Even though the V.I. government is months overdue in submitting its five-year recovery plan to the U.S. Department of Interior, alarm bells aren’t sounding in Washington, D.C.
According to the memorandum of understanding signed by Gov. Charles Turnbull and Interior Secretary Bruce Babbitt in October, the administration was to provide its five-year financial recovery plan to Interior 90 days after the memorandum was signed. But it wasn’t until last week – some five months after the MOU was agreed upon – that Turnbull received a draft of the recovery plan. And a final plan won’t be completed until April 15, according to James O’Bryan, a Turnbull aide.
Still, the tardy report isn’t causing alarm in Interior’s Office of Insular Affairs. OIA spokesman Keith Parsky said that by reaching other standards set forth in the memorandum as well as through meetings, the administration has shown it is making a good-faith effort.
"It didn’t come exactly on the 90 days, but nobody was being a stickler as long as progress is being made," said Parsky.
Parsky did note that the CORE report has been completed and turned in to the OIA. The $600,000 CORE report, conducted by a Washington, D.C., consultant, was funded by Interior during the Schneider administration to help the government with its financial situation.
O’Bryan said Turnbull’s financial recovery task force, made up of administration officials, senators, union leaders and representatives from the private sector, used the CORE report as an "integral part" of the five-year plan.
"CORE itself has consulted with the economic recovery task force," he said.
OIA wouldn’t supply a copy of the CORE report, but a copy of the overview contained in the draft Five Year Operating and Strategic Financial Plan gives insight into how the experts intend to pull the government out of its economic mess.
According to the task force, in January the government's accumulated budget deficit was estimated to be more than $250 million. Its debt obligation was an "unimaginable" $1.12 billion.
"A fundamental conclusion of this U.S. Virgin Islands Financial Recovery Plan is that the government cannot realize future, sustained, balanced, financial operation without the achievement of significant private sector growth and transfer of some of its service operations to the private sector," the draft plan states.
The recovery roadmap sets out four scenarios for the government to get back on track:
– Business as usual without any growth in government revenue.
– Business as usual with moderate government revenue growth.
– Five-year plan with no government revenue growth.
– Five-year plan with moderate government revenue growth.
The draft overview states that if the government continues with "business as usual" without increasing its revenue, as it has since 1994, it would become insolvent. That could prompt intervention by the federal government, payless paydays and missed contractor payments, interruption of basic services, rapid government contraction, a halt to off-island investment, and a flight of capital.
Even under the five-year plan scenarios, however, economic recovery isn’t assured, especially if "significant private sector growth" doesn’t occur. In fact, the overview states that the "private sector may be declining in real terms that would affect future revenues…."
"As with the Business As Usual Scenario–Zero Government Revenue Growth Case, the government would face insolvency, but at a slightly later time…"
The task force also noted that putting the recovery plan into place, specifically to grow the private sector, will take "lead time before real growth can be expected."
And implementing the plan itself will be expensive, according to the task force, which estimated the cost at $30 million. That includes the design and implementation of new computerized accounting and management systems, hardware and software and licenses, legal analyses and feasibility studies for privatization initiatives and training.
Turnbull recently noted that the private sector contributes two-thirds of the government’s general fund revenue. For an economic turnaround to take place, he said, the private sector must grow by 6 percent to 7 percent annually.
"It is now more evident than ever that the government needs to forge a better partnership with the private sector," Turnbull said.
