People in earthquake-prone areas constantly worry about the "big one." As each tremor begins, they wonder if this is going to be it. For a number of years, numerous observers, this writer included, have forecast a fiscal "big one" if the Virgin Islands government did not make fundamental changes to put its financial house in order.
While successive governors and legislatures did little to address the core issues, they did find ways to mask the territory's decline, while protecting what they valued. They valued the government payroll and a system of patronage and "insiderism" that has become increasingly outrageous as conditions of life have deteriorated for most Virgin Islanders.
Through evasion and gimmicks, these officials have made it inevitable that, when the "big one" arrived, the social and economic wreckage that it left would be severe.
This may be it. The responses of the government to the current situation have all of the hallmarks of full-blown panic, typically a sign that the usual tricks no longer work. The proposals that are being floated are so short sighted and destructive that they stagger the imagination. It is hard to imagine a set of revenue proposals that could do a better job of actually reducing revenues and wrecking the economy at the same time. Many people have spoken in the Source's pages of a day of reckoning, and that day now appears to be at hand.
Some observers have placed the Virgin Islands' situation within a context of the overall fiscal disaster facing the various states. The Virgin Islands and most states do share the reality of being broke. California, for example, with an overall budget of approximately $100 billion, is facing a deficit of close to $35 billion. Nobody has a clue with respect to what to do to close this gap.
It would, however, be a mistake to view the Virgin Islands problems through the lens of the shortfalls facing the states. There are critical differences that make the emerging situation far more serious for the territory than it will be for even those states that are in the direst of situations. Here are some of the major differences:
A situation more serious than any state's
– Unlike any state, the Virgin Islands has an economy dominated by government and public sector employment. If the territory is forced to resort to massive layoffs, the most likely outcome of what is ahead, there will be a cascading effect that will ripple through the entire economy and local society. In this regard, the Virgin Islands is much more like one of the former socialist republics of Eastern Europe than a state.
– Virgin Islanders also have a low savings rate; so the impact of cuts, when they come, will be felt much more quickly than they would in other places.
– The government of the Virgin Islands has no credibility. While the incompetence, misleading information, self-dealing and posturing that have passed for government in the last 15 years may be amusing in ordinary times, it is catastrophic in the face of true crisis. People must have some measure of confidence that they are being told the truth, and that their elected leaders have some notion of the way out of the crisis. There are no such leaders in the Virgin Islands, at least none currently in high office.
In the game of musical chairs that has stretched back over several administrations, it was inevitable that there was going to be a governor with the bad luck to be sitting in Government House when the music stopped. It now appears that Charles W. Turnbull will be that governor. It could be said that his combined cluelessness and grandiosity have earned him the honor. That would be true, but it would also miss two points:
First, someone is going to have to take charge to lead the territory out of a situation whose effects on people's lives are going to be far more severe than is currently thought.
Second, the norm of blaming rather than problem solving is a particularly unattractive feature of public life in the Virgin Islands, as it is in much of America. It is a norm that the territory can ill-afford because it is backward looking, divisive, and solves nothing. The only relevant question is going to be how to go forward and get out this mess with the least possible damage. Who is to blame will be of limited relevance.
The destabilizing danger in devisiveness
The social fragmentation of the Virgin Islands is both an impediment to finding solutions and a threat to stability. The deep divisions that separate islands, races, classes and those who live off government from those in the private sector cannot be ignored. In the absence of strong leadership adept at communicating with diverse communities, individual groups will feel that they are making all the sacrifices, that the deck is stacked against them, and that the "others" are conspiring.
What is just unpleasant in normal times becomes socially dangerous and destabilizing in periods of great stress. It is absolutely critical that all groups adopt the posture that "we are all in this together, and we will get out of it together."
The Virgin Islands lacks basic automated and human systems that are essential to defining the magnitude of the crisis, as well as the pathway out. In the end, this deficiency may be the straw that breaks the camel's back. Lenders, oversight bodies, auditors and others get tired fairly quickly of phony or constantly changing numbers. The lack of what is known as transparency is quite striking in the Virgin Islands. What is equally as striking is the fact that key government officials, both executive and legislative, don't even understand that this is a problem.
Finally, Virgin Islanders have gotten used to decline. There is a deep-seated pessimism that results in a mix of resignation and grandiosity. Over time, the norm has become to hold onto whatever "we" can, and leave everyone else to their own devices. As they say, "hurray for me, and screw you." It hasn't worked, and it clearly will not work when the real impact of the crisis begins to be felt.
Is there a way out of this crisis? For well over a decade, Virgin Islands governments have put off the day of reckoning through gimmicks and evasions. The result is a situation that is far worse than it might have been and also far worse than most people understand. People will be surprised by how fast already bad public services become worse. Because of the lack of systems, it is not clear exactly what the territory's fiscal situation is, but what is becoming inescapably clear is that, at some point in the near future, a cash-flow crisis is going to trigger a system crisis, which will, in turn, cascade through the economy and society.
No gain without pain
There are ways out of this mess, but, contrary to popular belief, there is no pain-free way out. The economic and social pain is likely to be quite severe because of the overwhelming role of government and the absence of other cushioning mechanisms.
The Source recently reported Sen. Richard Russell's proposal that a financial control board be appointed to lead the territory out of the crisis. This idea is a start, but it is not likely to be sufficient. There is an undeniable need to supersede the government's control of the territory's fiscal life. As in similar situations — e.g., New York City and Washington D.C. — the external control board would approve all expenditures. Not a nickel could be spent, not a person could be hired, not a contract could be signed without board approval.
This should be the starting point. Given the enormous power that such a board would exercise and the highly unpopular decisions that its members would have to make, it makes more sense to use outsiders with a familiarity with the territory rather than local people. Local leaders will face a choice, compromising in ways that squander a one-time opportunity for change in order to placate various groups, or becoming pariahs in their own
communities because they made very tough choices that affected people's lives.
Mr. Russell is absolutely correct in seeing that the current government — and almost any likely to replace it — will be incapable of taking any of the actions required to begin to build a new future for the Virgin Islands, a future marked by hope and true public-private partnership. A first step is to begin to gain community acceptance of the concept of a fiscal control board. To do that, it is useful to ask the following question: Is there anything in the experience of either the governor or the members of the Senate that would indicate that they are up to the job?
The system is broke. It can no longer be patched up. The choice is between bitter medicine that leads to a better future, and bitter medicine that leads to further social and economic decay. It is a simple choice but very difficult to make, because it involves a choice between the failure that is known and the hope that is unknown. Hope is the better option.
Editor's note: Management consultant Frank Schneiger has worked with V.I. agencies since 1975, most recently as consultant to United Way of St. Thomas/St. John. He was one of the founders of the St. Thomas/St. John Youth Multiservice Center.
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