Aug. 21, 2007 — Continuing a discussion from Monday, the Senate's Finance Committee Tuesday continued to pepper the governor's financial team with questions about increased revenue projections and the impact of new property-tax values on local residents.
On Monday, financial team members said that revenue projections for fiscal year 2008 have increased by about $26.1 million. While the Legislature makes the final call on how the money will be spent, the administration has recommended a supplemental budget appropriating the additional funds.
If the Legislature incorporates the supplemental budget in the FY 2008 budget proposal, about half of the extra revenues would go toward paying off prior years’ obligations, including overtime pay for officers in the Bureau of Corrections and wages owed to V.I. Fire Service employees.
About $10.2 million would fund recent appropriations made by the Legislature, explained Nathan Simmonds, the governor's senior fiscal policy advisor.
The supplemental budget notwithstanding, the FY 2008 budget proposal remains the same, with about $799.2 million worth of recommended appropriations from the General Fund. With other anticipated revenue sources — including federal funds — factored in, the government's overall spending plan for the upcoming fiscal year adds up to some $1.2 billion.
New revenue projections for FY 2008 total $825.3 million.
Factored into the collections figures is an increase in property taxes, which financial team members had previously anticipated to come in at about $96 million. Since new property-tax values have jumped by about 60 percent — representing some $12 billion in real taxable property within the territory — collections are slated to total approximately $123 million, Simmonds said.
Though it is not yet known what the new property-tax rate will be, Simmonds added that without an increase in real property collections, there will be no significant spike in overall revenue projections.
Calling the increase a "necessary evil," Sen. Ronald E. Russell suggested that the administration look at gradually raising the property-tax rate instead of immediately hitting residents with high bills. Then any increase in collections could be counted as a new funding source, which could be put toward funding such initiatives as a universal health-care plan for local residents, he said.
Building on Russell's statements, Sen. Juan Figueroa-Serville noted that delinquent property-tax collections are currently pegged at around $65 million. Raising property taxes any further could put additional financial strain on local households and continue to raise the outstanding amount owed to the government, he said.
The need to diversify the government's revenue streams was a major point of discussion Tuesday, as senators looked over tax collections pulled in over the past few fiscal years. Instead of continuing to take money from the General Fund to cover costs such as capital projects, the government could begin to take advantage of other sources such as gross- receipts taxes or returns made on investments, senators said.
Financial team members agreed, explaining that revenue collections will begin to hit their limit at some point if new funding sources are not identified.
In the meantime, the government needs to keep better track of the revenues it collects and the costs it incurs, senators added. Specifically, government fund balances need to be kept up to date, and should, at the end of the year, add up to the same figures recorded at the Department of Finance, said committee chairman Sen. Terrence "Positive" Nelson.
A few of the government funds have negative balances, which are not reflected on balance sheets submitted by the government, he noted.
In response, Finance Commissioner Claudette Watson-Anderson explained that there are specific accounts set up for various departments and agencies. When money is deposited into the account, the balance is recorded in the new enterprise resource planning system (ERP) — a government-wide database set up to hold financial data and other records.
Problems occur, however, when money is deposited in incorrect accounts, she said. Office of Management and Budget Director Debra Gottlieb added that records keyed into the old financial-management system contain incorrect fund balances, which the government is now trying to reconcile.
"That is still an ongoing process," Gottlieb said.
The Finance Committee will continue meeting with financial team members over the next month to ensure that senators are kept up to date with the government's fund balances, revenue projections and expenses before the close of FY 2007, Nelson said.
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