Sept. 24, 2001 – While top public officials in other tourism-intensive jurisdictions in the nation are calling for budget revisions to reflect a drastic drop in revenues as a result of the Sept. 11 terrorist attacks, those in the Virgin Islands have either rejected the need for such changes or have yet to address the issue.
The administration's proposed Fiscal Year 2002 budget goes before the Senate for a final vote Monday and/or Tuesday with the total dollar amount of appropriations virtually unchanged from the $551 million Gov. Charles W. Turnbull submitted on July 17.
Although the money has been moved around, with cuts to some agencies and increases in other areas, the package of 20-some bills as passed by the Finance Committee on Thursday and the Rules Committee on Saturday totals a record $550.9 million — up from $429.6 in the Fiscal Year 2001 budget adopted a year ago.
In Florida, Hawaii and Puerto Rico, the focus is on the need to reduce spending to reflect reduced revenues.
In Florida, Gov. Jeb Bush said on Thursday that he would call state lawmakers into special session later this fall to re-balance the state's budget. "The writing is on the wall, and we cannot ignore the obvious fact that Florida has been impacted by the tragedies," he said, adding that the government must "come forward with a plan to carry Florida through the worst of any future budget shortfall."
Bush also wants the legislature to consider ways to improve Florida's economy and suggested that state aviation fuel taxes could be spent on incentives to help the airline industry. Based on the slowing national economy, state economists had projected in early September — before the terrorists attacks — that Florida would end its current fiscal year, which runs until next June, with a $265 million deficit.
Small crowds have been reported at the state's theme parks, notably Disney World and other attractions in the Orlando area, and hotel occupancy has dropped sharply.
Bush did not indicate when he would call the special session. The Florida Legislature meets only 60 days a year in regular session. Senate President John McKay said the session should not be until November. "It's going to be very difficult to accurately forecast the amount of cuts that must be made, since no one has ever gone down this path before," McKay said. Support for waiting until better economic indicators are available has bipartisan support among the legislative leadership.
The Associated Press reported on Thursday that Florida is considering a new emphasis on advertising directed at people willing and able to drive to their vacation destinations, rather than fly. Meantime, over the weekend, Gov. Bush said Floridians themselves should consider it their "patriotic duty" to shop, eat out and travel.
In Hawaii, the number of people on Waikiki Beach in front of the Moana Surfrider Hotel "dropped 80 percent last week," the Associated Press reported, and hotel occupancy statewide plummeted from 70 percent to half that. Gov. Ben Cayetano was quoted by the AP in Honolulu on Thursday as saying "As the tourist industry goes, so will the rest of Hawaii's economy."
Cayetano said on Thursday that he will call the state legislature into emergency session in the second week of October. The Honolulu Star-Bulletin reported that he will ask the lawmakers "to approve legislation to use certain state funds to help offset deficits in the state budget and to provide some sort of tax relief to Hawaii residents and businesses."
The newspaper said the initiatives Cayetano has in mind "include possibly lowering the state capital gains tax, which is now at 7.5 percent, as well as using the state's rainy-day fund set aside from part of the nationwide tobacco settlement and the Hawaii Hurricane Relief Fund to offset deficits in the state budget. The governor also wants to extend unemployment benefits to those affected by the economy and find ways to encourage Hawaii investors to keep investing in the islands.
Also, the AP reported that Cayetano said he was waiving airport landing fees to save airlines some $36 million a year.
The Hawaii Legislature is not scheduled to convene in regular session again until next January. The Senate's Republican leaders called early last week for a special session. Leaders in both the Senate and the House said they have already begun reviewing the state budget to see what can be done, with both majority and minority caucuses involved in discussions. House Speaker Calvin Say noted that the lawmakers will "need to work with the business and organized-labor sectors for approval," the Star-Bulletin reported.
Puerto Rico
In Puerto Rico, where tourism, while not the greatest source of revenue, nevertheless pumps $2.4 billion into the government coffers and accounts for some 14,000 direct jobs, Gov. Sila Calderon has not called for a revamping of the budget.
