In the Senate Finance Committee's first budget meeting Wednesday, the overview of Gov. Charles W. Turnbull's Fiscal Year 2001 budget turned up more questions than answers throughout the long day.
Ira Mills, director of the Office of Management and Budget, appeared at the 10 a.m. meeting along with other administration officials, but Rudolph Krigger, the governor's assistant for fiscal policy and economic affairs, had to be summoned and didn't appear until late afternoon.
The lopsided budget took a beating as the senators tried to determine why the governor had increased taxes, especially gross receipts taxes, and why he hadn't adhered to proposals detailed in his Five-Year Operating and Strategic Plan.
Mills said the governor's $429 million budget doesn't cover a $50 million gap between projected revenues of $401 million and expenditures of $451 million. He said the governor proposed reducing spending and increasing collections to fill the gap. The proposed 1 percent increase in gross receipts taxes, from 4 percent to 5 percent, and new fees should yield about $24 million, he said.
In a letter which Berry read into the record, John deJongh Jr., St. Thomas-St. John Chamber of Commerce president, said the proposed gross receipts tax represents a 25 percent jump, and increased prices resulting from the tax could result in lower employment, lower corporate and personal income tax collections and a shift in consumer buying patterns to Internet purchases and trips to Puerto Rico.
Sen. Violet Anne Golden echoed deJongh's concerns. She asked Krigger how he could be party to increasing gross receipts taxes, which she called counterproductive. Upon further questioning, Krigger said, "I'm neither foolish, dumb or stupid — I'm here as a team player."
Krigger had filled out a questionnaire sent to all testifiers, deferring most of the questions to Mills. In answer to how the government planned to pay consultant contracts involved in the WAPA sale, Krigger said the matter was in the hands of the Territorial Court. However, he said the only firm that has been paid is PricewaterhouseCoopers, about $337,000 of the $650,000 owed. He said consultant firm Winston & Strawn is owed about $1.2 million. He noted that because "of the non-passage of the (WAPA-Southern Energy) proposal, the administration will be required to find a funding source to meet liabilities."
Also testifying were Bernice Turnbull, Finance commissioner, Nathan Simmonds, Lt. Governor's chief of staff, acting Internal Bureau of Revenue Director Louis Willis, Lauritz Mills, Bureau of Economic Research acting director and Tax Assessor Roy Martin.
Willis came up with a figure of $95 million owed the government in back taxes. After the lunch break, Berry announced that she and Campbell Malone, legislative post auditor, had figured $146 was owed and asked Willis to explain the difference.
Willlis allowed that amount could include interest and penalties. He admitted that the IRB may not have "done a very good job" in collecting taxes.
Berry refused to say where she and Malone had gotten their information. "It will all come out," she said, a remark she has made at previous committee meetings.
Willis said the taxes were from the past 10 years and were collectible, but "there are procedures that must be followed. Throughout the session, Berry implored Mills to allot more funds to the hurting IRB. She said the 2001 budget cuts the agency's funds and that "if we don't staff the revenue collecting agencies, we'll never get the money."
Willis said collections for FY 2000, as of August, are $328,645,093, and indicated there will be an increase in collections in FY 2001.
Willis said the outstanding taxes are:
– gross receipts, $26.5 million;
– withholding, $10 million;
– income, $59 million;
– hotel room, $230,000.
In other issues, Bernice Turnbull said in response to the questionnaire that $50 million had been paid to vendors for 1999, from the $300 million bond issue. However, more than $50 million in past years' vendor payments have not been made, she admitted. She said the government was setting up a negotiating system to deal with the vendors.
Lauritz Mills said the V.I. economy has not increased over the past four years, but "has been flat or negative," she said. But she added the number of projected jobs in the territory is expected to grow by 8 percent because of planned private-sector investment in hotels and other tourism-related projects. She cited the $75 million Ritz-Carlton Hotel and $67 million Carifest cultural theme park on St. Thomas, the $28 million Pond Bay Club Hotel on St. John, and HOVENSA's $535 million
coker plant on St. Croix. And, she said, "next year is expected to be a bumper year for visitor arrivals." Cruise ship calls are expected to increase by 20 percent, and increased TV and radio marketing is expected to increase air arrivals to about 630,000.
Berry said she still has not received budgets from many departments, including Education, Labor, Justice, the Industrial Development Commission, the Public Services Commission and the offices of the governor and lt. governor. Mills said he signed off on Tuesday on budgets for the last two, and Berry should have them.
The first budget hearings will be at 10 a.m. Thursday on St. Croix and 10 a.m. Friday in Senate Chambers on St. Thomas. Berry said the public may testify by calling Kim Boschulte Ramsingh at (340) 774-0660. Anyone testifying will have five minutes for remarks, she said.
An overview of the budget will resume Monday on St. Thomas with testimony from autonomous agencies, Berry said.
