June 12, 2002 – Gov. Charles W. Turnbull held out an olive branch of sorts to the Legislature on Thursday, but the branch may be too short, and it doesn't regenerate.
Turnbull, in a sketchily organized press conference on St. Croix, announced that he has "reluctantly decided to reduce the salaries paid to exempt workers." The reductions he is proposing, however, are but a small part of the hefty raises he approved more than a year ago.
He is proposing to roll back salaries between 2 and10 percent, depending on current levels, for any exempt employee making more than $40,000 a year, and only for a six-month period starting July 1.
The raises as proposed last year averaged 24.19 percent for upper-level employees and 20.18 percent for mid-level employees.
Turnbull said that his proposed cuts, on an ascending scale depending on salary bracket, will save the government $900,000.
He also announced that the projected deficit for the fiscal year ending Sept. 30 has risen again — to $152.4 million from the $144 million figure last cited by his financial officials. He said the latest figure takes into account the federal income tax reductions scheduled to go into effect in July, which will be mirrored locally, and what he described as the continued downturn in the economy.
Senators had mixed reactions to the governor's pay-raise rollback plan. Some considered it a "goodwill" gesture, while others, while not wishing to be named, termed it a "Band-Aid" and a "palliative."
Turnbull pointed out that "these salary reductions do not solve the enormous problem facing us." And for that reason, he said, "it is imperative the Legislature act expeditiously on the comprehensive package I submitted May 20."
The governor and the Legislature have been at loggerheads over his proposals to address the fiscal crisis. In addition to raising existing business taxes and adding new ones, he wants to float a $235 bond issue. All 15 senators told him explicitly in a letter that it's no dice; until he rolls back the exempt raises, they will not approve any borrowing. (See "Turnbull defends his fiscal plan, raps Senate".)
A dozen senators met with the governor and his financial team for 11 hours on Monday and the Senate members and administration officials convened again Wednesday afternoon. Senate President David Jones called the meetings "fruitful." However, he said on Thursday, there was "an impasse when it came to the point of borrowing. We do need to bridge the financial gap in the short term; however, the Legislature's position was articulated in the letter we sent the governor."
"A goodwill gesture to begin the process"
Referring to the rollbacks proposed by Turnbull, Jones said: "Clearly their intent is not to arrive at any significant impact. It's a goodwill gesture on the executive branch's part to begin the process of reducing expenditures, especially personnel costs."
Asked if the "gesture" would be acceptable, Jones said: "The jury is still out on that. We have to make that determination, and there is always room for compromise. The governor has responded by reducing the salary increases."
Further, Jones said, "It is my intention for all 15 senators to meet as a body to analyze [the governor's statement]. I've not set a firm date yet, but it will be before Tuesday." He said the meeting would be a closed caucus, not a public Senate session.
Several other senators concurred with Jones that the Monday and Wednesday meetings ended in a stalemate. They expressed frustration at what they said was the administration's simply bringing to the table the same plan the Finance Committee voted down last week, with few modifications.
Sen. Emmett Hansen II said he isn't going to any more meetings. "They brought up the same things," he said of the administration financial officials. "Of all the things we talked about, the overlying concern has been 'Don't touch my money!' That's the only thing we are hearing at this point."
Hansen added: "I wasn't in favor initially of meeting with them last week, but in the best interests of everybody, I went along. I feel it set us back — a good-faith gesture not returned."
What really upsets Hansen is the money that is out on the street while the governor is proposing to raise taxes. "There are a number of things we need to look at," he said. "Look at what we are not collecting from last term — $80 million on the street in uncollected property taxes. We still don't have a list of delinquent taxes."
And "the $80 million needs to be broken down," he said. "What does it represent — residential? commercial? And then there's the $65 million in exemptions. Who is getting these exemptions? Given our low rate of taxation, how can we possibly total $65 million?"
"We have been acting in good faith"
Hansen said the 25th Legislature has been doing its job. "The administration has to do what it has to do, and we'll do the rest. We have been acting in good faith."
Sen. Louis Hill was somewhat more sanguine about the meetings, but not satisfied. "Lots of ideas came, different ideas," he said, "but they didn't gain the support necessary to move forward; so we were never able to reach a consensus. In a way, I think they were not very productive."
Hill said the administration presented "essentially the same taxing proposals they had before. That has always been the cornerstone of their argument, and we have been in constant dis-agreement. Because of that fundamental difference, everything else got lost in dialog."
As for the governor's action announced Thursday, Hill said: "That's his response, except he hasn't rolled back the raises. What he has done is salary cuts. It's a beginning, somewhere to start. As you can see, the $900,000 doesn't in any way approach the issue."
