Op-Ed: How About Using Some Federal Money to Get More of That Money?

(Shutterstock image)
Money. (Shutterstock image)

As distant friends of the islands (we live in Virginia) let us make a suggestion about how to spend some of the federal funds available to the USVI, a resource that has blossomed with the passage of the $1.9 trillion American Rescue Act.

We, father and son, have written for the Source from time to time over the last twenty years, often about the islands’ finances. The older of us was with the Department of the Interior’s Office of Island Territories in Bill Clinton’s day.

We read recently about the Governor’s proposal to use federal excise tax funds to pay back the pay cuts that some of the better-paid civil servants suffered in 2011 and 2012 https://stthomassource.com/content/2021/06/11/bryan-proposes-using-federal-excise-tax-to-pay-back-salaries/ – which is an understandable idea, but it got us thinking in another direction.

Using an outside dollar to fix the roads or to repay those civil servants is a one-on-one transaction that uses a federal dollar to produce a local benefit of some kind worth one dollar.

Why not use some of the same money to hire some grant writers to make use of existing federal assistance funds which come in hundreds if not thousands of different shapes and forms … and state and territorial government get those funds, but only if they ask in the right way, and that can be very complicated?

A dollar spent on seeking new money should produce $10 or $20 in benefits to the USVI.

One possibility that we can see – from our distance – is that the oil refinery on St. Croix may not make it. Yes, some jobs will be lost, even as the air quality improves, but let’s think of the demise of it as a bunch of lemons just waiting to be converted to the tastiest of lemonades.

Let’s think about a possible federal enclave (the refinery site) as [a] place where various federally-funded programs can be performed. It could be a high-security prison for those guys now in Guantanamo. Alongside that there could be a training center for Peace Corps people about to be sent to tropical places and/or a Department of Agriculture-funded project dealing with tropical agriculture, or a center where law enforcement agencies could train their undersea divers. If the USVI could pull off any of those items it would make a difference in the economics of St. Croix.

And why not figure out some way to get the U.S. military to return to the islands?  The DoD always, always, has lots of money.

On a much more prosaic level, there is the question of educational funding for the islands.  Things may have changed, but several years ago the USVI, year after year, was not only not filling the federal papers in the right way to get competitive funding for interesting ideas, it failed to do what was needed to get even basic formula funding. No imagination was needed, just reading the instructions and responding appropriately.

Year after year, as we reported for the Source, the U.S. Department of Education would issue a list of states and territories, how much they could receive under the various formulae, and how much the states and territories actually received. The USVI, proportionately, was always at the bottom of the list.

Some of the moneys to be obtained from the American Rescue Act may need detailed applications along the lines used by the Department of Education over the years, and some technical assistance may be in order. That will bruise some local egos, but the experts should be hired anyway. More millions for the islands is worth some grumbling.

Those Pay Cuts. Getting back to those civil service pay cuts, here are some thoughts about how to handle such a program. We should bear in mind that if such moneys were to be paid out, they would go to a class that probably does not think about themselves this way, but they constitute a lucky elite within a larger elite.

Some people were employed by the territory in 2011 and 2012, and a less fortunate (and much larger) group were not. Within the population employed by the territory, some earned $26,000 a year, and a lot did not. If they get some or all of their wages back, as the Governor proposes, it will be like handing out money in a means-tested way turned upside down – only the favored would get these funds. Maybe they deserve refunds, maybe not, but here are three suggestions regarding such a program:

  1. If benefits are paid, the extra income should be subject to the normal income taxes, and the normal payroll tax deduction.
  2. There should be no interest payments laid on as extra frosting on the cake; it would be ridiculous to assume that all the missed payments were saved (not spent) and that these funds could have been earning say 2 percent a year in some kind of savings account.
  3. As one of us (Rodney) pointed out in an examination of the USVI tax collection system a few years ago, the income tax people paid out income tax refunds without deducting moneys owed to the property tax system and to other territorial agencies. Any payments made to the 2011-2012 era civil servants should be net payments after any debts to the territory have been paid.

Those getting these payments will, obviously, complain about these three provisions but these arrangements would make the whole process a healthier one, and would, indirectly, cause the sharing of these funds between the elite and the rest of the population.

Rodney North and David North

Editor’s note: David North is a public policy analyst with the Center for Immigration Studies, a Washington think tank, and Rodney North is a management consultant to nonprofit organizations, social enterprises and cooperative businesses. Both live in Northern Virginia.