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Legislature Addresses 2013 Budget Shortfall

The V.I. Legislature approved a package of budget cuts, new borrowing authority and intergovernmental transfers Friday in an effort to bridge a $23 to $26 million budget shortfall in the current fiscal year.

The legislation approved Friday largely comprises measures proposed by Government House in May, with several amendments and a series of line-item budget cuts worked out between senators and Government House.

In early June, Gov. John deJongh Jr.’s financial team raised the alarm, saying revenue projections were lower than anticipated and expenditures a bit higher, leaving a $23.5 million shortfall in the current fiscal year. DeJongh proposed a basket of options and suggestions for senators to choose amongst, one of which was a three-month extension of the 8 percent government pay cut the Legislature enacted in 2011. A $2.7 million supplemental appropriation for V.I. Superior Court enacted Friday expanded that shortfall to $26.2 million.

Several senators, including Senate President Shawn-Michael Malone, emphasized that the Legislature would not extend the pay cuts it previously enacted and had managed to find enough cuts to balance the budget while reinstating government employees’ former pay rates.

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"Through expenditure reductions, revenue enhancements and cash flow support we were able to balance the budget and reinstate salaries," Malone said in a statement shortly after the session adjourned. "The cooperation and creativity demonstrated by both minority and majority block senators was truly unprecedented," Malone said.

The bill approved Friday includes a 3 percent cut to all government departments and agencies, $10.1 million in cuts to the miscellaneous section of the FY13 budget and a $3.5 million transfer from interest earned on debt service to the General Fund.

It also authorizes the government to issue revenue anticipation notes of up to $40 million annually in order to improve cash flow in the months when tax revenues are lower than average. The debt contract would require the loan be paid in full that same fiscal year and so would not add to the overall government debt from year to year.

And it appropriates $12 million from the General Fund to the Division of Personnel to pay additional employer costs for health insurance coverage for V.I. government retirees.

The bill also increases the Bureau of Corrections’ appropriation for the current fiscal year by $3 million and makes it a lump sum budget, so Corrections can use the funds more efficiently.

And the bill reprograms $1.2 million to the Labor Department to pay interest on the Unemployment Trust Fund that was used for payments to the unemployed.

Another section of the bill directs the Office of the Lieutenant Governor to continue issuing real property tax bills at 1998 rates, thus allowing the government to issue and collect property taxes before reassessing all real property in the territory. It extends the 1998 assessments for use through the 2012 tax year.

It also repeals a 2010 legislative mandate to set aside a percentage of rum excise tax revenues to speed up paying off government bonds, which Malone said would free up about $2.1 million this year.

Voting to approve the bill and its package of budget measures were Malone, Sens. Craig Barshinger, Judi Buckley, Diane Capehart, Donald Cole, Kenneth Gittens, Clifford Graham, Alicia "Chucky" Hansen, Myron Jackson, Terrence "Positive" Nelson, Nereida "Nellie" Rivera-O’Reilly, Clarence Payne III, Tregenza Roach and Sammuel Sanes. Sen. Janette Millin Young voted nay.

The Legislature also acted on several nominations, zoning changes and other items of legislation, which are discussed separately in the Source.

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The V.I. Legislature approved a package of budget cuts, new borrowing authority and intergovernmental transfers Friday in an effort to bridge a $23 to $26 million budget shortfall in the current fiscal year.

The legislation approved Friday largely comprises measures proposed by Government House in May, with several amendments and a series of line-item budget cuts worked out between senators and Government House.

In early June, Gov. John deJongh Jr.'s financial team raised the alarm, saying revenue projections were lower than anticipated and expenditures a bit higher, leaving a $23.5 million shortfall in the current fiscal year. DeJongh proposed a basket of options and suggestions for senators to choose amongst, one of which was a three-month extension of the 8 percent government pay cut the Legislature enacted in 2011. A $2.7 million supplemental appropriation for V.I. Superior Court enacted Friday expanded that shortfall to $26.2 million.

Several senators, including Senate President Shawn-Michael Malone, emphasized that the Legislature would not extend the pay cuts it previously enacted and had managed to find enough cuts to balance the budget while reinstating government employees' former pay rates.

"Through expenditure reductions, revenue enhancements and cash flow support we were able to balance the budget and reinstate salaries," Malone said in a statement shortly after the session adjourned. "The cooperation and creativity demonstrated by both minority and majority block senators was truly unprecedented," Malone said.

The bill approved Friday includes a 3 percent cut to all government departments and agencies, $10.1 million in cuts to the miscellaneous section of the FY13 budget and a $3.5 million transfer from interest earned on debt service to the General Fund.

It also authorizes the government to issue revenue anticipation notes of up to $40 million annually in order to improve cash flow in the months when tax revenues are lower than average. The debt contract would require the loan be paid in full that same fiscal year and so would not add to the overall government debt from year to year.

And it appropriates $12 million from the General Fund to the Division of Personnel to pay additional employer costs for health insurance coverage for V.I. government retirees.

The bill also increases the Bureau of Corrections’ appropriation for the current fiscal year by $3 million and makes it a lump sum budget, so Corrections can use the funds more efficiently.

And the bill reprograms $1.2 million to the Labor Department to pay interest on the Unemployment Trust Fund that was used for payments to the unemployed.

Another section of the bill directs the Office of the Lieutenant Governor to continue issuing real property tax bills at 1998 rates, thus allowing the government to issue and collect property taxes before reassessing all real property in the territory. It extends the 1998 assessments for use through the 2012 tax year.

It also repeals a 2010 legislative mandate to set aside a percentage of rum excise tax revenues to speed up paying off government bonds, which Malone said would free up about $2.1 million this year.

Voting to approve the bill and its package of budget measures were Malone, Sens. Craig Barshinger, Judi Buckley, Diane Capehart, Donald Cole, Kenneth Gittens, Clifford Graham, Alicia "Chucky" Hansen, Myron Jackson, Terrence "Positive" Nelson, Nereida "Nellie" Rivera-O'Reilly, Clarence Payne III, Tregenza Roach and Sammuel Sanes. Sen. Janette Millin Young voted nay.

The Legislature also acted on several nominations, zoning changes and other items of legislation, which are discussed separately in the Source.