The territory’s financial crisis has forced the Office of Management and Budget to propose a 25-percent budget cutback if senators decide to vote down the latest borrowing proposal, which many of the government’s semi-autonomous agencies told senators Tuesday would pretty much shut down their operations for the rest of the fiscal year.
That includes daily activities at the University of the Virgin Islands, Waste Management Authority, the local courts and the territory’s two hospitals, whose representatives spent hours during the first half of the day’s session laying out the reality of what would happen once their money is frozen.
Last year, senators authorized the government to borrow up to $250 million to plug multi-million dollar funding gaps projected for both fiscal years 2010 and 2011. This initial proposal allowed officials to float bonds, tap into government public fund accounts, or turn to a bank or other financial institution for money.
At the time, the government opted to borrow $50 million from internal funds, which was then repaid by a portion of a $250 million line of credit subsequently opened with the banking syndicate formed by Banco Popular and FirstBank.
To date, the government has drawn down about $175 million on the line of credit, but is looking to pay down $100 million by floating $250 million worth of bonds by next month. That would free up some more money for next fiscal year, which may be a few short months away, but is still fuzzy in terms of the final economic picture, officials have said.
But to make all this possible, senators have to double the government’s current authorization to an overall $500 million, which has been met with some resistance all around, but is something that officials have said is really the only alternative to a drastic cutback in government employees and services.
That reality was highlighted Tuesday, as testifiers forced senators and citizens to imagine a territory where the basics in education, health care and waste management were non-existent.
Up to this point, and for at least the past couple of years, there’s been a move to cut as many unnecessary expenses as possible, many of the testifiers said.
"We have monitored our budgets closely to make sure we’re not engaging in expenses that we don’t need," UVI President David Hall explained. "We have not done zero-base budgeting before, and I have convened a task force of administrators and faculty members to look at the budget from top to bottom…to find areas where there is waste, to find areas where there is duplication and to find areas where we could better use our resources."
Hall said UVI’s board has also frozen staff salaries for the past three years and has been looking at more ways to generate revenue, which means stepping up fundraising and making sure alumni and community members come to the table with support, he said.
For UVI to take a 25-percent cut now, with three months left in the fiscal year, means taking $8.6 million out of the budget, Hall added. And to accommodate it means letting go of even the basics — such as paper or inter-island travel for teachers and students, both of the university’s summer school programs and of course, employees.
"To do that in this fiscal year, when we have received most of our funding, it would severely hamper operations," Hall said.
The situation looks even worse for the Gov. Juan F. Luis Medical Center, whose chief operating officer made it clear that such a drop — after the facility has already done as much as it can to tighten the purse strings — would revert the basic quality of care offered at the hospital back to 1986 levels, when many residents were sent off island for treatment.
Bottom line: the hospital will have to do away with its kidney dialysis unit, which is currently running a $3 million deficit, along with all of the services it currently provides to outpatient clinics, which costs another $2 million a year, explained Rosalie Javois.
"That would be $5 million up front that would go away," she said.
At this point, the hospital’s dialysis unit — which treats patients suffering from kidney failure — is not accepting any more patients, and officials have limited their spending to only "priority medical supplies and critical equipment" that directly impacts patient care, Javois added.
Speaking later in the hearing, Schneider Regional Medical Center’s new Chief Executive Officer Alice Taylor said she’s not sure the picture is that dire yet at the St. Thomas hospital, and that she would "try to peel the onion all the way back" before any programs are cut. But there might still be some realities that the hospital, which must provide millions in uncompensated care services throughout each year, will have to face if the budget is cut back even more, Taylor explained.
Unlike many other government agencies, the Waste Management Authority’s budget is not eaten up by personnel costs, but really trying to manage waste in efforts to stave off a federal takeover, which WMA head May Adams Cornwall said will become a possibility if a 25-percent cut goes into effect.
Because money has been tight, WMA has had to forgo hiring some critical employees, and has been unable to cover things like an increase in contractor expenses because of global spikes in oil prices and construction costs, she said.
Meanwhile, the federal Justice Department has already sent down draft consent decrees since WMA hasn’t been able to close the Anguilla landfill as soon as previously thought.
"We have delayed, hoping that we’d be able to close the landfill in a timely manner," Cornwall said. If enforced, however, the newest consent decree would involve the entire government, including the V.I. Port Authority, which owns the land and would in turn be cut off from Federal Aviation Administration discretionary funds if the situation gets any worse.
"And if we get cut beyond what we already have, then we won’t be able to collect waste," Cornwall added simply.
When notified by OMB about the possibility of additional cuts, the departments and agencies were asked to put in place a contingency plan showing exactly where the money can be shaved away. Testifiers shared some of the things they had in mind, but, to the chagrin of the audience full of residents packed into the Legislature’s chambers Tuesday, many of the plans included layoffs.
"If we think it doesn’t, then we’re fooling ourselves," JFL Hospital board chairman Valdemar Hill said Tuesday. "Because our position is such that absent the borrowing, various, vital, necessary, essential services would have to be cut."
All senators were present during Tuesday’s session.