While senators bowed their heads in prayer at the beginning of Tuesday’s full session, one of the many citizens that had assembled at the Capitol Building to hear the debate stood outside and blew his conch shell, symbolically fanning the spirit of revolution that would later cloud the hearing.
Many of the residents had come over from St. John, ready to testify against a proposal allowing the government to sell projected fiscal year 2007 property tax receipts in hopes of raising some quick cash to keep the wheels of the public sector turning until the economy picks up.
Since Gov. John deJongh Jr. and members of his financial team explained a couple weeks ago that they were scrapping that plan and opting instead to set the future collections aside for upcoming expenses, a handful of residents instead spent hours explaining why they mistrusted the government and urged senators to push for cutbacks instead of voting for the governor’s newest borrowing bill.
Calling for the salaries of the territory’s top officials to be trimmed by at least 10 percent, many said the government needed to clean house before "threatening" to fire employees and scale back services.
Many in the audience gasped as government officials — such as UVI President David Hall and Schneider Regional Medical Center’s new chief executive officer Alice Taylor, both seasoned professionals with decades of experience — revealed what they were making, giving some senators more ammunition with which to hammer the executive branch.
The bottom line, many said, is that the government has claimed to be in a financial crisis decade after decade, and still manages to come up with money they need at the last minute to keep cutting checks.
"From the minute I moved here, the government’s been saying they’re going broke — for the past 20 years," said Pam Gaffin, a bookkeeper on St. John. "And you know what, they haven’t yet."
Gaffin said there are government workers who come to St. John but ignore the public’s needs, while at least a dozen police cars — paid for through a previous bond financing — sit unused at the island’s police station. There are ways to cut, she pointed out.
The question of whether to believe officials’ repeated assertions that the government will run out of money by mid-summer framed the rest of Tuesday’s session, which extended well into the wee hours of Wednesday morning. While most of the residents said the government was either lying or failing to practice good money management, senators appeared to be split on the bill — even when financial team members stepped up for the second time in a month to lay out an economic analysis that Finance Commissioner Angel Dawson entitled "the anatomy of a financial collapse."
While Dawson said he would not allow the government’s coffers to completely flat-line, he walked senators step by step through the facts and figures, saying that in FY 2010 alone, the government’s total budgetary needs are more than $1 billion, while revenue projections haven’t even hit $760 million.
The $1 billion figure includes about $95 million in projected tax refunds, which many senators said the community is waiting for, but Dawson said the government could not cover if the new borrowing bill is not passed.
Last year, senators authorized the government to borrow up to $250 million to plug multi-million dollar funding gaps projected for both fiscal years 2010 and 2011. This initial proposal allowed officials to float bonds, tap into government public fund accounts, or turn to a bank or other financial institutions for money.
At the time, the government opted to borrow $50 million from internal funds, which is to be repaid by a portion of a $250 million line of credit subsequently opened with the banking syndicate formed by Banco Popular and FirstBank.
Since September the government has paid down about $175 million on the line of credit, but is looking to pay down $100 million by floating $250 million worth of bonds by next month. That would free up some more money for next fiscal year, which may be a few short months away, but is still fuzzy in terms of the final economic picture, officials have said.
To make all this possible, the new borrowing bill essentially doubles the government’s current authorization to an overall $500 million, which many senators have argued would raise the territory’s already staggering debt to even more astronomical levels.
The arguments were no different Tuesday, as many questioned whether the government was responsibly managing its money and how officials could call for more borrowing without putting an "effective" cost-cutting plan in place.
"My word to you is ‘freeze,’ just stop everything," Sen. Terrence "Positive" Nelson told the financial team Tuesday. "All unnecessary spending — just stop it. Make a proper assessment. I don’t think any of us want to face the cuts we have to make, but the truth of the matter is, there’s been fat building in the government for decades. We need to do a proper audit of the workforce, an inventory of our cash resources, all that stuff. Or else we’re just talking blah."
Many advocated for what was described as "structural fixes" that would streamline each department and agency and make workers more productive.
