Years of mismanagement have left the territory asking for a massive federal bailout. Absent congressional oversight, the money is unlikely to be well spent.
The U.S. Virgin Islands’ government is drowning in debt after decades of financial neglect — and its governor, Kenneth Mapp, is hoping he can parlay this into a federal bailout. Like a man eager to collect flood insurance on a house that hasn’t been maintained over the years, Mapp is poised to address decades of fiscal profligacy by using hundreds of millions in federal disaster-relief money to bail out the territory’s ailing public-employee-pension fund. Following the lead of Democratic territorial senators and pension-fund employees, Mapp laid out his plan to relieve the struggling fund using federal money in a May 31 letter to USVI Senate president Myron Jackson.
The Virgin Islands were ravaged by twin category-five hurricanes last September. Some significant portion of the territory’s roughly 100,000 residents is still suffering from the resulting damage. But one could be forgiven for doubting that victims will be most helped by bailing out a pension fund that — by Mapp’s own admission — has been mismanaged since long before last year’s storms. In his letter to Jackson, Mapp conceded that the pension fund is approaching insolvency for a very simple reason: “For the last 17 years the GERS [Government Employees’ Retirement System] has paid out more in benefits than it has received in contributions.”
The USVI government, or more specifically its Public Finance Authority, has already been entrusted with $516 million in federal disaster-relief money, and has requested $7.5 billion more. But if past performance is any indication, Washington would be negligent to turn over one more cent absent substantial congressional oversight. Even if Mapp’s administration were committed to frugality in handling federal dollars, which it is not, the PFA couldn’t be trusted to hold and allocate the funds. In a scathing audit produced by the Department of the Interior around the time of last year’s storms, the agency was found to have simply lost track of $50 million in public funds and shelled out $100 million on “questionable expenditures.” The report further found that PFA employees had created an “environment where errors and potential conflicts of interest flourish.”
Having assured the federal government that the issues detailed in the DOI report were a thing of the past — despite their having come to light less than a year ago — Mapp secured hundreds of millions in federal disaster loans, as well as $371 million in community disaster loans, to keep the local government operational. Yet despite that infusion of money, the government has roughly two to four days’ worth of cash on hand at any given time and remains unable to pay contractors working to repair the roughly 10,000 storm-damaged homes in the territory. Many of the territory’s financial woes undoubtedly stem from the deleterious effect that last year’s hurricanes had on its economy, which is largely dependent on the decimated hospitality sector. In fact, the government’s revenue was effectively halved by the fallout from the storms, according to a congressional budget report released in June. But, unfortunately for the Mapp administration, an act of God can’t be blamed for the way federal funds have thus far been allocated.
So, who has been paid with the federal money already given to Mapp’s government, even as relief workers are stiffed? For one, the islands’ local radio stations, whose favorable coverage Mapp will need if he is to win reelection in November. For another, a Washington, D.C., lobbying firm that happens to employ John Boehner and has been enlisted by the Mapp administration to bring home more federal pork.
While the radio stations and lobbying firm were receiving their piece of the federal pie, National Guardsmen who left their families and livelihoods to help rebuild the islands after last year’s storms received nothing for their months of round-the-clock work.
In an interview with The Daily Caller several months ago, Mapp defended his government’s payments to the radio stations. He explained that the contributions, made in February in the form of charitable grants, amounted to a reimbursement for the cost incurred by the stations to continue broadcasting vital public information during the storm. Critics were quick to question Mapp’s rationale: Why, if the funds were meant to reimburse stations that performed an invaluable public service, were they given to stations that did not remain open or primarily broadcasted music during the storms? Setting aside the question of which stations truly deserved the money, the IRS has prohibited charitable grants to private radio stations in the past, indicating that the entire enterprise might be illegal.
Mapp did not personally allocate the federal money to the radio stations. Rather, the Hurricane and Resiliency Advisory Group dispensed the funds to the Community Fund for the Virgin Islands (CFVI), largely composed of Mapp-administration officials, which then selected the stations as worthy grant applicants. The self-described mission of CFVI is to “build a collection of permanent funds, which will be used to enhance the educational, physical, social, cultural and environmental well-being of the children, youth, and families of the Virgin Islands.” A worthy cause no doubt — but one that surely would be better advanced by funding the only immunization clinic on the island of St. John than by funneling money to a handful of private radio stations.
A health-professions educator, who was unwilling to go on the record for fear of reprisal, revealed to NRO that the clinic, which provides immunizations to the uninsured and those who rely on Medicaid — immunizations required for students to graduate from the local high school — plans to close its doors imminently due to a lack of funding. The educator, who is intimately familiar with the clinic’s impact on the community, was at a loss when asked to explain why the clinic’s continued operation was not of the highest priority for the CFVI. Perhaps the clinic could have benefited from the $300,000 in federal funds that the Virgin Islands Department of Health forfeited in June due to a failure to spend it and process the relevant paperwork in the allotted time.
While the radio stations and lobbying firm were receiving their piece of the federal pie, National Guardsmen who left their families and livelihoods to help rebuild the islands after last year’s storms received nothing for their months of round-the-clock work. Troops were not paid after working 18-hour days from early September, when they were placed on territorial active duty, to January. Then, when they did start receiving paychecks, many of those checks bounced. Eventually, when they were finally paid, they received less than they were owed. The lack of payment affected readiness, leading some troops to go AWOL.
“You’re not getting paid, you’re working 18-plus hours. You have to go home to your family with no paycheck. It’s a bad deal,” one National Guard sergeant told the Caller. “Soldiers were forced to come in prior to the hurricanes. They left their wives, their families the night before the storm to come sleep in the armory where they’d be no use to the community,” said the sergeant, who personally spoke to 20 subordinates who went unpaid for months after going on active duty.
Mapp presided over all of this as the territory’s chief executive, and he feels no shame for it, judging by his avowed determination to plow ahead. “Unless we act and make the tough decisions, the GERS will be insolvent by 2024, if not sooner. This cannot happen, and, as governor, I will not sit back and allow it to happen,” Mapp wrote in his May letter to Senate president Jackson. In order to address this, Mapp has proposed using millions in FEMA money to purchase the pension fund’s non-performing assets. The funds would be drawn from a $300 million federal disaster loan the Mapp administration has requested to reduce the territory’s estimated $453 million budget shortfall for the current year. Washington hasn’t been entirely compliant with these requests but, astonishingly, it hasn’t entirely dismissed them either: Congress has turned over $65 million to help with the budget crisis, millions of which will undoubtedly end up paying for the pension fund’s “non-performing” assets, since no strings were attached explicitly prohibiting their use for that purpose.
Even so, the fund is approaching the fiscal cliff more rapidly than Mapp cares to admit. An audit conducted by Moody’s in February found that it will likely collapse “much sooner” than 2023. Despite the fund’s having been mismanaged for 17 years, Mapp would like us to believe that now it will finally be fixed. Some portion of the territory’s financial woes are undoubtedly due to the shortfall in tax revenue resulting from the storms. But American taxpayers shouldn’t foot the bill just so a fiscally irresponsible government can abuse the funds to fix its decades-old mistakes.