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Wednesday, May 18, 2022
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More Austerity Needed, OMB Director Says

More pain, in the form of unpaid holidays and tax increases, is going to be needed to balance the 2012 budget, Office of Management and Budget Director Debra Gottlieb told the Senate Finance Committee during a final budget markup session Wednesday.

OMB’s 2012 budget projections assume tens of millions of dollars in savings from new legislative proposals submitted along with the budget back in June, according to Gottlieb.

The 2012 budget was balanced in part by increasing the gross receipts tax by an additional 0.5 percent to 5 percent, a change projected to generate $17 million, she said. Implementing nine unpaid holidays was projected to save another $16.9 million and reducing personnel costs by the equivalent of several hundred positions was projected to save $29.8 million, she said.

If any of those measures are not approved by the Legislature, they must be replaced by equivalent spending cuts and revenue increases to avoid a budget shortfall, she said.

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Some savings have been realized by eliminating unfilled positions and staffing cutbacks, and implementing across-the-board pay cuts is saving money. But lawsuits and proposed legislation to repeal the pay cuts make it difficult to predict what the final, real savings will be, according to Gottlieb.

Senators peppered Gottlieb and the rest of Gov. John deJongh Jr.’s financial team with questions about alternative ways of enhancing revenues, such as increasing efforts to collect $45.6 million due in delinquent property taxes.

Bureau of Internal Revenue Director Claudette Watson-Anderson and Tax Assessor Bernadette Williams outlined increased efforts to collect back taxes. The tax collector’s office is in the process of placing liens on delinquent parcels and will proceed with property sales after the legally necessary notices are mailed, Watson-Anderson said.

But those measures, while bearing fruit, will not solve the immediate problem, members of the financial team told the Finance Committee.

"No one wants to lay off hundreds of employees. No one wants to give up holidays, but the day of reckoning is here," said Sen. Carlton "Ital" Dowe, the committee chairman. "I know the phone calls are coming … but the decisions have to be made, and we will sit down and have the discussion," he said.

Gottlieb and the financial team were before the committee to make final markup recommendations for the 2012 budget, reflecting changes in projected revenues and expenses since the budget was submitted to the Legislature in June.

Other than the aforementioned anticipated austerity measures, for the most part, 2012 revenue projections remain unchanged, Gottlieb said.

OMB now projects $722.2 million available for General Fund appropriations for 2012. Individual income tax comprises $386.5 million of that; gross receipts tax $117.3 million; real property tax $95.5 million; corporate income tax $56.4 million; remitted federal alcohol excise taxes $43.1 million; and the Transportation Trust Fund $13 million. The above income tax figures are before some $80 million in projected income tax refunds for 2012.

The biggest changes in projections is an $8.1 million reduction in remitted alcohol excise taxes, mostly due to the lag between when rum is produced on St. Croix and when it is sold from distributors, Gottlieb said. The other change is a $1 million reduction from the Transportation Trust Fund down to $13 million. The Transportation Trust Fund is replenished by driver’s fees and fines.

The deJongh administration is requesting several technical amendments to the 2012 budget, most notably a $20 million transfer from the Insurance Guaranty Fund to the General Fund, which Gottlieb said was inadvertently left off the original budget.

Each year, 5 percent of gross receipts tax paid on every insurance policy in the territory is deposited into the Insurance Guaranty Fund, to the tune of roughly $10 to $12 million a year. That pool of money can be tapped into only if an insurance company registered to do business in the territory becomes insolvent and cannot pay its claims. The government plans to use those funds, replacing them with the letter of credit, which will not be used unless an insurer goes belly up during the term of the letter of credit. The letter will expire and become void once the fund is refilled up to its legally mandated ceiling of $50 million.

The administration is asking for several small new appropriations too, Gottlieb said, including:
— $500,000 to Public Works to buy land to expand the Smith Bay Eastern Cemetery;
— $125,000 to the Health Department to finish funding a settlement with the U.S. Environmental Protection Agency;
— $280,000 to VITEMA for outstanding debts to vendors;
–$250,000 to Justice for its witness protection program;
— $63,000 to Agriculture to fund a position inadvertently left off the budget.

The current year’s budget needs some tinkering too, according to the administration’s financial team. Updated 2011 revenue projections indicate General Fund revenues will be about $24.6 million short of existing appropriations, Gottlieb said. Savings from salary cuts will reduce that by $5.3 million, leaving $19.6 million that must be addressed by reducing allotments, she said.

