St. Thomas – The Committee on Finance, chaired by Sen. Kurt Vialet, held a meeting at the Capitol Building on Wednesday, to receive testimony on the Fiscal Year 2018 Budget Overview and Revenue Projections from the Governor’s Financial Team.
“Today starts a two-month process that will end on September 31st. Mark-ups will follow and by the first week of October, we should have a FY 2018 Budget passed,” said Sen. Vialet. “This fiscal year is more challenging than previous ones because there is no access to working capitol and for the first time we are trying to spend what we generated.”
Similarly, Nellon Bowry, Director of the Office of Management and Budget stated that the Territory’s weak fiscal condition has taken place center stage for FY 2018. However, there is still hope. “Despite the challenges, the expansionary fiscal and economic policy program, consisting of tax increases and a large-scale infrastructure spending and other private sector investments, should support the economy,” said Director Bowry.
The FY 2018 budget breakdown for the Executive Branch is as follows: $373.2 million for personnel services, $15.7 million for supplies, $22.2 million for utilities, $1.4 million in routine capital additions, $162.6 million for contributions from semi-autonomous agencies, boards and commissions, $138.1 million for other services and charges, $656.5 million is allocated to Executive Branch and other agencies. The overall General Fund budget request is $713 million. This is $72.1 million less than the original FY 2017 appropriation budget. This also does not include the $30.6 million for tax refunds and the $90.3 million for long-term debt service; according to Director Bowry.
“How did the long-term debt service increase?” inquired Sen. Vialet. In response, Valdamier Collens, Commissioner of the Department of Finance said, “The $20 million increase is a result of an outstanding balance from a line of credit. By FY 2018 it will term out and then we can begin to pay it back.”
Separately, Sen. Jenelle Sarauw asked, “How much funds were generated from Limetree Bay?” Commissioner Collens stated that $13-$14 million was budgeted in FY 2017. “Based on the barrels of capacity, we anticipate it will increase anywhere from 20-30 million. Once this happens revenues will increase to $15 -$17 million per annum,” added Commissioner Collens.
Sen. Neville James said, “The Limetree Bay impact is a bit understated.” He asked, “Are you conceding that despite revenue projections, we will not be able to access the capitol market by FY 2018?” Director Bowry said, “We are conceding that the we will not have access to debt financing until FY 2018.” Commissioner Collens said, “The reality is that the Virgin Islands has no access to capital. Therefore, the budget is based upon our confines.”
“Even if we are able to access the financial market, it is not wise to do so,” said Sen. Vialet. “We should not go to the market without having a significant increase in revenues.”
Part of the revenue collection initiatives include collecting $22 million of current tax obligations and $400 million of delinquent taxes.
“Can you give me a breakdown of the $400 million?” inquired Sen. Sammuel Sanes. Director Bowry stated that an estimate of $100 million will come from the collection of property taxes. The balance is a combination of taxes, gross receipt taxes and income taxes. However, he does not have the exact breakdown.
Separately, Director Bowry stated that as a result of the FY 2018 Budget, there will be a change in the employee health insurance cost. “Currently, there is a 65% employer versus 35% employees. However, cost will be redistributed to 60% employer versus 40% employee split for active employees, 50% split for retirees under age 65 and 100% contribution by retirees over the age of 65 who are eligible for Medicare,” said Director Bowry.
Lawmakers shared their concerns for the rising costs of health insurance. “Medicare does not cover the full costs for medical and dental,” said Sen. Sanes. “These are veterans and retirees who are expected to dip into their pockets after thirty years of service.”
Sen. Marvin Blyden said, “The fiscal crisis is forcing us to be more creative in generating revenues. FY 2018 will be difficult moving forward. It is impacting the health care significantly. This will be a financial burden on the elderly. It will cause chaos in the community.”
The next Committee on Finance meeting as it pertains to the FY 2018 Budget, will take place on July 27 at the Frits E. Lawaetz Legislative Conference Room on St. Croix.