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Friday, February 23, 2024


The commentary on the proposed chief financial officer for the territory is part of an essential process of educating the public with respect to the financial situation of the Virgin Islands and the realistic choices that are available. The comments fall into several categories, each of which reflects the difficulty of the situation. They are also beginning to capture what is at stake. Here are some comments on the remarks made in the Source's "Open Forum" section and at the delegate's town meeting hearings.
The Comparative Argument: A persistent argument made is that "other states" have severe fiscal problems, and that they are not placed under the control of a chief financial officer or some similar entity. Gov. Turnbull regularly makes this argument. The basic problem with this argument is that the Virgin Islands is not a state under the Constitution of the United States. It is a territory with an Organic Act that serves as a combination constitution and city charter. A more appropriate comparison is to a city within a state. Cities are the creatures of states, and, like the Virgin Islands, have no constitutional place.
There are other differences between the Virgin Islands and states. Most states are required by their state constitutions to balance their budgets. The biggest difference, however, is in the role that government plays in the Virgin Islands as compared to states or cities elsewhere. This role is the single most important factor in viewing the Virgin Islands as a case unlike any other in the United States. When New York City was placed in receivership under an "Emergency Financial Control Board" in the mid-1970s, there was an almost immediate and visible deterioration of services as municipal budgets were slashed. The "fiscal crisis" was a public-sector financing problem, but it rippled outward and had negative social, economic and other effects.
Relative to New York City, which had and still has a large public-services sector, the role of government in the Virgin Islands is far, far greater. Government was not the biggest employer in New York City. It is in the Virgin Islands. What makes the current situation so dangerous, and what will require great sophistication and sensitivity, is that the negative impacts of a government financial collapse or a severe and rapid contraction under a CFO or other entity will be broad and deep. They will be economic, social and political. Financial transparency and "tough" decisions are only part of an overall plan that must be designed to avoid a "hard landing" with massive dislocations.
The issue of transparency is a critical. No one seems to have a handle on the numbers. In this situation, the reality is almost certain to be worse than the current perception. If no one knows where the money goes, it is not possible to define solutions. It is not clear what savings can be achieved in what ways. This situation prevails in no state and in few municipalities. The lack of functioning financial systems is almost unheard of under the American flag.
Democracy: The argument that the appointment of a CFO will violate democratic principles cannot be taken lightly. One morning in 1975, 7.5 million New Yorkers woke up to discover that they were no longer being governed by a democratically elected government, but instead by a group of appointed overseers. For all intents and purposes, democracy had been suspended for a period of time. The reason was that democracy had gotten out of whack. Rather than representing the broad "indivisible" interests of all of the city's citizens, an elected government was representing only the "divisible" interests of unions and other highly organized groups.
Something similar has happened on a smaller scale in the Virgin Islands. Government employees and their families, those whose livelihoods depend on government, are such a large group that they constitute a voting bloc that essentially elects their bosses. As in New York and other places, the results are promises and commitments that cannot be fulfilled. On the way to trying to fulfill them in the Virgin Islands, enormous damage has been and continues to be done, a notable example being the systematic bleeding of the territory's non-profit service sector.
As in New York and elsewhere in these situations, democracy is restricted or suspended for a defined period of time or until certain benchmarks are achieved. There is no point in sugar-coating this reality.
Timing: The timing of the delegate's proposal represents a potentially significant problem and a possible trap. When the Emergency Financial Control Board took charge in New York, the crisis was palpable. The city had gone to the banks to borrow money as it always had, and the banks had said "no." The president refused to "bail out" the city; thus, the famous New York Daily News headline: "Ford to City: Drop Dead." In other places, the crisis or scandal was also readily apparent.
Where is the crisis in the Virgin Islands? Why is there a need for a CFO at this time? There must be answers to these questions, because, if there are not, and such a person is appointed, the first action that he or she takes that inflicts pain will bring a chorus of attacks. This never would have happened if "we" were still in control. Virgin Islanders must have an honest rendering of the situation, an explanation of why delaying action will produce far greater dislocation down the road. There must be an explanation of why there are no "pain-free" remedies, why a "bailout" isn't the solution, and why proposed steps are being taken at this time. In the absence of such an explanation, the CFO or any other entity will be undermined by the forces of the status quo and will certainly not be able to achieve the minimum level of public support needed to succeed.

Editor's note: We welcome and encourage readers to keep the dialogue going by responding to Source commentary. Letters should be e_mailed with name and place of residence to source@viaccess.net.

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