Revenues remain flat, the current year budget still has a shortfall and balancing the budget for Fiscal Year 2015 required some painful choices, the governor’s financial team told the Senate Finance Committee as annual budget hearings began on Tuesday.
Education, by far the largest single department and budgetary expense, has a recommended 2015 General Fund budget of $157.9 million – down $4.6 million from FY13. Including federal and nonappropriated funds, the budget projects $210 million for Education this coming year.
Office of Management and Budget Director Debra Gottlieb led off the government’s testimony, saying the administration was able to provide a balanced budget for the 2015 fiscal year by “recommending [the] raising of additional revenues and further reducing government expenditures.”
The projected total V.I. Government budget, from all sources, for FY15 is very close to last year, at $1.1 billion, Gottlieb said. That includes $709.5 million from the General Fund; $162.2 million of federal operating grants; $71.7 million of other appropriated funds; $63.2 million of other nonappropriated funds; and $134.5 million of nongovernmental funds, Gottlieb said.
Human Services, which had fared well the past two budget cycles, seeing slight back-to-back increases, has a recommended General Fund budget of $62.3 million – a $2.7 million cut from last year.
The V.I. Police Department has a proposed 2015 General Fund budget of $57.6 million, nearly unchanged from $57.2 million last year.
The budget proposes $28.3 million for the Bureau of Corrections – a $2 million increase from 2014.
Projected local tax revenues comprising the $709.5 million in the General Fund are nearly unchanged from last year – up $2.6 million, or less than half of 1 percent. And those current year revenues have left a $54 million budget shortfall, which the government is now hoping to fill with new bond debt.
Those budget projections assume that several revenue-raising and cost-cutting measures included with the budget are enacted, Gottlieb said. That includes legislation to end night differential pay for employees scheduled to work between 6 p.m. and 6 a.m. and to reduce the employers’ share and increase the employees’ share of employee health insurance premiums by 5 percent. It also includes legislation "to preclude a legal right for previous salary negotiations and to hold salaries at the 2011 levels for the purposes of collective bargaining negotiations upon the sunset of the 8 percent salary cut," Gottlieb said.
Gottlieb listed a series of possible initiatives the Legislature could consider that, taken all together, could realize up to $57 million in new revenue, she said. That list includes a 10 percent surcharge on individual income; an increase in the real property tax rate; an increase in motor vehicle fees; and a decrease in the gross receipts tax exemption from $9,0000 to $5,000 monthly and from $225,000 to $150,000 annually.
Sen. Tregenza Roach suggested that a new revenue stream may be found in the tourism industry with the creation of a new tax, such as an environmental tax that would charge visitors a fee in consideration of the impact that tourism has on natural resources. “I’m always thinking, how do we make more money from these people who come, rather than taxing our citizens,” he said.
Members of the governor’s financial team explained that, despite the challenge to present a balanced budget in recent years, the administration is continuing to address the budgetary shortfall.
The governor’s FY15 budget projects local tax revenues of $674.3 million. Individual income taxes are projected to be $339.5 million of that and corporate income taxes some $50 million. Gross receipts taxes are projected at $165.6 million, assuming a 5 percent tax. Real property tax collections are projected at $78.2 million, including a $7 million adjustment for a reduction in Hovensa’s property tax to reflect the reduced value of the property without an active refinery.
Trade and excise tax revenue should be around $24.3 million. Other revenues, such as licenses, fees, permits and malpractice insurance, are expected to yield $23.7 million in FY15.
Rum tax revenues in the Internal Revenue Matching Fund are projected to be way down, at only $20.5 million. "The reduction as a contribution to the General Fund is derived from a substantial projected decrease in rum production by Cruzan Rum," Gottlieb said.
The territory will also have to make up $1.7 million the federal government overpaid the territory in FY13, she said.
If annual extender legislation extending the contribution rate at $13.25 expires and the default $10.50 rate takes effect, Gottlieb said, revenues will be "much lower."
The $709.5 million General Fund budget includes $244.8 million for personnel wages and salaries; $98.1 million in fringe benefits; $12 million for supplies; $185.7 million in "other services and charges”; $24 million for utilities’ and $2.4 million for capital spending.
Another $153.5 million is categorized in the miscellaneous segment of the budget, which includes budgets for the legislative and judicial branches of government, the University of the Virgin Islands, the V.I. Waste Management Authority, V.I. Election System, the territory’s hospitals and other autonomous agencies.
The miscellaneous budget includes:
– $29.6 million for UVI;
– $22.3 million for the V.I. Waste Management Authority;
– $22.4 million for Schneider Regional Medical Center;
– $20.1 million for the Gov. Juan F. Luis Hospital;
– $18.2 million for the Legislature;
– $5.5 million for the Supreme Court;
– $26.9 million for Superior Court;
– $3.8 million for the Office of the Public Defender;
– and $1.4 million for the V.I. Office of Elections and the two boards of election.
The FY 2015 budget allocates $452.6 million for executive branch agencies, with:
– $159.5 million for the Department of Education;
– $62.3 million for Human Services;
– $57.6 million for the Police Department;
– $28.3 million for the Bureau of Corrections;
– $20 million for the Health Department;
– $19.3 million for Public Works;
– $16.4 million for the Fire Service;
– $12.7 million for the Justice Department;
– $11.1 million for the Internal Revenue Bureau;
– $9 million for the Office of the Governor;
– $6.8 million for Planning and Natural Resources;
– $6.7 million for the Office of the Lieutenant Governor;
– $5.7 million for Sports, Parks and Recreation;
– $5.3 million for the Finance Department;
– $4.6 million for the Territorial Emergency Management Agency;
– $4.2 million for the Labor Department;
– $3.5 million for the Division of Property and Procurement;
– $3 million for the Department of Licensing and Consumer Affairs;
– $2.6 million for Tourism;
– $2.5 million for the Division of Personnel;
– $2.4 million for Agriculture;
– $2.2 million for the Bureau of Information Services;
– $2 million for the Office of Management and Budget;
– $1.4 million for the Bureau of Motor Vehicles;
– $1.3 million for the Energy Office;
– $1.3 million for the Office of the Adjutant General;
– and $300,000 for the Office of Veterans Affairs.
The budget includes $114.4 million in the miscellaneous section. Highlights include:
– $37.4 million for retiree health insurance premiums;
– $7.6 million for insurance on government properties;
– $4.9 million for V.I. Economic Development Authority;
– $3.9 million for WTJX Public Television;
– $3.3 million for tourism summer promotions;
– $3 million for the Police Department’s excessive force consent decree;
– $2 million for Frederiksted Health Center;
– $1.7 million for St. Thomas East End Health Center;
– and $1.1 million for Legal Services.
No votes were taken at the information gathering hearing. Committee members present were Sens. Clifford Graham, Judi Buckley, Donald Cole, Myron Jackson, Janette Millin Young, Terrence “Positive” Nelson, Nereida “Nellie” Rivera-O’Reilly and Clarence Payne III. Noncommittee members, Roach, Sens. Craig Barshinger and Alicia “Chucky” Hansen were also present.
