Governor John deJongh submitted to the 29th Legislature today a Fiscal Year 2013 budget that addresses the territory’s continuing economic challenges while maintaining current investments and building a sustainable economy.
Introducing the budget in a letter to Senate President Ronald Russell, de Jongh noted the territory for a third straight year faces diminished revenues, and for that reason “we took extreme care to craft the leanest possible budget.”
Those revenue pressures caused by external economic forces necessitated a new level of vigilance in spending public funds. At the same time, appropriations must continue to initiate capital projects either directly by the public sector or through the facilitation of private sector investments.
“We must make the hard choices that will right our course, no matter how difficult those choices may be,” wrote deJongh. “I look forward to our continued collaboration in the weeks and months ahead as we embrace our responsibility to lead our community.”
Earlier this year, the Virgin Islands economy looked to be stabilizing. Lost revenues were replaced by accessing capital markets, sustaining government operations while initiating capital projects to maintain a vibrant private sector.
Those measures, along with targeted tax increases, judicious spending of stimulus funds across social and community programs, and an imposed policy of limited hiring to reduce employment, resulted in positive economic signs.
But the sudden HOVENSA oil refinery closure dealt a catastrophic blow to the recovery. Because of the closure, the Administration was left with no choice but to use half of the $120 million intended to be borrowed in 2012 for working capital to close the gap in the 2013 budget.
“Needless to say, this one corporate decision has been devastating to our territory and our communities and it requires us to continue to adjust our expectations as we navigate our way forward,” deJongh wrote.
The loss of the refinery represents an estimated $580 million reduction in direct gross economic output — some 13 percent of the gross territorial product — and $92 million in lost tax revenue.
The governor believes that gap will be reduced in subsequent years due to the implementation of growth strategies and a continued focus on collecting delinquent taxes.
“Over the last year, and especially since the onset of the Great Recession in 2007, our community has been subject to economic and financial challenges not witnessed in recent decades,” the governor wrote. “Our resources have been severely strained and the near term options for alleviating these pressures are few.”
The General Fund operating budget is based on a net revenue projection of $695.8 million, an amount that reflects an anticipated reduction in revenues due to changes to corporate income and gross receipts tax income. Projected net revenues remain $100 million below what they were before the economic crisis began.
To balance the lost revenue, the budget leaves vacant staffing positions that are not absolutely critical, eliminates programs and services that cannot be justified in the current economic environment, streamlines government processes and shifts costs. It also makes investments in financial management systems and resources that will deliver savings down the road, funds programs to better collect taxes and draw down federal grants, and includes legislation to make more efficient the functions of government.
The budget restructures some government offices. It moves the Medical Assistance Program from the Department of Health to the Department of Human Services and transfers the Bureau of Economic Research to the Economic Development Authority.
The budget also includes legislation changing the structure of health insurance premiums, funding expansion of the Medical Assistance Program and reforming the Workmen Compensation Program.
It provides millions in funding for necessary school maintenance and repairs, road repairs, and construction of a Welcome Center and restrooms in downtown St. Thomas.
Some other key appropriations include: nearly $3 million for the Virgin Islands Police Department to implement the corrective action plan required by an excessive force decree; more than $7 million to the Office of Management and Budget to restore the 8 percent salary reduction in July of 2013, $1,663,000 to the Department of Personnel to fund the increased cost of health insurance premiums for retirees, $2 million replacement funding for the indoor sports complex at Mars Hill, $625,000 to the Health Department to fund outstanding mental health obligations and operating costs, $885,544 to pay for staff and operational costs associated with the opening of the Charles Wesley Turnbull Regional Library, $1.4 million for the Justice Department to hire additional attorneys and other support staff to accommodate the department’s increasing case load, $350,000 to fund the General Election, $5 million to the Department of Human Services to fund the increase in off-island residential placements and another $700,000 to keep the territory’s senior centers open.
“I continue to be hopeful that our future is extremely bright and that together we will set a dynamic foundation during this very challenging period in our history by Building Sustainability: A Foundation to Progress,” deJongh wrote.