Tonight's State of the Territory speech to focus mostly on economic troubles

ST. THOMAS - In his annual State of the Territory Address tonight, Gov. John deJongh Jr. will focus on the tough challenges facing the Virgin Islands economy.

With the HOVENSA oil refinery pulling out of the territory, approximately $100 million in annual revenues will be lost. Before the HOVENSA announcement was made, a $67.5 million budget deficit for Fiscal Year 2012 forced the governor to dismiss 500 government employees, and hundreds more are likely to lose their jobs in the coming months.

While deJongh said he has some positive news to announce during the speech, he said he will focus on the territory's financial crisis.

"The economy and HOVENSA I think, in terms of what I see and what we're going to be doing," he said about the main themes in his address. "Clearly, that's on everyone's mind."

In last year's State of the Territory Address, deJongh said the territory was at a "tipping point," and laid out an austerity package that included raising taxes, terminating government workers and not paying negotiated unionized salary increases.

The governor and the Legislature exchanged relentless arguments and public tongue-lashings as versions of deJongh's austerity package were approved and rejected throughout the year.

The Senate gave deJongh half of the Gross Receipts Tax hike he had asked for - raising it from 4 percent to 4.5 percent; slashed government salaries by 8 percent; and offered retirement incentives to remove people from the government payroll. Senators also gave the V.I. Internal Revenue Bureau the authority to publish the names of delinquent payers of the Gross Receipts Tax, and the Lt. Governor's office published a list of delinquent property taxpayers and began to auction off properties.

Despite the sacrifices made by taxpayers and government employees, revenues continued to drop. The government's core revenues have plummeted about 37 percent since the recession took hold - amounting to approximately $700 million in lost revenue since 2009.

The government has kept afloat by borrowing $500 million, using about $200 million in cash balances and cutting operating expenses.

Now the cushion is spent, and the government faces payless paydays as it struggles to cover the territory's $15.5 million payroll every two weeks.

In last year's speech, deJongh said the territory could not sustain any more borrowing to keep the government operating. In December, he submitted legislation to borrow $90 million for government operations, backed by an increase to a 5 percent Gross Receipts Tax.

Senators rejected the plan in December.

After weeks of closed-door meetings, last week senators came up with a rehashed version of the governor's proposal but left it useless after they authorized $120 million in borrowing but failed to pass the tax increase to back the loans.

While some senators have suggested delaying the payment of 2010 tax refunds to balance the budget and avoid additional job losses, deJongh said that is not a solution. The FY 2012 budget has $80 million earmarked to pay 2011 refunds, but a lack of revenue has meant the government still owes most of the 2010 refunds.

"I couldn't condone that policy," he said. "That's actually money that we owe them."

In order to maintain government operations with growing budget shortfalls, deJongh has asked departments and agencies to make deep cuts. Most of the cuts translate into the loss of funded vacant positions and actual employees. DeJongh said agencies are looking at services that can be cut as well.

The territory hopes to hear some new ideas and solutions for closing the budget gap and preventing future job losses in the private and public sectors.

DeJongh said he wants to focus on luring manufacturing jobs to the territory and plans to revisit the residency restrictions that the U.S. Treasury placed on the territory's Economic Development Commission beneficiaries.

"We need to look at bringing new business," he said.

Expect some good news and highlights of accomplishments from the past year in the speech as well.

DeJongh said he will have an update about a new sports complex for St. Croix that will be built with a private/public partnership.

No matter what the governor says in his speech tonight, many Virgin Islanders will be hanging on every word, hoping for a solution to the territory's economic turmoil.

The governor will address the V.I. Legislature in formal session at 7 p.m. tonight at the Ottley Legislative Hall on St. Thomas.

- Contact reporter Aldeth Lewin at 714-9111 or email alewin@dailynews.vi. - When: 7 p.m. today

- Where: Ottley Legislative Hall, St. Thomas

- Where to watch: Broadcast live on the Legislature's TV channel - Innovative Cable 17 on St. Thomas-St. John and channel 5 on St. Croix. Public television station WTJX Channel 12 will also broadcast the speech live.

- Where to listen: Live radio broadcast on 102.9 FM on St. Thomas and 90.09 FM on St. Croix.

Sign up for Text Alerts

Sign up for e-mail newsletters