Oct. 30, 2007 — Backed by support from several of the territory's unions and labor leaders, members of the Senate Finance Committee Tuesday approved sections of a comprehensive proposal designed to put a $45 million dent in outstanding retroactive wages owed to government employees.
The bill, sponsored by Sens. Carlton "Ital" Dowe, Usie R. Richards and Celestino A. White Sr., also set up mechanisms that would pool the financial assets of several of the government's semi-autonomous agencies into one investment portfolio, which would then be managed by the Public Finance Authority. (See "Dowe Proposal Would Pool Government Resources, Begin Paying Retroactive Wages.")
After listening to concerns from several agency representatives, senators decided to put these sections of the bill into a separate proposal, which will soon be reintroduced and acted on by the committee. The rest of the bill, dealing with settling some of the government's retroactive debts, was forwarded onto the Rules and Judiciary Committee, where it will be further amended.
During a recent interview, Dowe explained that each year, five percent of the gross premium receipts tax paid on every insurance policy in the Virgin Islands is deposited into the government's insurance guaranty fund, a pool of money used in the event of a natural disaster. The fund generates about $16 million a year, Dowe said, and has been capped at $50 million.
While the sections of the bill approved during Tuesday's meeting do not seek to eliminate the fund's cap, it does allow the government to use $45 million from the fund to start paying off retroactive wages, which are estimated at about $400 million. The bill also authorizes the Public Finance Authority to obtain a $45 million letter of credit from a local bank, which will be used in case the fund has to be tapped into before it can be replenished.
"We will use the $45 million from the fund to begin paying off the retro, and in the event of a disaster, the bank will guarantee that the money we used will still be there if we need it," Dowe summarized.
The insurance-guaranty fund is only used when insurance companies registered to do business in the territory do not have enough money to cover claims filed after a natural disaster. If such an emergency does occur, the $45 million letter of credit will be used as a loan, and will have to be repaid by the government, Dowe explained.
While Dowe has said that the fund continues to generate money annually and would soon be able to hit the $50 million cap, representatives from the local insurance industry have raised concerns about the fact that the bill does not identify a funding source that could be used to pay off the loan. Though there was some discussion during the meeting of pledging a portion of the West Indian Company's annual contribution to the General Fund, nothing was agreed upon after nearly six hours of debate.
While the proposal was lauded Tuesday by various union representatives, one member of the governor's financial team cautioned that the bill's lack of funding source could have a significant impact on the General Fund. Describing the bill as a "valiant attempt" to address the longstanding retroactive wage situation, Nathan Simmonds, the governor's senior policy advisor, explained that any excess money generated by the fund is generally used to balance the annual executive budget.
"The excess funds — approximately $10 million after transfers to the commissioner of insurance fund — are transferred to the General Fund and is needed to balance the budget," Simmonds explained. "It would take four to five years to replace the $45 million. Therefore, the General Fund will not have the approximately $10 million available annually during that period. In addition, should the letter of credit have to convert to a loan, debt service on the loan would also have to be come from the General Fund. This will have a devastating impact on the General Fund, and the bill does not propose any mechanism to make up these monies once they are used."
When contacted after the meeting, Richards said that amendments added to the bill in the Rules Committee would, among other things, identify funds that could be used to secure the loan.
The bill also authorizes the governor to establish a Retroactive Wage Commission, a group of experts who will work to determine how much is owed in retroactive wages, and to whom the money will be going. A $500,000 appropriation included in the bill will go toward paying for the commission's personnel costs and office expenses.
During the meeting, Dowe said senators would continue to meet with representatives from the semi-autonomous agencies on the creation of the second bill calling for the pooling of the government's financial assets and the development of a collective-investment portfolio. The new proposal would be reintroduced once most of the agencies' concerns have been addressed, he said.
Present during Tuesday's meeting were Sens. Liston Davis, Dowe, Juan Figueroa-Serville, Neville James, Basil Ottley Jr., Terrence "Positive" Nelson, Richards and White.
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