Bryan’s Financial Team Admits Structural Deficit as USVI Increases FY2025 Budget to $1.46 Billion

Amidst its struggle to stabilize the territory’s finances, the financial team for the Government of the Virgin Islands has increased revenue projections for FY2025, resulting in a marginal increase in the total budget for the upcoming fiscal year.

In June, the team approved the 35th Legislature of a $1.44 billion budget, including $896 million for the general fund, $97.9 million for other appropriated funds, $28.9 million in other non-appropriated funds, and $416.8 million in non-disaster related federal funds. On Tuesday, Finance Commissioner Kevin McCurdy told lawmakers that the new budget will reflect a net increase of $28.4 million in the General Fund category, increasing it to $925 million. All other budget categories remain the same, for a new total budget of $1.46 billion

The Department of Finance, Mr. McCurdy noted, has thoroughly analyzed all departments and entities to “ensure we capture all critical items for the fiscal year.” Among these critical items on the expenditure side: an additional $17 million for projected health insurance increase under Cigna United Healthcare, $5.9 million more for the miscellaneous wage line item, bringing the total to $10 million, and an “appropriation of $5.9 million to the Department of Finance to cover the additional work performed by auditors for prior year audit services

“Due to the nature of revenue projections, we are optimistic about the projected revenue numbers,” he told the Committee on Budget, Appropriations, and Finance. On behalf of the financial team, Mr. McCurdy promised to “monitor the pace of revenue collections to ensure that we meet our revenue targets and satisfy our mandated obligations.”

Kimika Woods, acting director in the Office of Management and Budget, explained how the team was able to bolster the budget. She told lawmakers that when the finance team presented the budget in June, “we did not utilize any anticipated revenues from projects. We’ve realized that in prior years, we counted on it, and the projects were not progressing as anticipated.” She noted that disaster recovery projects intended to spur major economic growth have failed to come on stream within anticipated timelines. The scanty number of Virgin Islanders available to work on these construction projects has not helped the situation.

With the announcement of Rebuild USVI, where recovery projects will be bundled into billion dollar packages, and the establishment of the Super Project Management Officecentral government is hoping to kick reconstruction into high gear. Several schools, including the Charlotte Amalie High School, continue to pose health risks to students and faculty as demolition and reconstruction plans lag. However now, “we have identified shovel-ready projects (and) we came back with a new, anticipated revenue outlook,” Ms. Woods assured lawmakers.

Despite the optimistic projections, senators continue to express doubts over the stability of the territory’s finances. Outstanding vendor payments, unpaid tax returns, delayed retroactive payments and a debilitating structural deficit have placed the USVI’s fiscal future in peril. In July, OMB issued a sweeping 5% cut on all allotments for that month and beyond. The executive branch is currently seeking a $50 million line of credit to cover debts until bulk tax payments are received in October and next April.

Nevertheless, Mr. McCurdy says the local economy performed well based on key indicators like the low unemployment rate. “The labor market is currently showing its strongest performance in two years,” he tested, noting that currently, unemployment is lower than pre-pandemic levels. “The USVI economy has been on a positive trajectory, with output showing steady growth since the closure of Hovensa in 2015,” he added. Further, Mr. McCurdy asserted that “despite the challenge of inflation, there are encouraging signs of slow down in energy inflation.” He credited WAPA’s efforts to enhance energy production. It was a proposition quickly shut down by Senator Ray Fonseca. “We ain’t’ got no decreasing inflation here,” the lawmaker declared.

However, Mr. McCurdy asserted that the Consumer Price Index showed that the inflation rate had fallen a percentage point from its peak in October 2023. According to the finance commissioner, these factors “show a strengthening economy” with the Virgin Islands “(continuing) to exhibit resilience. “

Since Tuesday’s expanded projections were based on the successful execution of recovery projects, Senator Franklin Johnson was concerned about potential risk factors that could impact forecasted figures. Mr. McCurdy was less worried. He called the projects “stable” and all expected to start “before the end of the calendar year.” ODR Director Adrienne Williams-Octalien supported the sentiment, telling Mr. Johnson that the projects have already received notices to proceed – including the Charlotte Amalie High School.

Meanwhile, lawmakers have urged the finance team to be more deliberate and detailed with financial tracking and to make more realistic projections as the USVI navigates through a difficult financial time.