Hill said he is bothered by what he sees as a "lack of urgency" on the part of the administration officials. "Their action doesn't represent that type of deficit," he said. "I wonder whether we actually have that acute a financial crisis."
What the governor has done now "is respond to the Senate's request and asked that the rest of the agencies make reductions," Hill said. "The semi-autonomous agencies won't have any impact on our financial crisis — they don't affect the General Fund. The lion's share of the cuts have to come from the executive branch to have any significant impact."
Turnbull called on the Legislature, the Territorial Court and autonomous and semi-autonomous agencies and instrumentalities to "institute salary reductions in a similar manner."
Sen. Carlton Dowe said the administration "brought back the same propositions. The only thing, they reduced the gross receipts tax a little." (The 18 percent gross receipts tax increase was voted down by the Senate Finance Committee last Thursday.)
Dowe added: "I continue to say I stand by the letter we sent and by the 25 points the minority prepared." And, he said, "both sides have looked at the reductions and revenues." Dowe said on Tuesday "we will move some amendments. If there is any borrowing, I am going to incorporate a capital project of $30 million for a government complex. We spend $10 million annually on rent."
As for the meetings, he said, "Discussion is always good, but I wasn't satisfied."
The governor in his address apologized to the unclassified employees whose salaries he has offered to cut for the next six months: "It is my sincere hope that if there is a sudden upward change in the economy, we wo
uld be able to reinstate these salaries," he said.
However, he had already said the raises were from July to December.
Turnbull said no salaries under $40,000 would be cut. The reductions are:
– 2 percent for employees earning $40,001 to $ 50,000.
– 3 percent for employees earning $50,001 to $65,000.
– 5 percent for employees earning $65,001 to $75,000.
– 7 percent for employees earning $75,001 to $80,000.
– 10 percent for employees earning more than $80,000.
What the cuts would mean
Under Executive Order No. 401-2001, all commissioners' salaries went last year from $65,000 a year to $85,000 — an increase of 30.77 percent. Under the governor's new proposal, they would drop 10 percent for the second half of the current calender year, meaning these officials would end up getting $80,750 this year — still 24.2 percent more than they were making before the raises.
A few other representative examples of how the governor's proposal would affect employees:
For the territory's two district deputy school superintendents, the governor's proposed increase last year was from $62,000 to $82,000, a 32.26 percent hike. On that basis, they would see a 10 percent drop for the last half of the year. Thus, their 2003 pay would come to $77,900 — which is 25.6 percent more than they were paid before the raises.
For the assistant Tourism commissioner, the proposed raise last year was from $58,000 to $80,000 — a 37.93 percent increase. On that basis, there would be a 7 percent cut for the last half of this year. That would being her 2003 earnings to $77,200 — or 33 percent more than she received before last year's raises.
For the two assistant commissioners of Housing Parks and Recreation, the proposed raises were from $52,500 to $75,000 — an increase of 42.86 percent. On that basis, they would get a 5 percent cut for the last half of 2003. Their earnings for this year thus would total $73,125 — or 39.9 percent more than they were paid before the raises.
The governor's confidential assistant, who got two raises under the executive order, from $45,000 to $58,000 (a 28.9 percent increase) and then to $65,000 (for a cumulative increase of 44.4 percent ), would be subject to a 3 percent cut for the last half of this year. That would bring his 2003 salary to $64,025 — or 42.3 percent more than he was earning before the raises.
For the public relations coordinator for the Planning and Natural Resources Department, the proposed increase last year was from $38,000 to $45,000, or 18.42 percent. On that basis, she would be subject to a 2 percent cut for the last half of this year. That would make her 2003 earnings $44,550 — or 17.3 percent more than she was getting at the start of last year.
(For an itemized list of last year's proposed increases for nearly a thousand exempt government employees under Executive Order No. 401-2002, go to the Source Community/Data: section and type the word "exempt" into the search engine at the bottom of the page. A total of 12 files will be displayed.)
The governor did not formally announce his press conference Thursday; and its time could not be ascertained until it began. A caller to Government House on St. Croix was told it would be at 2 p.m. time, but that was changed to 3 p.m. It was carried by WSTA Radio some time after 3 p.m.
In answer to reporters' questions, as relayed on WVWI Radio's 5 p.m. newscast, the governor once again laid responsibility for solving the financial dilemma on the Legislature. "As far as I know," he told a questioner, the Senate "has no comprehensive plan. The Senate needs to act right now. I expect, it is very necessary to act now. The month of June is a concern."
Admitting that his proposed pay reductions won't solve the problem, he said the lawmakers "need to take the [administration's] revised package back."
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