What we leave for our children is directly related to what we do today.
Can we truly avoid a government finance melt down if we do the same as we have done for the past two decades?
The timing as to when the odds turn is uncertain. However, the odds are extremely high that a financial exigency beyond our control will occur — unless we do something dramatic to forestall that occurrence.
For the last 20-something years, we have defied the odds while kicking the balancing of the budget down the road. Of even greater concern are the mounting consequences of failing to make serious investments in our economic future and how this lessens our community’s ability to compete regionally and globally.
The Fiscal Year 2017 budget now under consideration by the Legislature indicates that we will spend approximately $13,000 per resident on either delivering government services or amortizing debt. And yet we will borrow $110 million more to pay salaries and operating expenses.
In 2015, the Office of Management and Budget commented, “For at least the last 20 years, General Fund revenues have been insufficient to cover current expenditure…the accumulated General Fund deficiency for the five fiscal years between 2008 and FY 2013 totaled approximately $1.5 billion; an annual average of almost $300 million…. at the close of FY 2013 outstanding long term debt, attributable to primary governmental activities, totaled $2.7 billion…it is increasingly evident that this trend is not sustainable.”
In a Op-ed for The Daily News published June 6, 2016 (“Federal solution for Puerto Rico’s debt is alarm bell for V.I.”), I shared comments from a Bloomberg magazine article, which suggested that the Virgin Islands was on the same slippery slope to a financial crisis as the Commonwealth of Puerto Rico.
Regardless of why we are on this slippery slope, the reality is: This is where we are. Nothing foreseeable suggests that we are able to extricate ourselves from this trajectory.
And, even should some short-term windfall again allow the odds to break in our favor, the long-term prognosis probably will not change. The inevitable will simply be once again delayed.
The slippery slope we are on exists regardless of the mechanisms in place to prioritize the payment of bonded debt.
What is that slippery slope?
As a community, we compete regionally for economic activity. Our inability to set aside funds for meaningful investment in economic growth and strengthening competitive advantage has long-term implications for our community. Not doing so will catch up with us.
As the competitive gap widens, others move ahead — usurping the advantages and benefits our community previously enjoyed. When revenues are insufficient to invest in initiatives, which expand the economy, we lose competitive advantage.
Having a conversation on this subject is essential. All segments of the community need to be involved. Far too rarely do these conversations occur. The issues involved are complex, anxiety provoking, and frustrating.
Given the importance of the subject matter to each of us, why are we not more proactive in signaling concern? Why do we leave the solution solely to others who, though well-intentioned, are no more competent to devise comprehensive solutions to our economic growth problem than any one of us?
Inertia is a culprit. Another is the recognition that no one individual or small group of individuals can redirect the course our community is on. Given our own personal issues, it is far easier to lull ourselves into believing things will right-size themselves, eventually, before considerable damage is done.
For many of us, our daily life unfolds above the scrum of this disconcerting issue. We live in a beautiful part of the world. As long as we can address our individual needs, regardless of the increasing daily societal problems and business challenges, things are OK and we can get by.
Our daily life unfolds in a cocoon of relative complacency. We can temporarily divorce ourselves from what is peripherally problematic.
In private conversations, we rail against the state of affairs and, yes, our attention is heightened when others hold up a mirror that requires confronting the slippery slope our community is on.
The commentary of creditors, rating services, business and public policy pundits is troublesome and not easily overlooked.
And yes, most of us do desire constructive solutions, though some temporarily benefit from the vacillation and inaction.
Then again, what are the possible consequences of choosing to be more vocal with our concerns? Will what is said impact me, my family members, my employment, my business interest?
The truth of the matter is that the unfavorable odds will probably catch up with us before an eventual right-sizing occurs. At that point, we will look back and speculate what could have been done if we had chosen to collectively be more involved.
A famous Calypsonian once said, “We know better but we like it like so.”
Possibly we will need for the odds finally to fall against us to provide the required catalyst for us to help extricate ourselves from the slippery slope we are on.
Not engaging in community-wide conversation about where we are and where we are going has significant consequences. The absence of consensus impacts how future generations will experience the community in which we now live. The consequences are real.
Not engaging in conversation on what we expect from our community also has implications. Those who are most vulnerable are the first affected.
There is a direct connection between government spending and economic expansion. Government spending, when directed to economic expansion, stimulates economic development. If investments are not made, the long-term growth of the community is undermined and competitive advantage squandered.
Businesses consider financial return and the time frame for realizing those returns. Government’s investment horizon is significantly less circumscribed; the financial return can be less direct and bifurcated between social benefit and financial return. An effective transportation system may not directly pay its operating cost for many years, but that system reduces the transportation cost and time of its residents, facilitates the movement of goods and services, reduces air pollution and spurs the growth of private business along the transportation corridors. These all produce significant investment return to the community, often far in excess of the strict financial return associated with the investment itself.
As the community’s economic capacity expands, so do the opportunities for each resident. Why then the need for a community wide conversation on these issues?
Conversation opens thinking about direction, brings members of the community together and vests all who participate in the process and outcome. Participants open their minds to other perspectives and collaborate to devise strategies that allow accomplishing what the individual cannot.
Community organizations traditionally spearhead these discussions, with the objective of seeking to develop a shared vision of community direction. Government leadership does its part by signaling an openness to consider ideas and devise strategies, which move away from approaches that have not proven successful in the past and offer limited prospect of achieving anything more fruitful in the future.
As the community overall thrives, so do we as individuals similarly thrive.