March 15, 2007 — While representatives from the government's fiscal team are predicting a $46.5 million budget shortfall for fiscal year 2007, the territory still has about $294 million in excess revenues on hand that can be used to cover the difference, Sen. Terrence "Positive" Nelson said during a press conference Thursday at his office on St. Croix.
Using information recently presented to the Senate's Finance Committee by Nathan Simmonds, head of the government's fiscal team, Nelson said that the territory has wrapped up the past three fiscal years with a surplus, leaving an extra $127 million from 2004, $87 million from 2005, and $80 million from 2006.
Instead of reducing government allocations, this money could be used to balance the budget, he said.
Though Nelson added that his staff has not yet been able to determine exactly how much money, in total, the government has in its coffers, he explained that the surplus funds indicate that the territory's overall fiscal picture is "financially sound" and will continue to improve as the government continues to pay down on its debt obligations.
Currently, the territory is saddled with a more than $1 billion unfunded liability, which continues to deplete the assets of the Government Employees Retirement System. The government has also racked up approximately $15.7 million in outstanding vendor payments and owes at least $400 million in retroactive wages to employees in various government departments and agencies.
If revenue projections continue to decline, however, the government has to "tighten its belt" and curb expenditures, Nelson said.
During a Finance Committee meeting held earlier this month, Simmonds said that the first four months of FY 2007 showed a 17 percent decline in tax and other revenue collections — including an estimated $37 million reduction in projected corporate income taxes, a $3 million drop in Stamp Tax revenues and a lag in property tax collections (See "Governor's Financial Team Forecasts $46.5 Million Budget Shortfall").
Almost a year ago, government officials said that economic growth in the manufacturing, construction and tourism industries, along with an increase in tax collections, would produce enough revenue to sustain the 2007 executive budget, which originally totaled $749 million but ended up substantially larger after going through the budget markup process.
While the territory's economic outlook is expected to improve, Simmonds said when contacted Thursday afternoon that the government does not plan on using the surplus funds to balance the budget. Instead, budget appropriations will be pared down during the allocation process, when funds are disbursed to government departments and agencies by the Office of Management and Budget.
"We will manage the appropriations in a matter so that we will not run into a deficit," he said. "We do have an accumulated surplus, that's a fact, and how the Legislature determines how they will be using the money is their prerogative. But we do not plan on using the funds to balance the budget."
Keeping in mind that surplus revenue balances for fiscal years 2005 and 2006 have not yet been audited and are still subject to change, the government will also be reviewing appropriations included in the miscellaneous section of the budget, Simmonds added.
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