A permanent increase to one of the U.S. Virgin Islands’ critical revenue streams took center stage during Monday’s weekly briefing at Government House, though Gov. Albert Bryan Jr. acknowledged that federal spending cuts pose a number of challenges.
Teri Helenese, the territory’s director of State-Federal Relations and Government House’s representative in Washington, D.C., said that permanently increasing the rum cover-over rate to $13.25 per proof gallon means “we don’t have to keep going back to the Congress, begging for money that is ours.” Helenese repeatedly thanked U.S. Senate Finance Committee Chair Mike Crapo for adding the provision once the bill reached the Senate.
“This win, this legislative victory was hard-fought and many years in the making,” she said.
Excise tax collected on Virgin Islands-made rum exported to the continental United States is “covered over” to the territory, and the territory submits advance estimates of rum excise taxes to the U.S. Interior Department’s Insular Affairs Office each year. The rum cover-over rate was capped at $10.50 per proof gallon but extended — and retroactively applied — multiple times through federal legislation. For years, the U.S. Virgin Islands enjoyed a rate of $13.25 per proof gallon until the extension expired at the end of 2021.
Territory leaders have repeatedly expressed confidence in securing another extension, and the higher rate was assumed in 2022 when Bryan signed a securitization bill into law, refinancing the rum cover-over Matching Fund bonds to fund the Government Employees’ Retirement System — then on the brink of insolvency — for another 30 years.
GERS Administrator Angel Dawson said in a statement to the Source Monday that because the rate increase is not being applied retroactively, the system is owed $34 million from 2023 and $56.4 million from 2024.
“While the issue of permanency outweighs retroactivity when viewed over the course of decades, these are real dollars owed to the GERS,” he said. “We are presently having our actuarial firm complete an analysis of what the impact of both permanency of the $13.25 rum cover-over rate and the loss of retroactivity will be on the GERS. After these impacts are quantified, we can sit with the Governor and the Legislature to determine how the GERS Funding note and Indenture of Trust can be fulfilled,” he said.
The funding vehicle also assumes that consumers on the mainland will continue drinking rum, but the V.I. Public Finance Authority’s Nathan Simmonds, director of finance and administration, told the Senate Budget, Appropriations and Finance Committee last month that rum sales on the continent had been slow.
“Don’t worry, they gonna drink more rum when this ‘Big, Beautiful Bill’ hit the streets,” Bryan quipped during Monday’s briefing before adopting a more serious tone. “I think we’re gonna be all right. Spirits flow up and down. Tequila is really popular now, rum is trying to do something — Diageo is trying to do something — to make a comeback, flavored rums are actually selling pretty well, so I think we’ll be okay.”
“And you know,” he added, “we’re always hunting for a new rum company. We don’t talk about it, but we’ve been trying to do that for the last six and a half years too. That was one of my … proposed campaign solutions, so we’ve been trying to find another rum company, or two, to get it done.”
Though the U.S. Virgin Islands scored wins in the federal budget bill by securing the rum cover-over extension and a carveout for some beneficiaries of the territory’s economic development programs, cuts to programs like Medicaid and the Supplemental Nutrition Assistance Program are poised to have a massive impact on Virgin Islanders. Bryan said the government needs “to be a little bit more fiscally prudent” in light of “additional pressures.”
“One of the things that’s in there is double certification. So instead of certifying once a year now, for Medicaid, you’re going to have to certify twice a year, which is twice as much work,” he said. “And they’ve shifted the burden of that to the U.S. Virgin Islands. We don’t get that subsidy.”
The freeze on Section 8, he added, is definitely a threat.
“That is the most dire — could be a hit, but it’s not too hard. But there’s light at the end of the tunnel too. I think … no tax on tips and no tax on Social Security is awesome for our seniors,” he said.
Addressing the Legislature’s push to raise the minimum salary for government employees to $35,000 per year, Bryan claimed the raise could actually leave people and the territory worse off by shifting them “off of the federal payrolls and onto the Virgin Islands payroll.”
“They were probably getting three or four thousand a year in food stamps,” he said. “Now that food stamp goes away, and we the government are now paying the $4,000 in the form of salary, because they’re making too much to get food stamps. And that money is being taxed, so you’re actually probably making them poorer than they were before.”
Bryan said the wage increase forces the private sector to increase their own salaries, but it also pushes the cost of retaining government employees higher. Including fringe benefits, Bryan put the minimum cost of employing someone at $52,000 per year.
“What does that do? That pushes people off of federal programs, and then we end up paying for them instead of the federal government paying for them,” he said. “So you know, thank the Legislature in their brilliance, in making these moves.”
Bryan’s vexation with the Legislature was evident Monday, and he announced that a special session will convene on July 31 to consider: issuing a request for proposals for self-funded health and dental insurance plans for government employees; a bill prohibiting lawmakers from receiving a government salary and retirement annuity while accruing additional retirement benefits; and a measure eliminating the requirement that government employees take a six-month leave before running for office.
The briefing also included an update on the public-private partnership with Jackson Development Company to provide St. John and St. Thomas renters with a path to home ownership.
“For years, families on St. John have faced limited options and rising costs,” he said. “This project represents a real path to home ownership and a chance for residents to live and grow in the community they love.”
Clifford Graham, a partner at Jackson, noted that he was the V.I. Housing Finance Authority’s executive director when residences at Bellevue and Calabash Boom were built two decades ago. At the time, renters were told they could qualify to buy their homes if they paid their rent on time for 15 years. Robert Jackson, another partner, ran the now-defunct nonprofit that built the units. Graham said the units had completed their 15-year affordability period under the Low Income Housing Tax Credit program and that an additional 15-year local affordability period “can be relaxed if they’re converted to affordable home ownership.”
St. Croix Source
Local government, Local news
