Dec. 2, 2008 — The 27th Legislature may have closed out for good Monday, but the governor could still call the 15-member body into special session sometime in the next few weeks to discuss a bill he recently sent down to amend the fiscal year 2009 budget.
"Given the serious economic challenges that we are facing throughout the country and, in particular, within our territory, I believe that there are still several important legislative matters that we should continue to work together on before the end of this year," Gov. John deJongh Jr. said Tuesday, speaking from Philadelphia, where he is meeting with President-elect Barack Obama, Vice President-elect Joseph Biden and other governors from around the country to discuss the economic crisis. "I simply do not agree with an approach where we sit by idly and do nothing until the new Legislature is sworn in."
But senators aren't just going to be "sitting around," according to Senate President Usie R. Richards. They will also be off-island attending to national matters, he said Tuesday afternoon, adding that the off-island meetings, coupled with all the preparations for the transition and swearing in of the 28th Legislature, would leave little time to address deJongh's financial concerns. The governor has never been a member of the Senate and is unaware of the kind of activities senators have to attend to, Richards said.
He and other senators will go to an upcoming meeting of the Council on State Governments, host similar events in the territory or attend other meetings held by organizations such as the National Black Caucus of State Legislators, Richards said. Preparations for the swearing in and transition into the 28th Legislature are also underway, he said.
The Legislature adjourned sine die early Monday afternoon without addressing deJongh's revised budget bill or the proposal that would give the Public Finance Authority the go-ahead to float up to $400 million in bonds to fund a variety of territory-wide capital-improvement projects. The two items would be better left to the incoming 28th Legislature instead of being addressed by a "lame-duck Senate," some senators said. (See "Senate Closes Shop, Leaving Governor's Bills for 28th Legislature.")
To try to stave off a full-blown recession, the government intends to invest in a long-range capital-improvement plan that would put some cash back on the street, create hundreds of jobs and stimulate business activity. The bond issue is intended to finance a sizable chunk of that plan.
The revised budget bill was submitted early Monday morning before the full session, which senators said gave them little time to review the document. Keeping the budget at $842 million — the same as the budget approved for FY 2008 — was an intentional move that would allow senators to maintain control of the territory's purse strings while the government continues to revise its revenue projections, and figure out exactly what kind of cash it would have available by the end of the first quarter of FY 2009, they said.
"On the issue of the proposed $400 million bonding bill — if in fact the governor was sincere in his position, he could have summoned all 15 members and gone over the contents of the legislation before sending it down," Richards said Tuesday. "The route he chose was insufficient because he didn't provide the personnel needed to intelligently answer questions from senators during the meeting. He is solely responsible for the bill not going forward."
During a recent Committee of the Whole hearing called to discuss the bond authorization, Senators said they needed clarification on some of the government's proposed projects, and were upset that no representatives from any department other than Public Works attended the meeting.
"There is still a great deal of work to be done between now and the end of the year," deJongh said Tuesday. "There is a significant importance and concern with respect to moving forward with our capital-investment projects during these times of economic downturn."
The bonds will finance, among other things, about $103 million in education projects — such as the construction of new schools across the territory — $100 million in Waste Management projects, and about $61 million for other government projects, including affordable housing, tourism and agriculture initiatives. Another $28 million would go toward law-enforcement projects, including upgrades to police and prison facilities.
"My hope is to continue working with the Legislature to develop the answers and solutions to our economic woes," the governor said. "It is unfortunate that the Senate does not see the need for such an engagement; however, I am also looking forward to working with the incoming 28th Legislature as quickly as possible to address these deeply rooted economic challenges which confront our people."
The Revised Budget
Ever since the budget was signed into law a few months ago, members of the governor's financial team have said that the government's $842-million spending plan would have to be revised to take into account the recent drop in government revenue projections, and factor in a number of items senators omitted when the budget passed through their hands in September.
DeJongh made note of these items when he signed the budget into law in October, saying that the spending plan approved by senators does not fully fund salary increases implemented during FY 2008, a three-percent increase in the government's contribution to the Government Employees' Retirement System, or the recently approved government health-insurance package, which covers all government employees, retirees and their dependents.
