ARTICLE

Spending requires prioritizing choices

October 11, 2016 – Justin Moorhead

We cannot have anything, and surely not everything, unless we are willing to pay for it. This is true as individuals and more so as a community. Affordability is always a constraint in small communities where there are fewer individuals to share the burden of cost.

Any effort to address the existing Virgin Islands’ financial challenge requires a frank and painful discussion of what are ‘need-to-have’ versus ‘nice-to-have’ services.

The Virgin Islands does not have a revenue problem. The Government’s 2015 financial statements reflect that total governmental revenues amounted to some $1.2 billion. The population of the Virgin Islands is 105,000.

We have a spending problem. To be more accurate, we fail at prioritizing among need-to-have and nice-to-have government services and allocating funds accordingly.

Need-to-have services should receive sufficient funding to deliver services on par with comparable mainland communities. Nice-to-have services should only be funded once the requirements of those basic services, need-to-have, are adequately addressed.

We could probably all agree that certain basic services within public safety, health and welfare, utility, waste management environmental protections and infrastructure are need-to-have. Education and training, which prepare residents to staff our local economy or position them to be competitive nationally and globally, are also right up there in terms of importance. Effective government administration and economic development efforts, including tourism, would round out our collective list as essential.

Other services and certain embellishments on basic services would elicit different responses in terms of how necessary they are. Going through the exercise of ranking the relative importance of each, however, points a way forward to aligning spending priorities with what is affordable.

Today the cost of maintaining civil societies is significant. Government is expected to do what in years past community members and organizations did for themselves and each other. This imposes a significant financial burden on small and resource strained communities.

Consider the cost of waste management. Not too long ago waste was disposed of with little thought given to environmental consequences. Today we know that how municipal waste and soil erosion is managed has long-term implications to aquifers, wildlife and individual health.

The Virgin Islands promotes itself as America’s paradise. Paradise suggests a place of timeless harmony and an incomparable natural environment. Maintaining this environment does not come cheaply. Absent constant and diligent attention, garbage receptacles overflow attracting rats, dogs and wild chickens that scatter waste further afield. Plastic bags, bottles and detritus accumulate on our roadways and denigrate the shoreline. Soil erosion destroys coral reefs and fish habitats.

In the short term, the environment does not clean itself. With the growth of population comes ordinary as well as extraordinary pressures on the environment. The cost of remediation is an expense the community must incur to maintain paradise. Paradise is not cheaply maintained.

But how do we afford this ever escalating cost and who pays for it?

This requires some hard decisions. Everything is not possible. Some services must give way to allow others to receive the funding required to produce effective results. Prioritization of what is important is critical and acceptance by the community of the consequence of that prioritization, essential.

When tough decisions aren’t made, an opening exists for those with particular agendas to demagogue. Priorities are not determined in a rational manner but on the basis of the loudest and most influential advocates of one agenda over another. Self-interest establishes the spending agenda.

And, within every community, when it comes to contributing to the cost of community services, there are three types of individuals: those who look for ways to avoid contributing, those who contribute, and those who lack the financial resources to do so.

When demagoguery prevails the alignment of those who pay and those who benefit is further misaligned. The same determination that drives an individual to avoid paying his or her fair share more often than not drives a determination to insure that their individual good is satisfied first, regardless of the implication to others.

When government falters in setting priorities, the consequences can be ugly. California has led the country in allowing some critical decisions to be made by initiative. Other states have followed. Populist decision making is not effective decision making, Lacking a full appreciation of the ramifications of any given decision, populist choice, over time, most adversely impacts those with the most to loose.

Tough decisions have to be made. We have the resources to thoroughly analyze alternatives and focus resources towards advancing meaningful solutions. Not everyone will be satisfied but assuming there exists a true commitment to the public good, society collectively is better off.

All communities grapple with the question of what is affordable and necessary. And, within any community there will be voices advocating on behalf of what is most important to them.

At the federal level affordability decision-making is played out in the allocation of resources between defense and social spending and within these silos what individual programs are funded.

In the 1960s and early 70s federal tax revenue was substantial and the Great Society funded a plethora of programs designed to address poverty while pursuing new frontiers in defense, space and education. Little seemed beyond the reach of federal spending.

Today the emphasis is on reducing taxes and government spending. The federal budget struggles to fund essential social services while maintaining a strong defense capability. Laudable initiatives in health education and social welfare receive less funding. Several have been eliminated.

Initially some state and local governments attempted to fill the gap resulting from reduced federal spending. Many communities now demand that their state and local government budgets be similarly rationalized.

The Great Recession offered many communities the opportunity to do so, to make the hard choice between what is needed and what is desirable. The recession provided government leadership the political cover to do what was not otherwise doable absent a shared financial crisis.

In the Virgin Islands we punted. Since 2010 we have borrowed in excess of $700 million for operating cost, including amounts owed for. the Unemployment Trust Fund, to avoid making the truly hard yet critical decisions.

In the six years between 2008 and 2014, the VI Government jettisoned 2000 positions and reduced general fund appropriations by $70 million. Operating budgets have been reduced in no small by across the board percentage reductions that impact programs regardless of their importance.

Across the board retrenchments starve essential services of the funding required to ensure quality service delivery, effectively achieving the worst of all worlds; maintaining the fiction of a robust range of services but limiting the effectiveness of most. It is an ineffective approach to reducing sizable budget imbalances. It substitutes for making hard decisions. It fails to prioritize the relative importance of services. It deprives essential programs of the funding needed to deliver effective results. It allows nice-to-have programs to exist while need-to-have initiatives languish for the financial resources they require.

Harder to do but more effective is significantly reducing or eliminating the nice-to-have in an effort to ensure that those services with a higher community priority receive the required funding. Prioritization differentiates between the need-to-have and the nice-to-have. It requires painful decision-making and hard choices. It also requires our support if we are to address our financial challenges and continue to have a community worth living in.