No votes were taken during Wednesday’s budget markup hearing.

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More pain, in the form of unpaid holidays and tax increases, is going to be needed to balance the 2012 budget, Office of Management and Budget Director Debra Gottlieb told the Senate Finance Committee during a final budget markup session Wednesday.

OMB's 2012 budget projections assume tens of millions of dollars in savings from new legislative proposals submitted along with the budget back in June, according to Gottlieb.

The 2012 budget was balanced in part by increasing the gross receipts tax by an additional 0.5 percent to 5 percent, a change projected to generate $17 million, she said. Implementing nine unpaid holidays was projected to save another $16.9 million and reducing personnel costs by the equivalent of several hundred positions was projected to save $29.8 million, she said.

If any of those measures are not approved by the Legislature, they must be replaced by equivalent spending cuts and revenue increases to avoid a budget shortfall, she said.

Some savings have been realized by eliminating unfilled positions and staffing cutbacks, and implementing across-the-board pay cuts is saving money. But lawsuits and proposed legislation to repeal the pay cuts make it difficult to predict what the final, real savings will be, according to Gottlieb.

Senators peppered Gottlieb and the rest of Gov. John deJongh Jr.'s financial team with questions about alternative ways of enhancing revenues, such as increasing efforts to collect $45.6 million due in delinquent property taxes.

Bureau of Internal Revenue Director Claudette Watson-Anderson and Tax Assessor Bernadette Williams outlined increased efforts to collect back taxes. The tax collector's office is in the process of placing liens on delinquent parcels and will proceed with property sales after the legally necessary notices are mailed, Watson-Anderson said.

But those measures, while bearing fruit, will not solve the immediate problem, members of the financial team told the Finance Committee.

"No one wants to lay off hundreds of employees. No one wants to give up holidays, but the day of reckoning is here," said Sen. Carlton "Ital" Dowe, the committee chairman. "I know the phone calls are coming ... but the decisions have to be made, and we will sit down and have the discussion," he said.

Gottlieb and the financial team were before the committee to make final markup recommendations for the 2012 budget, reflecting changes in projected revenues and expenses since the budget was submitted to the Legislature in June.

Other than the aforementioned anticipated austerity measures, for the most part, 2012 revenue projections remain unchanged, Gottlieb said.

OMB now projects $722.2 million available for General Fund appropriations for 2012. Individual income tax comprises $386.5 million of that; gross receipts tax $117.3 million; real property tax $95.5 million; corporate income tax $56.4 million; remitted federal alcohol excise taxes $43.1 million; and the Transportation Trust Fund $13 million. The above income tax figures are before some $80 million in projected income tax refunds for 2012.

The biggest changes in projections is an $8.1 million reduction in remitted alcohol excise taxes, mostly due to the lag between when rum is produced on St. Croix and when it is sold from distributors, Gottlieb said. The other change is a $1 million reduction from the Transportation Trust Fund down to $13 million. The Transportation Trust Fund is replenished by driver's fees and fines.

The deJongh administration is requesting several technical amendments to the 2012 budget, most notably a $20 million transfer from the Insurance Guaranty Fund to the General Fund, which Gottlieb said was inadvertently left off the original budget.

Each year, 5 percent of gross receipts tax paid on every insurance policy in the territory is deposited into the Insurance Guaranty Fund, to the tune of roughly $10 to $12 million a year. That pool of money can be tapped into only if an insurance company registered to do business in the territory becomes insolvent and cannot pay its claims. The government plans to use those funds, replacing them with the letter of credit, which will not be used unless an insurer goes belly up during the term of the letter of credit. The letter will expire and become void once the fund is refilled up to its legally mandated ceiling of $50 million.

The administration is asking for several small new appropriations too, Gottlieb said, including:
-- $500,000 to Public Works to buy land to expand the Smith Bay Eastern Cemetery;
-- $125,000 to the Health Department to finish funding a settlement with the U.S. Environmental Protection Agency;
-- $280,000 to VITEMA for outstanding debts to vendors;
--$250,000 to Justice for its witness protection program;
-- $63,000 to Agriculture to fund a position inadvertently left off the budget.

The current year's budget needs some tinkering too, according to the administration's financial team. Updated 2011 revenue projections indicate General Fund revenues will be about $24.6 million short of existing appropriations, Gottlieb said. Savings from salary cuts will reduce that by $5.3 million, leaving $19.6 million that must be addressed by reducing allotments, she said.

No votes were taken during Wednesday’s budget markup hearing.