May 30, 2008 — A lag in real property tax collections and a downturn in the national economy has put a strain on the government's finances over the past few months, but the governor's $867.3 million spending plan for fiscal year 2009 aims to get the territory through these challenges and onto better footing in the face of rising costs for personnel, health insurance and energy.
"Many of the longstanding and deeply rooted challenges we face as a government and as a community were made worse this year by economic and financial developments that are well beyond either our control or even our ability to significantly mitigate," wrote Gov. John deJongh Jr. on Friday in an official letter sent to Senate President Usie R. Richards along with the FY 2009 budget.
The governor added, "We do not anticipate a significant change in the economic environment of the U.S., and therefore its impact on our economic affairs anytime soon. However, we believe there is some credible evidence that by the commencement of calendar year 2009 there could be some improvement in consumer confidence, and from that we draw hope that improved economic conditions will follow sooner rather than later."
Increased economic activity will also be driven in the territory by more cruise-ship calls to St. Croix, a push to finish off several already-funded capital projects, the collection of two years' worth — or $103.3 million — of property-tax bills at newly implemented rates, and the floating of an additional $100 million in bonds to start up new capital projects, according to a budget report prepared by Debra Gottlieb, director of the Office of Management and Budget.
Gross revenues projected for FY 2009 total a little more than $1 billion. However, government obligations — including $86 million in tax refunds, $49.2 million in debt-service payments and $11.7 million in transfers out of the General Fund — has left net General Fund projections at $867.3 million.
As usual, the government's costs for personnel eat up a large chunk of the projected General Fund revenues, coming in at $367.5 million for FY 2009. Corresponding fringe benefits total $141.3 million. Keeping up to date with ongoing and recent contract negotiations, $28.3 million has also been budgeted for anticipated salary increases.
Other services and charges — a category taken up with everything from transportation to costs for professional services — has been budgeted at $162 million for FY 2009, while utility costs have been budgeted at $27.6 million.
In writing about his FY 2009 priorities, deJongh said the administration has launched an "aggressive" energy-conservation program with the V.I. Energy Office, which focuses on a recent Senate mandate calling for the government to reduce its energy costs by 20 percent.
The miscellaneous section of the budget totals $132.9 million. For the first time, recommended budgets have been sent down for the Legislature ($20.2 million), the V.I. Supreme and Superior courts ($5.5 million for the Supreme Court and $30.3 million for Superior Court), the Judicial Council (nearly $327,000), and the Office of the Public Defender (about $3 million). In previous years, these entities have split a lump-sum budget appropriation sent down by the executive branch.
In an effort to mitigate rising health insurance and retirement costs, the budget also factors in a five-percent increase in employee health insurance premiums. This means employees would pay 40 percent of their insurance costs instead of 35 percent. The government would pay 60 percent, deJongh wrote.
During FY 2008, bi-weekly premiums deducted from employees' checks totaled $158.10 for single coverage and $281.67 for family coverage. With the new cost-sharing arrangement, government employees would pay $216.51 for single coverage and $380.89 in family coverage every two weeks.
The budget also provides:
— funding for an advisor responsible for helping to establish the new Bureau of Corrections;
— $14.8 million for outstanding road projects;
— funding for a consultant that would review gasoline pricing margins and help set up a new online business application and licensing database for the Department of Licensing and Consumer Affairs;
— funding that would allow the territory's third-party fiduciary to continue addressing issues stemming from the U.S. Department of Education's 2002 consent decree;
— money for additional employees for recreational activities and programs;
— money for park rangers and a beautification coordinator tasked with maintaining local parks; and
— funding that would allow the Department of Agriculture to enter into a partnership with local farmers in hopes of starting a program that would increase the production and delivery of local crops.
"It should also be noted that our budget has been developed in anticipation of the receipt of $166.4 million in federal funds to augment programs and initiatives addressing poverty, protecting our environment and providing social assistance and health care," deJongh wrote.
Adding in other federal, non-appropriated and other governmental funds anticipated for FY 2009, the government's overall spending plan is expected to top $1.2 billion.
The FY 2008 General Fund budget came down last year at $799.2 million. The near $68 million increase in revenues for FY 2009 is driven primarily by a spike in net projected income, property and gross receipts tax collections, which are anticipated to increase by $32.9 million, $44.15 million and $8 million, respectively. Projections for gross-receipts taxes reflect the fact that many visitors to the territory will come from the "still-struggling U.S. mainland," deJongh wrote.
Corporate income taxes are projected to come in at $170 million.
Contributions from other government funds into the General Fund — which came in around $78.2 million in FY 2008 — will drop to $57.9 million during FY 2009, because of reduced transfers from the Caribbean Basin Initiative Fund and the Insurance Guaranty Fund, recently tapped to pay down a portion of the government's longstanding retroactive wage debt.
While senators said Friday afternoon that they have not had time to fully review the FY 2009 budget, many — such as Finance Committee chairman Sen. Terrence "Positive" Nelson — said they would be "looking with deep interest" to see what deJongh's spending priorities are.
"Especially when it comes to things like WAPA issues, those pressing matters that we have to address — those are my biggest concerns," Nelson said when contacted Friday. "I am also interested to whether the administration will be using the money left over from prior-year obligations — I think that's somewhere in the neighborhood of $96 million — in the budget to take care of some of our everyday matters."
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