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Undercurrents: The Good News is Revenues are Up …

A regular Source column, Undercurrents explores issues, ideas and events developing beneath the surface in the Virgin Islands community.

V.I. budget officials have their fingers crossed. It looks like the territory may take in more money this year than was predicted.

The government’s still going to fall short of expected expenditures, however, and officials are preparing to make some drastic recommendations to cover the difference — which is one reason they are cautiously optimistic about revenue projections.

Budget Director Nellon Bowry said Monday that since the 2015 fiscal year began last October, tax collections, particularly individual income taxes and gross receipt taxes, have been “trending upward.” No one wanted to celebrate prematurely, but when the increase continued through the second quarter and then into the third, it seemed safe to count a few chickens.

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Bowry was unable to immediately release actual numbers, but expects to reveal those to the Legislature once deliberations begin for the FY 16 budget process later this month and into June. The best news, he said, is that the revenues are up sufficiently in the first half of the fiscal year and the Office of Management and Budget is not going to have to revise projections downward — as it has sometimes had to do in the past.

He declined to speculate on the reason for the apparent slight upswing.

“IRB (the V.I. Internal Revenue Bureau) is analyzing it to see” what the cause may be, he said.

Bowry and OMB Deputy Director Debra Gottlieb said the increase won’t be enough to cover an anticipated shortfall for this year.

“We’re looking at several different options” to close the gap, Bowry said.

Among the ideas being floated are the deferral of income tax refunds and additional borrowing; the government obtained a $40 million line of credit, and so far it has used only $20 million of that. Such measures would likely be implemented in combination with updating revenue projections and with reducing allotments.

Options are limited mid-way through a fiscal year, Bowry noted. There isn’t enough time for long term solutions like tax increases to make a difference.

As of May 8, the budget office has released $450,878,199 of General Fund revenues in FY 15, according to Gottlieb. The appropriations level is a “moving target” she said because the Legislature continues to pass spending bills. But as of May 8, legislative appropriations from the General Fund stood at $743,838,679. That means at approximately 60 percent through the fiscal year, the government has allotted monies equivalent to just under 60 percent of what was appropriated.

“There is no across the board fiscal year 2015 General Fund allotment reduction in effect at this time,” Gottlieb said, “although most departments, agencies and programs have been advised that they will sustain a reduction of their fiscal year 2015 General Fund allotments.” So far, the Budget Office has been holding back about 5 percent for most departments and about 4 percent for items in the Miscellaneous section of the budget, which contains funding for local charities, sports and recreation programs, and other private organizations.

The Bureau of Corrections, Fire Services, Veterans Affairs, the Police Department, the Inspector General’s Office and the two hospitals are all exempt from the cuts, Bowry said, as are a number of small programs.

Corrections and the Police are operating under consent decrees that make funding cuts particularly problematic. The hospitals are also under pressure from regulatory bodies and can’t absorb cuts. Other untouchable items include funds for government employee and government insurance policies.

So far, only the executive branch is affected by allotment reductions.

“We don’t have the authorization to reduce the Legislature or the Court” budgets, Bowry noted.

“We’ve asked the other branches of government to share in the reduction,” Gottlieb said.

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