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Charlotte Amalie
Thursday, March 28, 2024
HomeNewsArchivesDeJongh to Rotary: We Need to Tackle Deficit Right Now

DeJongh to Rotary: We Need to Tackle Deficit Right Now

If the government and Legislature do not take the painful steps right away to address this year’s $40 million budget deficit, the cost and pain will only increase, Gov. John deJongh Jr. told Rotarians at Gertrude’s Restaurant on Wednesday morning.

Most Virgin Islanders know about the challenges facing the government, but not all the news is bad, deJongh told Rotary Club of St. Croix Mid-Isle members. While the closure of the Hovensa refinery, government layoffs and a decline in cruise traffic have all taken their toll, especially on St. Croix, employment and tax revenues have stabilized and there are signs of growth, he said. DeJongh gave a broad overview of the territory’s economy and his administration’s economic plans, goals and hopes.

But as the territory moves forward, "the question is how do we deal with the most current problem that we have: That’s the $40 million deficit, looking at Fiscal Year 2014?" deJongh asked. "With nine months left in this fiscal year, if we don’t address it sooner rather than later, then it will cost us more than $40 million in order to address it in this current fiscal year," he said.

He said his administration has met recently with the Legislature to look at capital projects, and whether any help for the budget could be found there, and to give the latest revenue and expenditure numbers.

"They have looked at each and every project that we have – federally funded, locally funded, bond funded. Can we move monies from those projects to be able to help the budget? I think they feel comfortable knowing the answer to that is no," deJongh said.

"The question now is ‘Where do we go from here?’” deJongh said. "The $40 million is a tough nut to crack. When Detroit declared bankruptcy, its deficit was $65 million. So how do we address that? We’ve reduced government employment from about 7,000 to about 5,500, on the General Fund. We have reduced our expenses in each year in a manner that allows us to streamline but, at the same time, we still have core expenses we have to meet each and every day," deJongh said.

The challenge is "how do we deal with a deficit that is structural, that has been ongoing, in a manner that allows us to not have a disruption to our community," he said. "Together some very difficult choices will have to be made in a very difficult year." In a year when others are running for reelection, some may want to shy away from difficult short term-choices now, deJongh said, adding "the only way we will get there is by the community saying that you have got to address these decisions now."

Rotarian Francois Dominique asked deJongh what he proposes to fix the deficit. DeJongh said the administration suggested a laundry list of possibilities to the Legislature, including adding unpaid holidays, furloughs, "that we look at some revenues measures and that we prune certain areas in terms of employment and shift it towards federal funding."

"There are a host of areas we looked at that we think in the aggregate – it all depends on the appetite that they have – can close it," deJongh said. "The Legislature is in charge of the purse strings so what we have done is give them a laundry list and said lets sit down lets look at these areas and see what we can come up with," he said.

Another looming crisis is the GERS unfunded liability of $1.8 billion, he said.

"The only in the long term we are going to be able to address the unfunded liability of GERS is by increasing the amount of the annual contribution from the government in a meaningful way," deJongh said. It is a nationwide problem and people are talking about whether we need a national institution to insure public pensions, he said.

DeJongh said his original plan for GERS was to devote a portion of new rum revenues to the problem, but the recession changed those plans.

"The current plan … which I have submitted to the Legislature to review, is to increase the employer contribution by 2 percent starting in 2015," he said. That will slow or stop the unfunded liability from growing more but will not make it go away, deJongh said, adding he sees no way to fix the problem in the next year.

"The only way to address it is by revenue growth," and the way to increase revenue is to make sure the economy is stable and growing, he said.

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