Government Seeking Short-Term Borrowing to Bridge Budget Gap

The government has less than two weeks of funding left and will soon be unable to meet payroll, unless something changes, V.I. Budget Director Nellon Bowry told the Senate Finance Committee on Wednesday.

Bowry and Gov. Kenneth Mapp’s financial team urged the Legislature to approve three pieces of legislation to let the government borrow now, based on anticipated revenues later in the year.

Currently this year’s budget deficit stands between $90 and $110 million, Bowry said. The government has made up part of the shortfall by reducing all agencies’ allotments by about $25 million and by deferring $35.5 million in tax refunds until funds are available, Bowry said.

That helps with $60.5 million of the gap "hence the need for the $60 million bond borrowing authority" sought in the bill, Bowry said.
"It’s going to come to a point when the Finance Commissioner is not going to be able to meet payroll," Bowry said.

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The committee held the bills pending the call of the committee chairman, Sen. Clifford Graham. There was little opposition to the bills’ overall goals, but some senators expressed concerns about the details.

One of the measures [Bill 31-0147] expands a 2013 law letting the government borrow up to $40 million in each fiscal year, secured by anticipated tax revenues, to smooth out cash flow problems. It would increase the borrowing cap to $60 million and eliminate the requirement it be paid back the same year.

Several senators were concerned about simply eliminating the time limit for repaying the loans.

"I believe simply removing the language about not limiting repayment to a single year, I think that should be tightened," Sen. Tregenza Roach said, suggesting it be amended to limit repayment to 24 months.

Sen. Kurt Vialet asked if a 24-month time limit would work and Bowry said it would.
 

Sen. Terrence “Positive" Nelson said, “Borrowing an additional $20 million to address the deficit will resolve a fraction of the problem. A holistic comprehensive financial plan needs to be created that will cover the overall debt of GVI.”

Sen. Janette Million Young said, “I don’t really approve of borrowing. However, it is needed. We need to strategize on ways to grow the economy by bringing more businesses and companies to the territory.”

The other two bills before the committee would work together.

One [Bill 31-0148] would let the government borrow short term by issuing up to $50 million in real property tax revenue anticipation notes this year and for up to 80 percent of anticipated property tax in future years.

The other [Bill No. 31-0149] would authorize the Office of the Tax Assessor to issue the real property tax bills for a given calendar year based on the current year.

Tax Assessor Ira Mills said the problem is that the 2015 tax bill is due to be issued this year, in August, but the revenue will not arrive in time to help this year’s budget. The loan would help bridge the gap and essentially let the revenues be used in this fiscal year instead of the upcoming one, according to Bowry and Mills.

The bills were scheduled to be introduced in session Wednesday, but Senate President Neville James said he felt senators needed more time to digest and analyze the measures.

James and other senators said the stop-gap measures may be necessary, but would not address the underlying, structural imbalances in the budget.

"I look forward, when we go into session, to hopefully supporting these measures and, beyond that, hopefully support other measures so that we will not again be in this predicament," James said.

The committee voted unanimously to hold all three measures pending the discretion of the Graham.

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