Facing stark fiscal realities head on, Gov. John deJongh Jr. set an ambitious agenda of agency consolidations, austerity measures, tax increases and development projects Monday in his first State of the Territory address since reelection.
“And so this evening is a time for speaking truths — very hard truths,” deJongh said to the well-dressed gathering seated in the Earle B. Ottley Legislative Chambers on St. Thomas.
“We must finally face problems that have been made worse by the crushing effects of the global financial crisis and the Great Recession that has so damaged our economy, and which now require us to act decisively and quickly,” he said.
Revenues have dropped by 20 percent since 2008; the budget this year is now projected to fall short of revenues by $75 million and the projected deficit next year is $132 million, he said. Those numbers do not include the Government Employee Retirement System’s pension fund, which would need another $70 million a year, he said.
DeJongh spoke about the nature of the challenges facing the territory—from crime and early childhood education to energy costs—hitting many familiar themes and highlighting ongoing administration projects.
But he said the “state of the territory is at a tipping point,” and again and again he came back to the need to honestly and directly address the territory’s financial woes.
“If we do not rise to this challenge for our people and our territory … our financial condition will only deteriorate and the opportunity to build a vibrant economy … and a future for our children, will pass us by,” the governor said.
To address the crisis, deJongh gave a long list of ambitious money-saving and -generating proposals. Some are likely to be uncontroversial and popular, such as a plan to borrow capital to replace the Paul E. Joseph baseball stadium in Frederiksted with a new baseball field and a sports and entertainment complex with nationally sanctioned swimming and tennis facilities.
To more efficiently use the resources the government has available, deJongh said he wants to consolidate several agencies. He wants to fold the West Indian Company together with the V.I. Port Authority, saying they “too often still find themselves competing with each other, duplicating costs and consuming scarce resources.”
He proposes to merge the departments of Health and Human Services, saying they serve many of the same people and so would be more efficient as one entity.
And he wants to merge the University of the V.I. Research and Technology Park with the V.I. Economic Development Authority. Both entities offer tax incentives for businesses that set up shop in the territory.
While not a consolidation, DeJongh said he will again ask for legislation to bring the V.I. Waste Management Authority into the central government, because it is entirely dependent on government financing.
The governor listed a string of austerity measures, some of which have already been implemented and are already controversial. They include:
— plans to submit legislation to implement a two-year freeze on salaries;
— instituting three unpaid holidays;
— abandoning $31 million in previously approved salary increases for government employees;
— cutting $17.1 million to executive branch departments and agencies in the current fiscal year budget;
— limited hiring, with priority given to police, schools and health care; and
— laying off roughly 300 per-diem and part-time employees.
Unionized government workers stood outside the Legislature throughout the speech, holding signs protesting deJongh’s decision to freeze salaries.
DeJongh also proposed something few elected officials dare to: raising some taxes. Specifically, he said he will request the Legislature increase the Hotel Room Tax from 8 to 10 percent and add a $10 per-day fee on time-share units that are rented or exchanged. This will generate another $6 million for the Tourism Revolving Fund to bolster airlift, advertising and tourism product development, he said.
He will also request a cell phone tax similar to those applied to land lines, with the funds earmarked for emergency management operations. And he plans to ask the Legislature to approve a 1 percent increase in the gross receipts tax, which he said he wants to ultimately transform into a sales tax "that can be more transparently and effectively applied, collected and enforced," deJongh said.
While many of these actions may anger or dismay segments of the population, "taken together they will allow us to address this most severe situation, and avoid the massive layoffs and severe cutbacks in services that will be required if we cannot move together down this path," he said.