Oct. 12, 2008 — Cuts senators made to the fiscal year 2009 budget may leave the government with a deficit of about $80 million, forcing the need for some additional belt tightening until more money comes in and the economy improves, according to Gov. John deJongh Jr.
The governor made the comments over the weekend as he signed into law the entirety of the budget, along with several other bills.
The budget, as amended by senators, does not fully fund salary increases implemented during FY 2008; a three-percent increase in the government's contribution to the Government Employees' Retirement System; or the recently approved government health insurance contract, which covers all government employees, retirees and their dependents, the governor said in a letter sent to Senate President Usie R. Richards along with the signed budget and bills.
During a session last month, senators said they significantly trimmed the governor's budget by cutting 15 percent of the funded vacant positions for various government departments and agencies. The approval of a "bare-bones" budget was based on a projected reduction in property-tax collections and a continued slowdown in the U.S. economy, Richards said after the September session. Keeping the budget at the same level as it was in FY 2008 would also ensure that senators maintain control of the financial purse strings, he said.
When deJongh submitted his budget at the end of May, it totaled about $867.3 million. The Senate's amended budget laid out a total General Fund budget of about $560.5 million for central-government departments and agencies and a $142.5 million miscellaneous budget. Bringing the total General Fund budget up to approximately $842 million were separate budget bills passed for WTJX Channel 12, the University of the Virgin Islands, the Waste Management Authority, the Legislature and the territory's court system.
In reviewing the budget — which was significantly amended by senators before it was passed during last month's full Legislative session — deJongh said he considered "those factors which will impact the economic and financial environment of the territory during the course of the fiscal year." A continuing downturn in the U.S. economy has put the territory's financial landscape "through significant turmoil," which has resulted in a decrease in consumer spending, hotel bookings and available jobs, he said in the letter to Richards.
While the issuance of economic-stimulus checks and efforts made by government officials to build on partnerships with airlines flying to and from the islands provided a bit of relief, the recent losses felt by various U.S. banking and investment institutions has had a global impact, the governor said.
"This economic environment means that financial resources to provide essential social services, to access the capital market to undertake critical infrastructure projects, and to generate the revenues needed to sustain public sector operations will be managed in an extremely difficult atmosphere," deJongh wrote to Richards. "This reality will negatively affect our local customers and our tourism revenues, not simply in the direct impact to our hotels, restaurants and jewelry stores, taxis and pleasure boating, but also indirectly as this will also impact those companies that support these businesses."
Not signing the budget into law under these circumstances will keep the government in the "same financial predicament" as it was in last year, the governor added. He noted, however, that the Senate's budget cuts would force the Office of Management and Budget to continue to monitor the revenues, and allot based on the government's available financial resources.
"This will, most likely, require the impositions of financial restrictions, such as the restrictions on executive-branch travel which I recently issued and continuing my earlier issued freeze on hiring, except for designated agencies and with my approval," the governor wrote. "Further, entities which may be budgeted to receive money under the miscellaneous sections … should not make any expenditures unless they receive confirmation from OMB that their budgeted sums can be allotted."
The judicial and legislative branches are being asked to cooperate with any request to voluntarily take a reduction in their FY 2009 allotment if needed, the governor said.
"I realize this step may appear extreme to some," deJongh wrote. "However, the current circumstances require the same until stability is restored to the worldwide economies and we have an opportunity to more fully assess the impact of the global crisis on the territory."
To make up for the money needed for the GERS contribution, the health insurance contract and salary increases, a supplemental budget should be submitted during the second quarter of FY 2009, he said.
The governor also signed into law bills:
— giving delegates to the Fifth Constitutional Convention until May 31, 2009, to come up with a draft document, increasing the budgets of the Offices of the Governor and Lieutenant Governor, and recognizing the appointment of Sen. Patrick Simeon Sprauve as the replacement for former Sen. Basil Ottley Jr.;
— appropriating $100,000 for the Bureau of Economic Research to conduct a living-wage study on what residents need to be earning, at a minimum, to cover basic living expenses such as rent or housing, food, child care, health care and transportation;
— preventing employers from forcing their employees to participate in "employer-sponsored" political or religious events;
— calling for the Department of Education to allow for K-12 instruction on St. John and the government to construct, renovate or acquire a building for a school;
— attracting specialized captive insurance and reinsurance companies to the territory with tax benefits;
— raising the bonding capacity of the V.I. Water and Power Authority and authorizing the government to issue a guarantee in support of a new $40 million credit line for WAPA; and
— repealing the minimum $300 property-tax requirement; and
— allowing for the development of the Island Crossings Shopping Center on St. Croix and the issuance of tax increment financing (TIF) bonds through the Public Finance Authority to help support the project.
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