However, Caribbean Business reported on Thursday, "Already late for this year, Puerto Rico's brand-new destination campaign will have to be postponed further. The New York area is Puerto Rico tourism's bread and butter. Running beautiful TV ads luring New Yorkers to get on a plane to Puerto Rico this winter might even backfire." The television campaign in key U.S. markets had been scheduled to start on Oct. 15.
Caribbean Business quoted Reinhard Werthner, president of the Puerto Rico Hotel and Tourism Association as saying, "Right now it could be a waste of money. We must wait until the country is ready to move on." But it also quoted the P.R. managing director of American Airlines, Enrique Cruz, as saying, "No later than 30 days from now, the island's tourism executives should be ready to launch the destination promotion, full speed ahead."
The Virgin Islands
In submitting his budget in July, Turnbull indicated he was counting on an upswing in the V.I. economy to fund the record expenditures. His fiscal aides told the Senate Finance Committee on Aug. 22 that the territory's economy was headed for full-scale recovery in the coming year, fueled by increased tax collections and millions of dollars in projected and actual private-sector development.
Sens. Lorraine Berry and Emmett Hansen II wrote to the governor after Sept. 11 urging him to rework the budget in light of the drastic drop in tourism and, thus, in the territory's revenues, and Sen. Vargrave Richards said airline cutbacks make a budget review essential. None of them sits on either the Finance or the Rules Committee.
Sen. Adlah "Foncie" Donastorg, a Finance member, suggested during Thursday's session that a "round-table discussion" on the budget be held "to ward off a possible crisis in the next few months." The reply of Sen. Alicia "Chucky" Hansen, committee chair, was that the budget worked out by the committee and the majority bloc over two months was the budget that would go through. "You can't use the disaster to sabotage the budget," she said. "There are means in place to secure the avenues of our economy." Freshman Sen. Norma Pickard-Samuel then declared, "Osama bin Laden couldn't stop this budget."
One budget change Hansen introduced and saw to passage was a provision that money in the Tourism Advertising Revolving Fund be used exclusively for tourism advertising. It has been a legislative habit in the past to tap the fund to finance the territory's three annual carnival celebrations and to pay for other pet projects.
What the territory's plans were for winter-season advertising before Sept. 11 and what they are now is unknown. Source requests to the Tourism Department for information on these and other matters have gone unanswered for months.
Meanwhile, Hansen has proposed that the government donate $10 million to New York City for the terrorism victims and that the terri
tory acquire a part of the federal government's multibillion-dollar airline bailout and use the money to subsidize airfares so as to attract tourists to the Virgin Islands. She also suggested wooing Puerto Rican tourists by offering subsidized ferry and airline service.
The governor has made no public comment on his FY 2002 budget vis a vis the economic impact of the terrorist attacks in the Virgin Islands. Neither he nor Lt. Gov. Gerard Luz James II, whose office includes the Banking and Insurance and Corporation Divisions, attended a meeting on Friday where the territory's four main business associations presented a plan to stave off economic chaos.
The plan includes deferring payment of gross receipts taxes and WAPA bills for four months and calls for the immediate creation of a Tax Reform Commission that would have 30 days to come up with its own plan.
Caribbean Business cited a report from financial analysts PricewaterhouseCoopers saying that, in the wake of the terrorist attacks, the U.S. hotel industry is facing its worst performance in more than three decades.
The economic impact on the airlines is multi-faceted: the loss of business during the two days that the Federal Aviation Administration grounded civilian flights; sharply reduced passenger loads since regular air service resumed; the cost of increased security; and a possible increase in fuel costs if the United States embarks on military action.
The immediate response of the airlines has been to curtail service and lay off employees by the thousands. Industry analysts say a likely response to come will be increased fares — at the same time that passengers are experiencing increased inconvenience in air travel. Thus, even if potential travelers overcome their current fear of flying, there will be other disincentives for their traveling by air.
For overnight visitors to the Virgin Islands, that's the only way to get here.

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