Bryan Proposes Using Federal Excise Tax to Pay Back Salaries

In his third State of the Territory address in January, Gov. Albert Bryan Jr. vowed to repay the government employee salary cuts of 2011 through 2013. (File photo by Barry Leerdam, Legislature of the Virgin Islands)

Gov. Albert Bryan Jr. sent down legislation this week to earmark some of the federal excise tax dollars Congress gives to the territory each year to repay government workers who had temporary 8 percent pay cuts for two years, from July 2011 through July 2013.

That year, the government was facing ongoing annual deficits of tens of millions of dollars and had already racked up a lot of debt to fund the government after the worldwide financial collapse of 2008.

Gov. John deJongh Jr. proposed a series of austerity measures but the Legislature rejected some of those and instead passed the V.I. Economic Stabilization Act in June of 2011, which included an 8 percent wage cut to employees earning more than $26,000 per year.

The cut was projected to save $28 million per year or around $56 million for the two-year duration.

Seven unions sued the government over the pay cuts, arguing they violated their negotiated contracts and that other remedies, such as layoffs, were possible.

In March 2012 the unions lost the case in U.S. District Court. U.S. District Judge Curtis Gomez ruled the pay cuts enacted by the V.I. Legislature were legally permissible abrogations of the union contract because the actions have “a legitimate and important public purpose,” there was a lack of readily available alternatives, and the law was crafted to apply across the V.I. government and not directed toward a particular entity.

But in 2016, the U.S. Third Circuit Court of Appeals overturned the District Court, agreeing with the unions that the cut violated the U.S. Constitution’s contracts clause.

The ruling did not mandate immediate payment and the government continued to face serious deficits. The payments were not made at the time.

In his letter to Senate President Donna Frett-Gregory, Bryan said he intends to make payment as he promised in the January State of the Territory Address.

“This includes all employees in the unions that challenged the action and those that were not union members but affected by the application of the act,” Bryan wrote.

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  1. That’s certainly never done in the private sector. When a company has to do belt tightening, they make permanent across the board cuts. As business improves, people get raises again. Some, very few, restore original salaries. Restoring retroactively what was originally given up would be highly unusual, and would almost certainly only occur if a company was unusually profitable. Our government most certainly does not fall into that latter category…