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Good Morning.
Before turning to the primary subject matter of this morning’s Press Conference, I would like to take moment to reflect upon the losses marked last week with the funeral of former Lt.
Gov Derek Hodge and that we will mark this week with the funeral of former Governor Juan Luis. These men gained the public trust and held awesome responsibilities in our Territory and a lot of what those of us do each day in Government is built on a foundation that they initiated or constructed. They are important figures in the recent history of the Virgin Islands, individuals that I hope our young people will learn from and one day use as examples. Their contributions were significant and lasting. I also thank Mrs. Luis and Mrs. Sibilly Hodge, and their families, for sharing them with us while they held office and for their personal strength as we as a community paid our respects during this mourning period.
And so this morning I am here to announce that on Friday, June 10th, as I had previously agreed to do with the Senate President, I submitted to the Legislature the budget for the upcoming fiscal year, 2012.
It has been my custom to hold a press conference on the day I submit the budget, but I did not do so deliberately this year so I could continue my discussions with the senators to determine if changes to my proposed course of action was warranted.
This budget preparation was more difficult than previous ones as it required a fundamental shift away from how we have done things and required us to look at how we going to do them going forward and with less resources and far fewer people.
Our revenues, which are the baseline as what level of expenditures we can incur, were completely decimated by the effects of the global financial crisis and the Great Recession. Not just in tourism but across all sectors of our economy; tax payments have been reduced because economic activity and profits have been substantially off past levels.
We have been vigorous in our efforts these past three years to avoid the most dire consequences of these reduced revenues by resorting both to borrowing to cover our operating expenses and using as much of the assistance from the federal government -- the ARRA funds -- to sustain operations and government employment.
But now, there are no more federal dollars to buffer general government services and there is no more borrowing capacity available to us. Most – well over two thirds – of our local budget is personnel expenses, and the benefits that have been made available to our workers over the past decades. To put it simply, to have a major impact in reducing the cost of the Virgin Islands Government, one must either permanently cut the amount paid to Virgin Islands government workers or reduce the government workforce. That is the simple and unavoidable truth of the matter.
But despite all past efforts, we find ourselves facing a remaining deficit for this fiscal year of approximately $17.4 million and a vastly larger $90 million deficit for the coming fiscal year. The FY2012 budget at $731.3 million submitted balances expenses with projected revenues, through a reduced workforce, unpaid holidays and a continued focus on cost containment, tax and fee increases, improved collections in delinquent receivables and economic growth. To address this fiscal year’s deficit and to cover a portion of Fiscal Year 2012, I have authorized the dismissal of approximately 600 central government workers. Notices to these workers will be delivered shortly and the executive officers of the government have been preparing to operate their departments and agencies in the absence of these workers.
I have worked long and hard to prevent this day from coming. But for reasons well understood by the public, my proposals have not been met with timely action so that this announcement could have been avoided. I do not intend this morning to look backwards over the debris of proposals made and left without action, or to review whether such proposals were workable or practicable.
Today, I am starting with where we are today.
And where we are today is that we have met the obligation to submit a balanced budget as required.
We have submitted a budget that the administration developed to try to spread across the government, the burdens of reducing expenses, of reducing personnel, in a way which allows our government to continue to operate as well as it can under these financial constraints and after these reductions in personnel and programs.
Let us all understand that the executive not only has the power to reduce the expenditures of government, it has the duty -- the obligation – to do so in the absence of funds. Only the Legislature can increase taxes. Only the Legislature can spread the burden of this crisis beyond the Executive Branch to either itself, the Judiciary or the independent instrumentalities of our government.
I have been constantly in contact with and in discussion with the Legislature notwithstanding past events. Either I or my senior advisors met with Senators on February 1st, February 8th, March 7th, March 24th, April 5th, May 19th, May 20th, May 24th, and, of course, yesterday. I continue to work with leadership in the Legislature and indeed I held out some sliver of hope that these discussions might yet lead them to take the kind of action that might postpone the dismissal of these workers, and possibly, in the future, make these dismissals unnecessary.
