May 5, 2009 — The government is almost broke, and unless it gets a large amount of money soon or cuts its expenses, there's going to be some payless paydays on the horizon for local workers, officials said Tuesday.
The Senate's Appropriations and Budget Committee took the first step toward solving the problem by approving a short-term financing proposal for up to $200 million that would help mitigate projected multi-million dollar budget shortfalls for fiscal years 2009 and 2010. The bill — a joint effort by Sens. Carlton "Ital" Dowe and Louis P. Hill — has been in the works for months, and also contains a provision that would help the government pull in some much needed property tax revenues over the next couple of years.
Voting for the bill were Dowe and Hill, along with Sens. Wayne James and Sammuel Sanes, while Sens. Terrence "Positive" Nelson and Patrick Simeon Sprauve voted against it. Sen. Craig W. Barshinger was absent during Tuesday's meeting.
Under the bill, the governor is authorized to borrow the money from public fund accounts and if needed, can turn to the banks for a line of credit or other form of short-term financing that would help provide the capital needed to cover operating costs. The government anticipates using both options — taking about $50 million in local funds and borrowing about $150 million from a bank or financial institution — to fill the hole, according to Finance Commissioner Angel Dawson Jr.
When asked by senators whether adding to the government's debt by borrowing more money was a good idea, members of the governor's financial team said they have been pulling out all the stops in an attempt to cut down government costs. With the territory facing a $188 million shortfall for FY 2009 and $193 million shortfall for FY 2010, the governor has laid out plans to cut the shortfall with federal economic stimulus funds ($32 million in Fiscal Stabilization Funds and about $7 million through capital infrastructure projects), reductions in allotments (about $10 million), and implementing a hiring freeze, which is expected to generate another $7 million, Dawson said.
But without borrowing money, the government's only other options would be to lay off employees, cut back on holidays or reduce the work week — all things that should be considered a last resort, according to members of the governor's financial team.
Rallying behind the bill, Sen. Michael Thurland pointed out that the proposal would not pile more debt "on the shoulders of future generations." Instead, the $150 million would be paid back in about five years, he said. During the first two-to-three years, the government would focus on paying off the interest using gross receipts tax revenues, and after, would use increased rum revenues to pay off the outstanding credit, Dawson explained during the meeting.
If the debt isn't paid in full after five years, the balance would convert to a term-loan or be paid off by a gross receipts tax bond, he said.
Calling the arrangement a "Ponzi scheme," Nelson said the government was trying to push a "fear pill" down the territory's throat.
"But not everybody going to stop and swallow that pill," he said. "I know government hiring is still going on, that contracts are still going out the door — it feels like we're doing something very similar to those executives at the corporations in America. You all have to do some belt tightening first."
Nelson called for a listing of the government's fund balances, and was irate when he found out no one had brought them, saying that senators couldn't vote on the bill unless they knew how much money was in the bank. Dawson said later that the fund balances were being reconciled. Meanwhile, the government's General Fund balance is currently about $104 million, while the special and other fund balance is $168 million.
The final provision in the bill calls for the government to allow local residents to pay off their FY 2006, 2007 and 2008 property tax bills in installments.
Amendments to tighten up the bill should be added during a Rules and Judiciary Committee meeting upcoming in the next two weeks, Hill said.
During Tuesday's meeting, senators unanimously approved two government lease agreements: one with Peter Phillips (doing business as Peter Phillips Professional Body and Fender Repair) and the other with Red Hook Marina Inc.
Phillips has held his government lease for an auto body and fender repair shop for about two decades. The lease approved by senators Tuesday is for 20 years, with two five-year options to renew, at $412.38 per month or $4,948.55 per year.
The Red Hook property will be used for a charter boat service. The lease is for 10 years, with four five-year options to renew, at $4,167 per month or about $50,000 a year.
Senators also approved a grant application for an additional $638,390 in STOP (Services, Training, Officers, and Prosecutors) Violence Against Women funding, made available through the recently enacted American Reinvestment and Recovery Act. The Law Enforcement Planning Commission (LEPC) has been a VAWA STOP grant recipient for the past three years, and uses the money for, among other things: training law enforcement and court personnel (including judges and prosecutors) to deal with sexual assault and domestic violence cases; developing or implementing more effective domestic violence and sexual assault policies; and enhancing programs dealing with stalking.
While the grant application passed through unanimously, senators said they were concerned about losing about $275,000 in federal funds awarded over the past three fiscal years. A portion of the money is about to expire, but some of the local agencies have not applied for the funds through LEPC, according to commission officials.
Present during Tuesday's meeting were Dowe, Hill, James, Nelson, Sen. Nereida Rivera-O'Reilly, Sanes, Sprauve, Thurland and Sen. Usie R. Richards.
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