Kirk Callwood, Gov. Albert Bryan’s nominee for Commissioner of Finance, received nods from all members of the Senate Committee on Rules and Judiciary Thursday, bringing him one step closer to confirmation.
“It’s not politics for me. This is serious work we have to do,” Callwood told lawmakers during a hearing at the Earle B. Ottley Legislative Building on St. Thomas.
As Callwood went through hours of questioning, members of the committee, chaired by Sen. Alicia Barnes (D-STX), expressed approval of the nominee, a stark contrast to a February financial update hearing at which senators criticized members of the governor’s finance team, led by Callwood, for being unprepared.
According to Callwood, one of the biggest threats to the territory is liquidity issues.
“We have a lot of competing liquidities that we must manage on a day to day basis,” Callwood said.
Callwood comes from a decades-long private sector finance background, and admitted that he has had to get acquainted with terminology the local government uses. In spite of challenges and a short time at his current post, Callwood touted various achievements that he and his team have accomplished over the last two months, including the disbursement of more than $200 million in payments to disaster-related contractors and subcontractors.
When asked if the territory has enough resources to front recovery costs before federal reimbursements, Callwood said, “We have to employ liquidity strategies and make sure that we’re forecasting to be able to meet that requirement for expending the funds first.”
Callwood said the territory is also working with local banks as a resource.
He said the Finance Department also participated in the kickoff of the Department of Homeland Security Office of the Inspector General’s audit on the territory’s spending of the Federal Emergency Management Agency’s public assistance grants. The audit contract, given to KPMG, LLP, aims to make sure the territory and sub-recipients are recording the use of public assistance program grant funds and expending them in compliance with FEMA regulations.
According to Callwood, as of Monday, the Virgin Islands has 10 days of cash on hand, or roughly $26 million. The calculations, he said, are based on cash in the general fund, divided by remaining allotments for the remainder of the fiscal year, including what the government owes vendors. The government currently spends at a rate of $2 million a day.
Callwood said he aims to eliminate the structural deficit within 10 years, but could not enumerate to Sen. Athneil “Bobby” Thomas (D-STT) the steps the V.I. needs to take to get there. Callwood said it’s a collaborative effort.
When asked if the territory can sustain the recently instituted salary raises for police officers, Callwood said, “At this point I cannot give a definitive answer…that’s going to be a huge challenge given the liquidity concerns.”
Sen. Kurt Vialet also pointed out that the Commissioner of Finance is statutorily required to serve on various boards, and while the Senate legal counsel clarified that the law limits the number of board memberships to no more than two, a provision allows the governor to name commissioners like Callwood to specific boards if regulations require it. Vialet said that, based on a conversation with former Finance Commissioner Valdamier Collens, serving on six boards consumes too much of the Finance Commissioner’s time.
In the short term, Callwood said his department will work on expediting the processes involved in getting Public Assistance program funds. Common mistakes can be avoided, he said, particular those that delay reimbursements, result in negative audit findings, and, potentially in federals funds getting de-obligated.
Callwood said he also aims to adjust government insurance premiums operating at 20-year-old rates. The department is reviewing the actuarial reports to develop a plan that will change the collected premiums in an effort to reduce the unfunded liability.
According to Callwood, the Finance Department is also in the process of completing the 2017 audit, the deadline for which has been extended to April 1.
“It is critical for us to demonstrate that we can produce financial statements accurately and timely to gain favorable investor confidence as we aspire to re-engage in the capital markets to fund capital investments and receive federal funding,” Callwood said.
When the Fiscal Year 2017 audit is finally issued, the Fiscal Year 2018 audit field work and testing is scheduled to begin immediately, Callwood said. His department aims to complete the 2017 audit no later than April 15, and the Fiscal Year 2018 audit no later than Dec. 31.
Labor Commissioner Nominee Approved
Twenty-eight year education veteran Gary Molloy, Bryan’s nominee for Labor Commissioner, also received nods from all present members of the Senate Rules and Judiciary Committee.
Molloy reported that because of the 2016 declaration by the U.S. Department of Labor that designated the V.I. Labor Department a “high-risk grantee,” his staff of roughly 120 employees have to deal with demands on multiple fronts. This includes technical assistance telephone calls from the regional Labor Department office, as well as mandatory reporting schedules and regular audits. This is on top of the employees’ regular work responsibilities, Molloy said, an added burden resulting from the significant amount of additional compliance regulations tied to “high-risk grantee” designations.
Molloy said within one week of taking the helm at Labor, the Labor regional administrator told him that preparations have already taken place to impose a third-party fiduciary on the local Labor Department. Molloy said he hopes it doesn’t have to come to that.
The department’s Workers’ Compensation Administration program also remains “on life support and has been for many years,” Molloy said, noting severe under-funding that results in challenges in meeting costs for medical services, travel, equipment, lifetime payouts and biweekly payroll for injured workers. This is on top of long wait times for approval or processing due to staffing shortages and delayed payments to providers.
“Currently, the Workers’ Compensation program is in arrears for over $15 million in payments owed to providers, and that figure continues to grow daily as our clients seek medical care. We are at the point where we have had to make difficult decisions affecting the injured workers and the service providers,” Molloy told lawmakers.
Molloy also called for addressing a Division of Unemployment Insurance “in intensive care,” which has resulted in the Virgin Islands Trust Fund incurring a deficit of more than $68 million due to extensive borrowing to cover federally required unemployment benefits. Molloy’s department recently released new unemployment tax rates to address the Trust Fund solvency issue: while the rate for new employers remains at 2 percent, the unemployment tax rate for employers who have been in business for more than three years will increase from 1.5 percent to 2.5 percent.
Callwood’s and Molloy’s nominations now face review by the full Senate body.