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TURNBULL STILL SEES BORROWING AS ANSWER

June 20, 2003 – In a statement from Government House on Friday night, Gov. Charles W. Turnbull said he hopes the Senate will be "meeting again soon to consider my request to borrow" a total of $235 million, something legislators did not even consider doing in the two long days of a full Senate session this week.
Instead, Senators approved borrowing $30 million from the Insurance Guaranty Fund, a move intended to allow the government to make its next two payrolls. (See "Senate allows tapping Insurance Guaranty Fund".)
But Turnbull said he would "not jeopardize the solvency of the Insurance Guaranty Fund" on the brink of hurricane season.
Turnbull announced in May that the government was facing a $115 million deficit for the current fiscal year, with a cash shortfall of $29 million expected at the end of June. He then sent a package of bills to the Senate calling for new and increased taxes and for borrowing $235 million – $100 million for operating costs and $135 million for capital projects.
As senators met with the governor and his financial team behind closed doors and as finance officials grappled with the numbers, the projected deficit rose to $152 million.
Turnbull said on Friday that the measures the Senate came up with this week for reducing the budget and raising revenues fall "far short of the $152 million comprehensive plan I submitted and which is required to solve the deficit."
The governor also expressed concern about the Senate's reduction of the overall Fiscal Year 2003 appropriations by $55 million – which actually amounts to a savings of $9 million on top of $46 million already cut through an allotment-withholding process early in the year.
"It will be particularly difficult to absorb an additional $9 million reduction only in the fourth quarter of the fiscal year without a significant impact on personnel – in short, laying off many government workers," Turnbull said. And that is something he has vowed to avoid.
The Senate initiatives include a plan to ask the Hovensa oil refinery to prepay up to $14 million of its property taxes. The governor said there is "no certainty" of this happening and, indeed, that it "may not come to fruition."
Turnbull also said in his statement Friday night: "While my financial team is still analyzing the total impact of the measures passed during the two-day session this week, it appears that the revenue-enhancement initiatives and expenditure cuts approved only amount to approximately $35 million."
This is not the first time Turnbull has asked to borrow money. In 1999, during his first year in office, the government, with the blessing of the 23rd Legislature, borrowed $300 million to pay vendors and overdue tax refunds in the belief that putting money back into the pockets of Virgin Islanders would stimulate the economy. Business leaders, however, were not convinced.
Noel Loftus, then St. Croix Chamber of Commerce president, harkened back to former Gov. Roy Schneider's borrowing of $106 million under the same theory.
In October 1999 Loftus told the Source: "We tracked it, and it didn't even make a blip. It didn't even turn the economy for a week." He said people used their vendor payments and tax refunds "to pay off bills and set it aside."
John P. deJongh Jr., St. Thomas-St. John Chamber of Commerce president at the time, said then that he wasn't against the $300 million bond issue. But he said that it was imperative for the administration to develop an economic recovery plan — which deJongh, as chair of a task force named by the governor, and his associates went on to produce.
Their "Five Year Operating and Strategic Financial Plan" for the most part was never implemented. Many feel the government went on with "business as usual" – behavior predicted to bring the V.I. treasury to exactly the place it is today.
In 1999, Margaret Guarino, a financial consultant to the V.I. government, said business as usual would bring the territory's spending deficit to $954 million within 10 years. The deficit was $58 million at the time. Again last May, in confidential memo, Guarino told government officials to expect a "significant cash shortfall."
The "Five Year Operating and Strategic Financial Plan" released in April 2000 predicted that "business as usual" would bring about a $114 million deficit "by year three" of the plan. That would be 2003.
As the governor has stated on many occasions, no one could have predicted the events of Sept. 11, 2001 and their financial impact, or the downturn in the mainland economy.
In his statement Friday night, Turnbull said: "The Legislature must continue to work together with the executive branch to boldly approve a complete package of reforms that will eliminate the projected deficit and restore fiscal balance without eliminating services or requiring employee layoffs."
Along with borrowing $235 million Turnbull's plan included:
– An increase in the gross receipts tax to 4.75 percent from 4 percent.
– A new 2 percent excise tax on imported food items.
– New "environmental excise taxes" of 2 cents a pound on items manufactured in the territory or imported for business purposes and of 20 cents a barrel for crude oil refined in the territory and petroleum products imported into the territory.
– A rental car surcharge of $5 a day.
– A hotel room surcharge of 2 percent.
The Senate rejected all of those measures but approved an environmental "user fee" of 2 cents a pound on Thursday on most items brought into the territory for business purposes.
It also approved a property tax amendment which will allow the territory to send out about $45 million in tax bills. This is predicted to bring $8 million into the coffers by the end of the fiscal year on Sept. 30.
The bill seeking approval to borrow $235 was not on the agenda for the Senate full session. Two weeks ago, all 15 senators told Turnbull they would not take up the measure unless and until he rolled back sizable salary increases he gave exempt government employees last year.
The governor's response a week ago was an offer to impose relatively small pay cuts, for the last six months of this year only, of 2 percent to 10 percent on a sliding salary scale. The Legislature has not responded formally to that offer, and the bond issue bill remains before the Finance Committee.
Turnbull said on Friday that "piecemeal solutions are unacceptable and unworthy of the trust and confidence placed in us by the people of the Virgin Islands who elected us to make necessary and difficult decisions."

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