The governor's revised budget is based on a $43.5 million reduction in projected revenues, which is primarily based on the "reality of the worldwide economic crisis and its direct and indirect effects on our local economy," deJongh wrote in a letter sent to Richards Monday morning, along with the revised budget bill.
The new projections are based on gross General Fund operating revenues of $905.1 million, contributions of $92.9 million from other government funds and about $700,000 from other revenue sources, for a total $998.7 million. From that amount, $90 million is paid out for income-tax refunds, $49.8 million for debt service on outstanding government bonds and about $21.4 million in transfers-out from other funds.
New revenue projections also factor in a $5-million drop in individual income-tax collections, a $40 million drop in corporate-tax collections and an $18.3 million drop in real property-tax collections, which are expected to come in at about $105 million once both FY 2006 and FY 2007 tax bills are issued, government officials have said. The FY 2006 bills — for which $6 million has already been collected — have already been issued, while FY 2007 bills are expected to come out next year.
Whether the government will be able to factor any property-tax revenues into upcoming budgets depends on the outcome of a longstanding court battle between the government and a group of commercial-property owners. Most recently, Presiding District Court Judge Curtis Gomez found the government in contempt of the 2003 settlement agreement that prohibited the bills from being issued at anything other than the 1998 property-tax levels. The government subsequently challenged Gomez's decision, prompting the U.S. Third Circuit Court of Appeals to stay the contempt order until the appeal gets settled. (See "V.I Government Re-Issuing 2006 Property Tax Bills.")
The Third Circuit is expected to hold a hearing to address the government's appeal sometime this month.
"The resolution of the government's appeal pending before
the U.S. Court of Appeals for the Third Circuit on the status of our ability to control our real-property-tax system will play a significant role in any future budgetary submissions to the Legislature," deJongh wrote Monday. "It is because of the existing financial uncertainty that it is necessary that the Legislature act on this proposed measure promptly to ensure that the government operates smoothly, to avoid default on our health-insurance coverage premiums, to prevent the government from further exacerbating the unfounded liability of the GERS and to preclude the growth of any existing retroactive wage amounts owed to government employees."
In addition to funding the items omitted by the Senate, deJongh said in his letter to Richards Monday that the revised spending plan also reduces by $2 million the budget of the V.I. Superior Court. The cut still leaves the court with a $5.7 million budget increase over FY 2008, and reflects the fact that the newly created Magistrate Division will not become fully operational until the end of the fiscal year, or in FY 2010, deJongh wrote.
"While the implementation of the Magistrate Division is important to the development of the Superior Court and the judicial apparatus of the U.S. Virgin Islands, the total funding should not be committed to the project in the FY 2009 budget at this time in light of this current pace of implementation and the immediate dire needs in other areas of the government," the governor explained. If the territory's economy gets better, the $2 million could go back to the court in a supplemental FY 2009 proposal — if not, then it will be factored into the FY 2010 budget, deJongh said.
The revised budget includes money for two court judgments. The government has to pay almost $4 million to the Long Bay Trust and $3 million to close out a settlement with H&O Warehouse. If the payments aren't made in a "timely fashion," the government would be required to pay in excess of $4.3 million, plus 6-percent interest and attorneys fees incurred by the Long Bay Trust from the start of the court case in the early '90s, deJongh said.
Another $6 million factored into the budget for the Williams Delight road project has been taken out to "decrease pressure" on the General Fund, the governor said Monday. The Public Finance Authority instead recently committed $4 million for the project, while the remaining money will come from the St. Croix Capital Improvement Fund, the governor said.
"This fiscal year will be one of the most challenging in the history of the U.S. Virgin Islands, as we continue to monitor our operational budget, develop a local stimulus package and ensure our participation in any federal stimulus package, while continuing to meet our public-service objectives," deJongh wrote Monday. "I am prepared to work with this Legislature and the 28th Legislature to make the adjustments necessary to ensure that the people of the Virgin Islands receive government services in an efficient and beneficial manner."
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