June 6, 2003 – The League of Women Voters will see some bright spots in amendments the Senate Finance Committee made Thursday to Gov. Charles W. Turnbull's proposed fiscal recovery package.
The senators threw out virtually all of the governor's proposed business tax increases. And they approved his funding plan for waste collection and disposal and sewer projects. And they held in committee the $235 million bond issue he proposed as an immediate cure-all for the territory's financial deficit. (See "Finance axes gross receipts tax increase".)
Rosalie Simmonds Ballentine, league president, addressed the Finance Committee Thursday during its meeting to consider Turnbull's proposals. She began by reiterating the league's statement on the 2003 Omnibus Bill: "When will the government of the Virgin Islands shelve its crisis-to-crisis management style?"
"We ask that question again," she said.
Ballentine noted that "barely four months before the end of this fiscal year, the executive proposed a plan to cover a projected $144 million deficit, not even an exact figure." She wondered: "Is it true that closing this gap will only meet this year's operating expenses?" Prior years' obligations — such as amounts owed to the Water and Power Authority — have not been included, she said.
She also said that, with the recently enacted federal income tax reduction and the territory's mirror tax system, the deficit "will increase as personal income-tax revenues decrease."
Ballentine minced no words regarding the stiff new and increased taxes that Turnbull proposed. "It is the league's position that new or increased taxes must not be imposed until such time as there has been a vigorous program to reduce the cost of operations and an aggressive tax collection program," she said.
Altogether, she said, the league is "keenly aware" that the federal tax cut, a lack of adjustments to account for prior-year obligations and the projected outcome of current 90-day tax amnesty programs will all impact on the fiscal year 2003 deficit. She urged the governor to revisit his projections to "arrive at more realistic revenue and expenditure estimates."
Two amnesty programs are in progress: on pre-1999 property taxes, through Aug. 26, and on pre-April 2003 gross receipts taxes, through Sept. 2.
The league suggested a number of cost-reduction and revenue-enhancement options to address the fiscal crisis:
Short term cost-reduction options:
– Reduce by 50 percent the sizable salary increases granted last year to exempt employees, which reportedly have an annual price tag of $7.9 million.
– Defer Earned Income Credit payments, an annual expense estimated at $16 million to $20 million.
– Prorate the health insurance premium payments of retirees and active employees.
– Decrease government contributions to the Government Employees Retirement System by 3 percent and increase employee contributions by the same rate.
– Reduce the Legislature's operating costs by 15 percent starting July 1. The Legislature's budget has already been cut by 14 percent.
– Suspend provisions of Act 4440 relative to negotiating for economic issues for at least three fiscal years in order to mitigate the steady climb of executive salary increases.
– Initiate an aggressive program to collect the reported $150 million outstanding in accounts receivable, including individual and corporate income taxes.
– Enact legislation to require that all proposed tax measures be analyzed and recommended by the Tax Study Commission.
– Enact legislation to discontinue the practice of extending tax exemptions beyond the first benefit period.
Long-term cost-reduction options:
– Enact legislation setting a cap on the cost for personal services and fringe benefits that the General Fund may pay out in a given fiscal year.
– Establish a financial control board to monitor the implementation of programs or plans for elimination of the deficit.
– Adopt the policy of the federal government not to negotiate for wages. Instead, develop an effective merit system that provides for annual increments based on satisfactory performance.
– Pursue further privatization of government services.
– Limit Economic Development Authority tax exemptions to a single seven-year start-up period for new businesses.
– Increase the real property tax rolls and annual cash flow by selling government-owned real properties not in use, or for which plans do not exist.
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