Gov. John deJongh Jr. submitted the administration’s 2013 budget proposal Friday evening, and the news is not good, with continuing budget cuts across most departments.
Introducing the budget in a letter to Senate President Ronald Russell, deJongh said the territory faces diminished revenues for the third straight year, so “we took extreme care to craft the leanest possible budget.”
“We must make the hard choices that will right our course, no matter how difficult those choices may be. I look forward to our continued collaboration in the weeks and months ahead as we embrace our responsibility to lead our community,” deJongh wrote in his transmittal letter to the Legislature.
The 2013 proposed executive budget totals $695.8 million – $35.3 million less than last year – with $249.3 million for salaries, $120.7 million for benefits, and $27.7 million for utilities, among its larger individual categories.
Education, by far the largest single department and budgetary expense, has a recommended 2013 General Fund budget of $162.5 million – a drop of a $15.8 million from the 2012 budget.
Human Services, which has seen a large increase in clients since the recession began, is a rare budget item showing an increase for 2013, with a recommended General Fund budget of $57.3 million, a roughly $6.5 million increase from last year.
The V.I. Police Department has a proposed 2013 General Fund budget of $51.8 million, a drop of $2.1 million from last year.
The Bureau of Corrections is allotted $25.8 million from the General Fund, a half-million dollar reduction from last year. But with increased federal funds, BOC’s total budget is expected to increase slightly from last year.
The Health Department is facing particularly sharp cuts, with a recommended 2013 budget General Fund budget of $21.7 million – a $9.1 million reduction over last year, nearly a 30 percent cut. Health’s total budget, including revenue from fees for services and substantial federal funding, shows an even sharper reduction, dropping to $44.5 million for 2013, from $71.2 million in 2012.
The territory’s hospitals will see only minor cuts in local funding, however.
After the government instituted major budget cuts, tax increases, and bond-financed capital projects, the economy – and with it, the government’s fiscal picture – appeared to be stabilizing, according to a statement from Government House.
But the sudden Hovensa oil refinery closure hurt the recovery. As a result, the administration had to use half of the $120 million intended to be borrowed in 2012 for working capital to close the gap in the 2013 budget, according to Government House.
“Needless to say, this one corporate decision has been devastating to our territory and our communities and it requires us to continue to adjust our expectations as we navigate our way forward,” deJongh said in a statement.
The loss of the refinery represents an estimated $580 million reduction in direct gross economic output, amounting to about 13 percent of the gross territorial product, according to Government House. As for the government’s budget, the closure also resulted in $92 million in lost tax revenue, according to Government House. DeJongh believes that gap should shrink as the economy grows and the administration continues to focus on delinquent taxes.
“Over the last year, and especially since the onset of the Great Recession in 2007, our community has been subject to economic and financial challenges not witnessed in recent decades. Our resources have been severely strained and the near term options for alleviating these pressures are few,” deJongh wrote.
Next year’s General Fund operating budget is based on a net revenue projection of $695.8 million, an amount that reflects an anticipated reduction in revenues due to changes to corporate income and gross receipts tax income, according to Government House. Projected net revenues remain $100 million below what they were before the economic crisis began several years ago.
To balance the lost revenue, the budget leaves vacant staffing positions that are not absolutely critical, eliminates programs and services that cannot be justified in the current economic environment, streamlines government processes and shifts costs. It also makes investments in financial management systems and resources that will deliver savings down the road, funds programs to better collect taxes and draw down federal grants, among other measures, according to Government House.
The budget restructures some government offices. It moves the Medical Assistance Program from the Department of Health to the Department of Human Services and transfers the Bureau of Economic Research to the Economic Development Authority.
The budget also includes legislation changing the structure of health insurance premiums, funding expansion of the Medical Assistance Program and reforming the Workmen Compensation Program.
It provides millions in funding for school maintenance and repairs, road repairs, and construction of a welcome center and restrooms in downtown St. Thomas.
Some other key appropriations include:
- nearly $3 million for the Virgin Islands Police Department to implement the corrective action plan required by a federal consent decree on excessive force;
- more than $7 million to the Office of Management and Budget to restore the 8 percent salary reduction in July of 2013;
- $1.7 million to the Department of Personnel to pay for increased retiree health insurance premiums;
- $2 million replacement funding for the indoor sports complex at Mars Hill;
- $625,000 to the Health Department to fund outstanding mental health obligations and operating costs;
- $886,000 for staff and operational costs from the opening of the Charles Wesley Turnbull Regional Library;
- $1.4 million for the Justice Department to hire extra attorneys and other support staff to deal with increasing case loads;
- $350,000 to fund the general election;
- $5 million to the Department of Human Services to fund increased off-island residential placements;
- and another $700,000 to keep the territory’s senior centers open.
