Gov. Charles Turnbull's first budget will be delayed another three weeks while financial planners slash spending, restructure departments, and try to increase revenues. The pared-down budget will be presented to the Legislature on Aug. 24.
Budget director Ira Mills asked the Senate Committee on Finance for an extension as soon as budget hearings opened Wednesday.
"This request is consistent with the administration's commitment to partnering with each branch of government as well as the private sector and the unions, to bring about the all-inclusive solutions critical to the economic survival and recovery of the territory," Mills said.
Layoffs will likely result from the cuts, he said.
"We have to recognize that everyone complains about the number of persons we have on board in government who are not performing at a level that warrants their retention. We've asked department heads to look at their departments and see if they can identify persons who fit that description. We cannot afford to pay for non-productive employees in this government."
Senator Lorraine Berry, chairwoman of the committee, asked Mills if departments were having difficulty making the 10-percent budget cuts ordered by Turnbull last month.
"We have received from a few departments the fact that for them to do an additional cut of 10 percent would create a great hardship for them relative to service delivery," Mills answered. "Nonetheless, if the resources are not there, we can't continue to spend."
The finance committee also heard Legislative Post Auditor Campbell Malone sharply criticize the Turnbull administration's revenue projections as vastly inflated. He said the government was relying on taxes that will not exist and an economic boost that will not occur.
"It is my considered opinion that the budget projections are severely overstated and without sound basis," Malone said. "Many businesses have closed, the tourist season is over, no major capital projects are planned and no major private investment is known of."
"None of the parameters that could be responsible for an upswing in economic activity seem to be present at this time, and we see the same scenario for fiscal year 2000."
Senators also scrutinized the administration's plan to take out an additional $100 million loan to repay a $35 million payroll loan, and to pay vendors and tax refunds.
Mills said the loan legislation was being finalized, and the administration will send a bill to the Senate in the near future. He told the committee the government had "more than a 50 percent chance" of getting the loan.
Most of the hearing concerned the administration's plans to cure the worsening fiscal crisis.
Sen. Gregory Bennerson was wary about letting the administration plunge the territory further into debt.
"The previous legislature approved $106 million to pay for vendor payments and other obligations," Bennerson said. "The first act this Legislature did was the Y2K loan. The second financial debt we went into was for the payroll. One was at $31.1 million, one was at $35 million. And now you're going to ask this Legislature, again, for $100 million!"
"We want to borrow ourselves into prosperity. You cannot borrow yourself into prosperity. All you're doing is delaying the inevitable."
Sen. Roosevelt David also wondered about the government's ability to secure the loan.
"I believe that the repayment ability on behalf of the government is very fickle and I also believe that the collateralization source is unstable as well," David said. "And in the worst-case scenario, if we were unable to borrow that money . . . does it mean then that we have to turn the keys over to a control board?"
Mills, however, said there were some indications of a slight upturn in the territory's economy.
"It is reasonable to expect that modest growth in some sectors, specifically manufacturing, construction, and the service industry, is achievable in fiscal year 2000," he testified. "The overall result is a positive economic growth outlook for the territory."
Mills cited the construction of HOVENSA's coker plant, a new casino and, possibly, the Beal rocket assembly factory on St. Croix.
The administration has also met with persons interested in building a sports complex on St. Croix, a company that wants to operate a fish farm and relocate its headquarters to St. Croix, and another group planning to develop a hotel and casino on that island, Mills said.
Those projects may stem this year's increase in unemployment, the OMB director said.
The territory's unemployment rate increased from 6.7 percent during the first three months of 1999 to 7 percent in the second quarter. On St. Croix alone, unemployment has risen from 8 percent to 8.6 percent.
"The most difficult hurdle that we must face as fiscal officers in the present and future budget years is on the revenue side," Mills said.
Government revenues have remained steady, he said, but contributions to the general fund from loans are down more than 90 percent, from $154.9 million in 1998 to $15.3 million in 1999. He attributed the decrease to $143.7 million in loans taken out in 1998 that are not available this year.
However, the forthcoming $35 million payroll loan will increase general fund contributions, Mills said.
Finance Commissioner Bernice Turnbull said the administration planned to implement a stricter financial management policy that should prevent departments and agencies from spending money they don't have.
"If a department or agency account shows an overdrawn amount no check will be processed until the situation is resolved," Turnbull said. "This could have far-reaching implications because of payroll. However, we cannot continue to have accounts overdrawn."
The administration will also hold its fiscal planners more accountable, Turnbull promised.
"The certifying officers are charged with the responsibility of being the fiscal managers for their respective departments, however, we are finding more and more that managers are taking this responsibility lightly," she said. "It is imperative that the government of the VI begin to hold its fiscal managers accountable for their actions."
"We're a half-billion-dollar business and we have to operate like a half billion-dollar business, (or) pretty soon you're not going to be in business," said OMB director Mills.
Budget hearings are taking place throughout this month. They will continue on Friday, and Wednesday, Aug. 11, and then begin again on Aug. 24.
