budget proposal.

The 2010 statement and single audit should be completed by the end of the calendar year and posted online soon after, according to Simmonds.

Simmonds recapped the government’s plan, which includes:
–reductions in general fund allotments to departments, agencies and miscellaneous appropriations of $19.2 million;
–the continuation of the limited hiring freeze/attrition program, which will generate a projected saving of $5 million;
–implementing three unpaid holidays to generate savings of $3 million in FY 2011;
–laying off part-time and per-diem employees to save $2.4 million;
–a two-year freeze on salaries and defer the implementation of budgeted salary increases for savings of $31.4 million; and
–increasing the gross receipts tax rate from 4 to 5 percent (effective May 1, 2011 for two years) to generate additional revenue of $14.1 million in FY 2011.

The senators had sharp questions for the governor’s team, asking when they knew, whether more borrowing is possible and why they did not prepare for this eventuality several months ago.

Many questions dealt with what happened to previously appropriated funds for pay raises and other costs. Simmonds, Gottlieb and Finance Commissioner Angel Dawson offered copious detail of what funds had what amounts in them, but in the end, wound up returning to the inescapable point that projected revenues had declined and insufficient money was on hand to both pay for pay raises and avoid laying off large numbers of government employees.

While no senators disputed whether severe action was necessary, Sens. Neville James and Nereida "Nellie" Rivera-O’Reilly and others said the Legislature also needed to take the fiscal reins and come up with its own agenda and plan to address the crisis.

Rivera-O’Reilly offered up a laundry list of money-saving and cash-raising suggestions, from a moratorium on granting new Economic Development Authority tax credits to a four-day workweek.

"Research shows a reduction in sick time, increased employee morale and savings in energy and other overhead costs because you shut down for one day and offices are open 10 hours instead of eight hours every day," she said.

Rivera-O’Reilly also suggested new taxes in addition or instead of those being proposed by deJongh, such as a 5 percent or smaller income tax surcharge on high earners or sin taxes, like a cigarette tax or taxes on sugary food and drink.

To save money, she suggested more consolidation of government offices and asking the government to consider whether it would be more efficient to consolidate all law enforcement functions within the V.I. Police Department, including the V.I. Casino Control Commission and the V.I. Lottery Commission’s enforcement officers.

In a similar vein, Sen. Shawn-Michael Malone suggested the senators and government officials could absorb cuts in some of their fringe benefits and perks of office.

"We don’t really need government vehicles, and we don’t need to be given cell phones," Malone said, continuing that he sees cars as a luxury that should be given up before any employees are laid off.

Union leaders testifying Tuesday had varying perspectives, from denying there was any financial crisis or any cash shortage (as did United Steelworkers local 8249 President Luis Morales) to working toward the least disruptive way to achieve the cuts, a solution proposed by Fire Fighters union representative Andre Dorsey.

No bills were presented and no votes taken. Present were: Malone, Rivera-O’Reilly, Sens. Carlton "Ital" Dowe (chairman); Louis Hill, Janette Millin-Young, Sammuel Sanes and Celestino White.

Also present were Sens. Terrence "Positive" Nelson and Usie Richards.

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