The economy is picking up a little and government revenue collections are moving upward, helping to reduce this year’s deficit and improve next year’s revenues, but the territory is still struggling financially, Budget Director Nellon Bowry told senators during a budget wrap-up hearing Tuesday. [Mapp FY 2016 Executive Budget]
"As of July 31 … this fiscal year’s overall General Fund collections were up by slightly over 9 percent in all major tax categories as compared to the same period for the last fiscal year," Bowry said. Corporate income tax increased the most, at 15 percent, followed by individual income tax, at 12 percent, according to Bowry.
That helps, he said, but does not eliminate the territory’s budget woes. It has helped the current Fiscal Year 2015 budget deficit, which takes some pressure off the next year’s budget, Bowry added.
"Our most recent estimate of the Fiscal Year 2015 General Fund deficit is approximately $89 million. You will recall that the shortfall in General Fund revenues versus appropriations was estimated earlier in the fiscal year, at approximately $144 million," Bowry said.
Bowry attributed the roughly $55 million reduction in the deficit to a $51 million increase in net revenues and contributions and a $4 million decrease in General Fund appropriations. He said the $89 million gap will be closed by a combination of $25 million in withholding of appropriations via the allotment process; $25.5 million withholding of tax refunds; and $40 million in borrowing through the territory’s working capital line of credit.
Overall Bowry said OMB is reaffirming the position it took at the beginning of the budget process this year, saying the V.I. economy "has already absorbed, although definitely not recovered from, most of the negative impact of the 2008 Recession and the Hovensa refinery closing, and that there is a basis for cautious optimism in the economic landscape.”
Cash remains tight and the territory still only has about 8 days of cash on hand, according to Bowry.
To help make ends meet, Finance Commissioner Valdamier Collens recently drew down an additional $20 million under its existing line of credit, Bowry said, crediting the Legislature for enacting legislation to let that happen. He also said the PFA is already in negotiation with a local bank to finalize the $50 million property tax revenue anticipation loan the Legislature authorized earlier this year. (See Related Links below)
With budgets cut to the bone, growing the economy is the best way to improve the government’s finances and budget balance, according to Bowry.
“We have to be vigilant in improving the productivity profile of the economy. It will require careful and structured management,” he said.
Sen. Marvin A. Blyden asked about when the next batch of income tax refunds would be sent. Bowry said it would depend on when the Department of Finance released the funds and he and other members of the governor’s financial team said that it would depend on the government’s cash flow position.
Along the same line, Sen. Clifford Graham, the Finance Committee chairman, asked how much was left to pay on 2014 income tax refunds.
Bowry said that of the $60 million in refunds initially due, about $16 million still needs to be paid.
Officials said that they would like to pay the balance by the end of the fiscal year, on Sept. 30, but doing so would require a significant cash infusion, likely from the revenue anticipation loan.
No votes were taken at the information gathering hearing. All members were present.