Yesterday, we met for over six hours with ten of the members of the Majority. The senators present were: Senator Ronald Russell, Senator Louis Patrick Hill, Senator Celestino White, Senator Sammuel Sanes, Senator Carlton Dowe, Senator Shawn-Michael Malone, Senator Usie Richards, Senator Patrick Simeon Sprauve, Senator Alvin Williams and Senator Janette Millin Young. When we got up from the table, they said we had a deal. They have since backed away from that agreement, and thus, the notices of dismissal are being prepared as we speak.
Here is what the Majority members said they would do yesterday, and would not do today.
1. An across-the-board 8 percent reduction in salaries of all government employees in all branches of government including employees of all semi-autonomous agencies and independent instrumentalities; said salary reductions to begin with the pay period starting July 3, 2011 and continuing through the pay period ending October 5, 2013.
2. The gross receipts tax currently at 4.5% shall increase to 5% effective October 1, 2011, which increase shall remain in place until June 30, 2013.
3. Those members of the Government Employees’ Retirement System (“GERS”) with more than 30 years service in the employ of the government shall be offered affordable incentives to encourage them to make a declaration of early retirement not later than August 31, 2011 to retire between June 30, 2011 and September 30, 2011; and those members with 30 or more years of service who do not opt to retire shall commence payment of an increased contribution to the GERS effective October 1, 2011.
3. The reincorporation of the Waste Management Authority into the central government as the Waste Management Agency. Additionally, I asked for the Legislature to act on proposals to merge the Departments of Health and Human Services, as well as the marine assets of the Port Authority with the West Indian Company. This they refused to do at this time, and in the interest of arriving at an agreement, I was willing to compromise.
It is also important that while we address the operating budget for the next several years and make the adjustments that are required, we must also keep in mind several other important considerations and obligations.
The first of these is that now is the time for every taxpayer to step up and pay what you owe. We recently had published a list of delinquent real property taxpayers. Shortly the names of those who owe gross receipts and hotel room taxes will be made known as well. There is no reason some should go home without an income because others will not pay what they owe.
And why should those who do pay be called upon to pay increased taxes when others do not pay their taxes? The Bureau of Internal Revenue has had the clearest of instructions from me to enforce our tax laws thoroughly, fairly and with vigor.
Next, we must recognize the following:
An unfunded liability of $1.6 billion in our funding of the retirement system, which currently provides financial support to approximately 6,000 retirees and 9,300 current employees that will look to it for support;
An obligation of $21 million to the Federal Unemployment Trust Fund, which is growing by $1.2 million monthly and may have to be repaid in 2012; and
A deficit of approximately $20 million in the Government Insurance Fund.
Corrective action in these areas and putting them in balance must be part of our plan.
While these actions are being done, we continue to undertake certain initiatives to ensure that our economy grows from a crisis/recovery mode to a growth/job creation mode:
Targeted marketing programs by the Economic Development Authority and the RTPark to companies that will expand our knowledge-based businesses;
Revisions to the captive insurance statutes to make us an attractive location;
Continued support for our rum industry partners;
Implementation of downtown development programs in Charlotte Amalie, Frederiksted, Cruz Bay and Christiansted to enhance their appeal and drive private sector investment;
Continued discussions with the U.S. Department of Treasury on the statute of limitations and the issue of residency in order to achieve consistency of application and stability;
Construction and implementation of the ‘Middle Mile’ and its operation by Virgin Islands Next Generation Network;
Submission of an export grant application to the U.S. Small Business Administration to explore external markets for our businesses;
Submission of a grant application to the U.S. Department of Treasury to provide enhanced credit support and access to financing for our businesses.
I believe that all of this can be done.
I believe we can begin to act on the structural changes, deal with the immediate crisis, and set in place tools to achieve long-term growth. I believe this because I believe people of good faith throughout our community see that we can only survive this crisis by shared responsibility and shared sacrifice. I believe we can do this not because my beliefs have been shaped by recent actions, but because my faith has always been both in the good will of our fellow Virgin Islanders and in the goodness of our God.
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