Gov. Charles Turnbull's first budget will be delayed another three weeks while the administration's financial planners slash spending, restructure parts of the government and attempt to enhance revenues.
The revised and reduced budget will be presented Aug. 24 to the Legislature.
Upon opening its budget hearings Wednesday, the Senate Finance Committee granted Management and Budget Director Ira Mills' request to give the administration more time to submit "a comprehensive budget reduction package."
"This request is consistent with the administration's commitment to partnering with each branch of government as well as the private sector and the unions, to bring about the all-inclusive solutions critical to the economic survival and recovery of the territory," Mills said.
Budget hearings, previously scheduled to take place throughout this month, will continue Friday, then Wednesday, Aug. 11, and then again Aug. 24.
Wednesday's hearing also heard legislative Post Auditor Campbell Malone sharply criticize the Turnbull administration's revenue projections as vastly inflated.
Most of the hearing concerned questions about the administration's plans to cure the worsening fiscal crisis.
Layoffs will be likely to result from the cuts, Mills said.
"We have to recognize that everyone complains about the number of persons we have on board in government who are not performing at a level that warrants their retention," Mills said. "We've asked department heads to look at their departments and see if they can identify persons who fit that description. We cannot afford to pay for non-productive employees in this government."
Finance Committee Chair Lorraine Berry asked Mills if departments were having difficulty making the 10 percent budget cuts that Turnbull ordered last month.
"We have received from a few departments the fact that for them to do an additional cut of 10 percent would create a great hardship for them relative to service delivery," Mills answered. "Nonetheless, if the resources are not there, we can't continue to spend."
In his presentation, Post Auditor Malone accused the administration of relying on taxes that will not exist and an economic boost that will not occur.
"It is my considered opinion that the budget projections are severely overstated and without sound basis," Malone said. "Many businesses have closed, the tourist season is over, no major capital projects are planned and no major private investment is known of."
"None of the parameters that could be responsible for an upswing in economic activity seem to be present at this time and we see the same scenario for fiscal year 2000," Malone said.
Senators also scrutinized the administration's plan to take out an additional $100 million loan to repay a $35 million payroll loan, pay vendors and outstanding tax refunds.
Mills said the administration is finalizing the legislation authorizing the loan and will send it to the Senate soon. He told the committee the government has "more than a 50 percent chance" of acquiring the loan.
Sen. Gregory Bennerson was wary about letting the administration plunge the territory further into debt.
"The previous Legislature approved $106 million to pay for vendor payments and other obligations," Bennerson said. "The first act this Legislature did was the Y2K loan, the second financial debt that we went into was for the payroll. One was at $31.1 million, one was at $35 million. And now you're going to ask this Legislature, again, for $100 million.
"We want to borrow ourselves into prosperity. You cannot borrow yourself into prosperity. All you're doing is delaying the inevitable."
Sen. Roosevelt David also wondered about the government's ability to secure the loan.
"I believe that the repayment ability on behalf of the government is very fickle and I also believe that the collateralization source is unstable," David said. "And in the worst case scenario, if we were unable to borrow that money . . . does it mean then that we have to turn the keys over to a control board?"
Mills, however, said there were some indications of a slight upturn in the territory's economy.
"It is reasonable to expect that modest growth in some sectors, specifically manufacturing, construction and the service industry, is achievable in fiscal year 2000, he testified. "The overall result is a positive economic growth outlook for the territory."
Mills' said the optimism was based on the construction of HOVENSA's coker plant, a new casino and, possibly, the Beal rocket assembly factory on St. Croix.
The administration has also met with persons interested in building a sports complex on St. Croix, a company that wants to operate a fish farm and relocate its headquarters to St. Croix, and another group planning to develop a hotel and casino on that island, Mills said.
Those projects may stem the increase in unemployment that has occurred this year, the OMB director said.
The territory's unemployment rate increased from 6.7 percent during the first three months of 1999 to 7 percent during the second quarter. On St. Croix alone, unemployment has risen from 8 percent to 8.6 percent.
"The most difficult hurdle that we must face as fiscal officers in the present and future budget years is on the revenue side," Mills said.
Government revenues have remained steady, but contributions to the general fund from loans are down more than 90 percent from $154.9 million in 1998 to $15.3 million in 1999, Mills said. The decrease is attributed to $143.7 million in loans taken out in 1998 that are not available this year. The $35 million payroll loan soon to be taken out by the government, however, will increase general fund contributions, Mills said.
Finance Commissioner Bernice Turnbull said the administration plans to implement a stricter financial management policy that should prevent departments and agencies from spending money they don't have.
"If a department or agency account shows an overdrawn amount, no check will be processed until the situation is resolved," Turnbull said. "This could have far-reaching implications because of payroll. However, we cannot continue to have accounts overdrawn."
The administration plans to hold its fiscal planners more accountable, Turnbull said.
"The certifying officers are charged with the responsibility of being the fiscal managers for their respective departments. However, we are finding more and more that managers are taking this responsibility lightly," she said. "It is imperative that the government of the V.I. begin to hold its fiscal managers accountable for their actions."
"We're a half-billion-dollar business and we have to operate like a half-billion-dollar business (or) pretty soon you're not going to be in business," OMB Director Mills added.
