Government revenue in 2013 to date is $7M more than expected
Published: August 31, 2013
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ST. THOMAS - The governor's financial team stood firm behind its proposed Fiscal Year 2014 budget at a hearing Friday before the Senate Finance Committee to give updated accounts of revenue collected during FY 2013 and of projected revenue for the upcoming year.
Office of Management and Budget Director Debra Gottlieb said there are no significant changes to the proposed budget of $743 million for FY 2014.
Gottlieb also reported that revenue collections for FY 2013 to date had exceeded expectations by about $7.1 million. The sources of the beefed up revenue are a $700,000 contribution from the Casino Revenue Fund; an increase in the contribution from interest on debt service reserves of $3.5 million; and an increase in the contribution from the Internal Revenue matching fund by $2.9 million.
All were made possible by the passage of Act 7499, according to Gottlieb's testimony.
However, revenue collections still are about $6 million below appropriations scheduled for FY 2013, with all General Fund appropriations totalling $723.5 million.
Another $27.4 million in appropriations is slated to be released by the Office of Management and Budget before the end of FY 2013, Gottlieb said.
The Senate Finance Committee will have to take up the issue of approving a balanced budget for FY 2014 and of making minor modifications to the Miscellaneous Section of the FY 2013 budget in mark-up sessions next week.
Sen. Clifford Graham, chairman of the Finance Committee, said that, in testimony provided during the summer, government departments and agencies had, as expected, asked for more money in appropriations than was expected to be available, creating the challenge of finding ways for the V.I. government to live within its means.
"We hear the cry of the departments and agencies as to what was recommended and what they need to carry out their duties," Graham said. "Next week, we will take a comprehensive look at the budget."
Some senators who attended Friday's hearing expressed discomfort with the margin of uncertainty the governor's financial team attached to its updated figures.
For example, the revenue projections are based on $7 million in property taxes from the HOVENSA oil refinery on St. Croix under the Fourth Amendment Agreement with the refinery's owners.
That agreement was voted down by the Legislature earlier this month, rendering the refinery liable for $14 million in property taxes under the previous existing agreement. However, it remains to be seen whether HOVENSA's owners can or will honor their obligations to the V.I. government.
Other unknowns include the full impact of federal sequestration cuts to V.I. entities and how the V.I. government will enact reforms around its unfunded pension liability, Gottlieb said.
"There are still a lot of things tumbling," Gottlieb said.
Chief among the sources of uncertainty were full impact of the HOVENSA closure, which created a $100 million loss of direct tax revenue, and its future operational status, as a buyer has not come forward to restart operations, according to Gottlieb.
"You are telling me that there may be a change in the revenue projections, and what that change might be will be as a result of whatever happens with the refinery, but will it be a change upwards or downwards?" Sen. Terrence Nelson asked.
Gottlieb and other members of the financial team did not waver from saying that projections were just that, and, therefore, subject to change.
Sen. Nereida Rivera-O'Reilly asked about long-term plans for financial stabilization.
"Does the government have a comprehensive, integrated action plan that goes across the territory and all agencies of the government that deals with the optimization of the resources, the optimization of collections, the proper utilization of tax dollars and the elimination of waste?" Rivera-O'Reilly asked. "Is there a road map the government is following and is it in writing?"
"Yes, senator," Gottlieb replied. "And believe it or not, that document is the budget."
In testimony about the territory's economic outlook, other members of the financial team tried to inject notes of caution along with the good news about enhanced revenue collections.
Wharton Berger, director of the Bureau of Economic Research, said that sources of optimism include the V.I. Water and Power Authority's moves to reduce energy costs, more cruise ship passengers scheduled during the upcoming tourist season and the online opportunities for job growth afforded by the Virgin Islands Next Generation Network's completion of the broadband network.
However, the territory's unemployment rate remains high, and projected job growth for 2014 will be sluggish, according to Berger. Although, the nation has recovered somewhat from the recession, the Virgin Islands could not expect any significant relief until 2015, Berger said.
V.I. Finance Commissioner Angel Dawson Jr. stated that although revenues are up in this quarter of the fiscal year, the government still is recovering from a 30 percent loss of revenue in 2008, or almost $400 million, and still has to reckon with the extensive amount of borrowing it has done since to cover working capital needs. He said that the territory has the ability to borrow another $140 million before it reaches its legally set debt ceiling, but it is not the administration's desire to borrow any more money to solve financial woes.
Gottlieb urged senators to consider abandoning the internal budgetary controls that call for departments to get legislative authorization to deviate from outlined budget line items.
Instead, the appropriations should be meted out on a quarterly basis in lump sums, with departments and agencies having the discretion to alter budgets internally as needs arise.
This would "facilitate the delivery of services to the public in a more efficient and prudent manner," Gottlieb said.
- Contact Amanda Norris at 714-9104 or email email@example.com.