In anticipation of one of the most difficult years in recent Virgin Islands economic history, Governor John P. deJongh (D) this week spoke before a crowd of St. Croix Chamber of Commerce members during its annual breakfast meeting on Feb. 7.
Seeking support for many unsavory but necessary initiatives, the Governor shared plans he indicated must be implemented to bridge the economic gap in 2011. He began his remarks by stating the federal government’s economic stimulus program, which had pumped more than $300-million into local economy over the past two and a half years, was about to end and the stimulus funds were one of the main reasons the territory had not incurred the severe economic impact that other jurisdictions felt.
Having said that, Governor DeJongh predicted that fiscal year 2011 would be challenging, and reminded attendees that the choice was made to borrow money in 2010 so that the territory would not have the massive layoffs experienced elsewhere.
In doing so, the government established two priorities:
1) to maintain services and not close schools, hospitals or reduce police presence
2) to rely upon the private sector’s ability to generate funds until the local economy was once again on the upswing. Unfortunately, despite the significant economic activity throughout 2010, it hadn’t been enough to reduce the deficit so additional cost savings need to occur.
Before going into the additional measures, the Governor wanted all present to appreciate his efforts:
1) to be fair and equitable to all
2) to not take away from the forward momentum achieved by the business community
3) to impart a sense of confidence and assurance that the Virgin Islands will get through this difficult time together
“The choices will be difficult,” stated deJongh, “The impact will be felt by families and businesses. We must make a choice and we must decide how best to approach the next two years in a responsible and fair way.”
The Governor’s proposed cost containment measures included:
1) not paying the salary increases of $31-million to unionized employees
2) placing a limited hiring freeze which recognizes replacing critical personnel in police, health care, or education
3) cutting all government department budgets by 5% to 10%
4) consolidating agencies where duplications existed like WICO and Port Authority or Health and Human Services
5) instituting a two percent increase in hotel taxes
Perhaps what most business owners were waiting to hear was about the Governor’s proposal to increase the gross receipts tax by an additional 1%; raising it from 4% to 5%. This proposal, according to the governor could be instituted for two years followed by a study to transition into a sales tax.
In reference to health care, deJongh indicated he strongly supported the national reforms that would help to change many of the VI’s inequities in programs like Medicaid. The local/federal cost sharing change from 50:50 to 45:55 which has the potential to bring in an additional $300-million annually and possibly raise the number of those served from 5,500 to over 22,000.
The governor made it clear that he welcomed input from other groups and announced he would meet soon with the legislature for their input. Governor deJongh also offered to meet with union officials so they could view the government’s financial “books.” In closing the Governor was adamant that nothing would be possible without the active involvement of the private sector.