V.I. Budget Director: Storms May Have Blown $325 Million Hole in 2018 Budget

Senate President Myron Jackson (D-STT) speaks at Friday's Committee of the Whole hearing. (V.I. Legislature photo by Barry Leerdam)
Senate President Myron Jackson (D-STT) speaks at Friday’s Committee of the Whole hearing. (V.I. Legislature photo by Barry Leerdam)

Along with billions of dollars in damages to U.S. Virgin Islands hospitals, schools, homes and more, the loss of tourism due to the storm may balloon the V.I. government’s deficit, Budget Director Nellon Bowry told the Legislature Friday.

Before the storms, the territory was looking at a roughly $80.9 million shortfall in a 2018 budget of $914.8 million – about 9 percent.

Based on very preliminary and admittedly “soft” estimates, the FY 2018 budget gap could widen to as much as $325 million, Bowry said Friday. That’s a deficit of 36 percent – about a third of the total budget, which already included sharp cuts.

To bridge this gap, Bowry said the government is looking at a short menu of options, including as much as $120 million in cuts to discretionary spending and a massive Federal Emergency Management Agency Community Disaster Loan.

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He said the loan application is being prepared now.That type of federal disaster loan is capped at $5 million but “in previous natural disasters, including Hurricanes Katrina and Rita, Congress has enacted legislation to remove the cap. allowing damaged municipalities to borrow hundreds of millions of dollars,” he said.

According to Bowry, the discussions on Capitol Hill in D.C. “acknowledge the necessity of lifting the $5 million cap.”

If approved, these would be for local government operations and not capital projects or matching funds, he said.

Deputy Finance Commissioner Clarina Modeste-Elliot told senators the government had about $30 million in available cash, thanks to $12 million in rum revenues advanced by the federal government and tax collections of about $5 million since Oct. 1.

Communications, electricity and local financial management are still very limited, but the territory’s emergency backup in Maine is functioning and printing V.I. paychecks in Maine. As a result, paychecks are being printed, but delayed by the mail.

“Are we looking at payless paydays?” Sen. Dwayne DeGraff (I-STT) asked.

“That is more of a cash issue. I don’t think we are anticipating that at this point,” Bowry replied.

Sen. Janelle Sarauw (I-STT) asked about revenue collection numbers from August and September. Internal Revenue Bureau Director Marvin Pickering said the government is unable to access its electronic database due to power issues.

Sen. Novelle Francis asked if vendors were being paid. Elliot said there are delays in paying vendors because the checks are mostly being mailed from Maine, but in dire situations checks are being written locally on a case-by-case basis. She said the Finance Department hopes to resume local processing of payroll and finances by around Oct. 21.

Senate President Myron Jackson asked if the government planned to pay any of the overdue or current income tax refunds.

“I’m not sure we have a response at this point. … That determination is yet to be made,” Bowry said.

Sen. Neville James asked what would happen with the budget.

Bowry said the government would submit a ” reformulated budget” after it got “a better handle on the impact on our revenues.” Meanwhile, under V.I. law, in the absence of a budget approved by the Legislature, last year’s appropriation levels apply to the current year, according to Bowry.

Elliot said Finance Commissioner Valdamier Collens is in New York meeting with consultants “hopefully to get some money for the Virgin Islands.”

Bureau of Economic Research Director Donnie Dorsett said the storms were likely to harm the tourism economy in the medium term. Before the storms, visitor volumes for the fiscal year had dropped by 10.2 percent from 1.61 million to 1.25 million, with cruise visitors dropping 15.3 percent while air visitor arrivals grew 4.9 percent, from 403,876 in 2016 to 423702 over the same time the previous year.

The same trend is expected to continue, he said.

BER anticipates job losses in the hospitality and leisure sector and accommodations, he said.

“Hurricane Irma and Maria have caused significant damage to hotels, guest houses and other lodging places,” he said. But on the plus side, “as the territory begins to rebuild its roads, commercial and residential buildings, the construction sector is expected to have an uptick in jobs and become a major contributor to non-agriculture employments,” he said.

With rebuilding, excise tax revenues should increase. But individual income taxes, the largest revenue component, may decline, and hotel tax revenues will decline because of the loss of available rooms.

Present were: DeGraff, Francis, Jackson, James, Sarauw, Sens. Marvin Blyden (D-STT), Jean Forde (D-STT), Alicia “Chucky” Hansen (I-STX), Positive Nelson (ICM-STX) Tregenza Roach (D-STT), Sammuel Sanes (D-STX) Brian Smith (D-At Large), and Kurt Vialet (D-STX). Absent were Sens. Janette Millin Young and Nereida “Nellie” Rivera-O’Reilly.

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