ST THOMAS, USVI -- Governor John de Jongh on Monday submitted his administration’s proposed Fiscal Year 2015 operating budget for the government of the US Virgin Islands. In a three-page transmittal letter that accompanied de Jongh’s financial blueprint for the operations of the government, he highlighted the financial challenges that continue to confront the government.
Governor John de Jongh
“I am making this submission in the absence of a clear path to fill the gaps we currently have in Fiscal Year 2014 and am hopeful this will be clearer in your next session. The challenges that we faced in Fiscal Year 2014 continue -- the Fiscal Year 2015 Executive Budget submission proposes a financial plan to address a budgetary gap of approximately $159.6 million -- but with the actions proposed we believe that the next fiscal year will start with a sturdier foundation,” de Jongh said.
“Our community continues to face the economic and financial challenges resulting from the impacts of the Great Recession and the closure of the oil refinery, once our largest single employer and taxpayer. We are continuing the process of adjusting to this ‘new normal,’ even as we are strengthening our foundation for the present and future. We are continuing to streamline services and reduce costs even as we maintain governmental operations, as we continue to make investments in our infrastructure and provide the means to generate private sector investment to grow and diversify our economy. As I reiterated last year, there are no simple solutions to the profound challenges that confront us. We must continue to grapple with the difficult decisions that will each affect our financial viability and economic stability as a community in the coming years and that are necessary as we seek to continue to provide a high quality of life and range of opportunities for all Virgin Islanders,” he continued.
In addressing specific issues, de Jongh said that one critical challenge that he sought to address in 2014 was the unfunded liability of the GERS.
“This complex problem has grown year by year, and we can no longer ‘kick-the-can’ down for the next group to address. This is truly an issue that touches our entire community: our retirees who depend on its solvency to meet their living expenses each month, an entire workforce relying on its solvency down the road for their retirement, and a local economy for which the retirement system is a critical source of income and savings for all manner of businesses and investment. I submitted proposed legislation to this body this year that reflects the recommendations from the final report submitted to me by the Task Force on Pension Reform, comprised of private, public and non-governmental members. There is no doubt the decisions required will be difficult and modifications to that legislation will be made and debated, but this is a challenge of the greatest urgency and it is time that we begin to move forward toward a long-term solution that brings solvency to the system at a price that we can meet year after year,” he explained.
A challenge in 2015, he said, will be the reduction in the Internal Revenue Matching Fund’s contribution to the General Fund if Congress does not approve the extension of the Internal Revenue Matching Fund to the cover over rate of $13.25.
“We presently anticipate approval of the extension during the remainder of this calendar year and, if approved after the Department of the Interior’s (DOI) initial advance, we would request an adjustment as soon as the extension is approved. However, we must remain cognizant that if the Congress does not approve the extender, not only will this result in lower cover-over revenue in Fiscal Year 2015, but in Fiscal Year 2016 we would have to repay DOI the additional advance received in Fiscal Year 2014,” de Jongh said.
The General Fund operating budget for Fiscal Year 2015 is $709.5 million, $51.7 million less than the current Fiscal Year 2014 appropriation level of $761.2 million, and $21.5 million less than the current Fiscal Year 2014 projected allotment level of $731.0 million.
“Our revenue projections are based on a 1.6% increase in net total taxes to $578.6 million, and an essentially flat Total Revenues (growth of 1.0%) at $594.3 million. The biggest impact is the $53.8 million reduction in the transfers to the General Fund. The revenue actions required for this budget reflect the continuing fiscal challenges that we face in our core categories and with respect to our rum partnerships. This budget includes assumed spending of $709.5 million, a level of appropriations that is $51.7 million below the current Fiscal Year 2014 appropriation level. To support this level of appropriations, this budget will require a combination of revenue and expenditure initiatives. A critical component of our revenue projections is our continued aggressive collection of past-due taxes.
“During the budget development process we have continued the policy of not filling General Fund supported positions unless deemed absolutely critical, reduced the appropriations to departments and agencies and eliminated programs and services that could no longer be sustained, streamlined processes whenever possible, and shifted costs to achieve more equity and efficiency. I still maintain the priorities to law enforcement, healthcare and education positions within these parameters,” de Jongh told the Senate on Monday.
The governor reiterated his commitment to working with the Senate as together a future of stability and opportunity is built. “I know that by working together we can achieve the goals that we share for our community and for our future.”
In closing the letter that accompanied the budget, de Jongh reminded the Senate of the challenges that confronts the government.
“Each year, we have sought to take measures to deliver the leanest possible budget that still enables us to meet our public sector responsibilities. Fiscal Year 2014 is no different, yet it continues to rely on $30 million of borrowed funds. This is not our preferred path forward, but it reflects our preference for a moderate path toward fiscal balance to taking harsher actions with respect to personnel spending that would only do further damage to our economy and delivery of public services,” he said.
The governor suggested that right after the budget overview is presented by the OMB director and other members of the administration’s financial team, a meeting be scheduled to discuss and review the revenue and expenditure options.