"In 2006-2007, we passed a budget, which the government said was inflated," said Sen. Neville James. "Then in the 27th Legislature, the government realized record revenues. The best time to address the structural fixes is when you got the money, not when you don’t have the money because then the only fix is to borrow."
DeJongh and his financial team members have outlined more than once what the government has been doing to scale back, and officials repeated those points Tuesday, but Dawson also presented what he called a "menu" of alternatives that the government would soon be looking to when the opportunity to borrow has passed and the money has run out.
Layoffs, he said, would save the government $40 million per every 1,000 employees, while a 10-percent reduction in the government’s work force would save $45 million. A 10-percent across-the-board salary reduction would yield a savings of $33.5 million, while a reduced 36-hour workweek would also save $33.5 million.
Chopping eight unpaid holidays — an option that was offered last year, but opposed by senators — would have also saved the government $10.4 million, Dawson said.
With officials cutting back on vehicle use, limiting the amount of people they hire and saving as much cash as possible by using federal funds, those are the realities of where the government is heading if the status quo is maintained, he said, adding that the government would basically have three months to cut $81 million.
Many senators simply said they didn’t want to be the ones to send government workers home, or to tell them, when some are months behind on their mortgage payments, that the tax refunds they’re relying on won’t be coming.
Others said they couldn’t believe there was any doubt that the government is in trouble.
"We need to grow up," said Sen. Sammuel Sanes. "I hate to say it, but every one of us in here needs to grow up and start treating people with respect. The financial team members were asked to be here and we call them liars to their faces. To their faces? Come on, now."
Earlier in the day, Office of Management and Budget Director Debra Gottlieb explained that departments and agencies — with the exception of UVI and Education — were asked to put in place a contingency plan that would support a 25-percent budget cut if the borrowing bill wasn’t passed.
For some senators, forcing those entities to take a cut that would wipe out their entire fourth quarter allotment was also not an option.
"Cuts?" asked Sen. Michael Thurland. "We want to do that now? That is poor planning. If we want to do that for next fiscal year and let everybody know now, let it be that. But not now."
Thurland added that some of the arguments presented for and against the bill were sound.
"Some of them," he said. "But some are just pure political posturing for a spot at the White House on Kongens Gade."
The bill was voted on around 2:30 a.m. Wednesday, after a record 16-hour session, and passed with eight in favor and seven against.
Voting in favor of the bill were Sens. Carlton "Ital" Dowe, Louis P. Hill, Wayne James, Sanes, Patrick Simeon Sprauve, Thurland, Celestino A. White Sr. and Alvin Williams.
Voting against the bill were Sens. Craig W. Barshinger, Adlah "Foncie" Donastorg, Neville James, Shawn-Michael Malone, Nelson, Nereida Rivera-O’Reilly, and Usie R. Richards.
The back-and-forth debate and final vote were all that was talked about on the radio airwaves Wednesday, with residents both commending and criticizing senators for their decisions.
The governor also joined in the discussion, making a public statement Wednesday about the vote.
"I wish to publicly commend the eight members of the 28th Legislature who, by their vote last night, showed clearly and courageously that they put the well-being of the people of the Virgin Islands ahead of petty and personal politics," deJongh said. "Their vote will permit us to continue to keep your government working. They know, as I do, that this is not simply a matter of avoiding laying off government workers. It is about maintaining the vital services of government and avoiding an economic catastrophe that would engulf us all, small businesses, large businesses, retirees, school children, all of us."
The territory still has a ways to go on the road to recovery, however, deJongh added, saying that a press conference to reveal what the government must now do is scheduled for 10 a.m. Monday at Government House on St. Thomas.
Editor’s Note: The Source incorrectly reported that the $50 million in internal funds borrowed by the government has already been repaid. It has not, and does not have to be until the government hits the initial $250 million limit authorized by the Senate. To date, the government has drawn down $175 million on its line of credit, and coupled with the $50 million in internal funds, still has some wiggle room before its initial authorization is used up.
