[House Report 108-645]
[From the U.S. Government Publishing Office]



108th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     108-645
======================================================================
 
 TO CREATE THE OFFICE OF CHIEF FINANCIAL OFFICER OF THE GOVERNMENT OF 
                           THE VIRGIN ISLANDS

                                _______
                                

 September 7, 2004.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

  Mr. Pombo, from the Committee on Resources, submitted the following

                              R E P O R T

                        [To accompany H.R. 3589]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on Resources, to whom was referred the bill 
(H.R. 3589) to create the Office of Chief Financial Officer of 
the Government of the Virgin Islands, having considered the 
same, report favorably thereon with an amendment and recommend 
that the bill as amended do pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. CHIEF FINANCIAL OFFICER OF THE VIRGIN ISLANDS.

  (a) Appointment of Chief Financial Officer.--
          (1) In general.--The Governor of the Virgin Islands shall 
        appoint a Chief Financial Officer, with the advice and consent 
        of the Legislature of the Virgin Islands, from the names on the 
        list required under section 2(d). If the Governor has nominated 
        a person for Chief Financial Officer but the Legislature of the 
        Virgin Islands has not confirmed a nominee within 90 days after 
        receiving the list pursuant to section 2(d), the Governor shall 
        appoint from such list a Chief Financial Officer on an acting 
        basis until the Legislature consents to a Chief Financial 
        Officer.
          (2) Acting chief financial officer.--If a Chief Financial 
        Officer has not been appointed under paragraph (1) within 180 
        days after the date of the enactment of this Act, the Virgin 
        Islands Chief Financial Officer Search Commission, by majority 
        vote, shall appoint from the names on the list submitted under 
        section 2(d), an Acting Chief Financial Officer to serve in 
        that capacity until a Chief Financial Officer is appointed 
        under the first sentence of paragraph (1). In either case, if 
        the Acting Chief Financial Officer serves in an acting capacity 
        for 180 consecutive days, without further action the Acting 
        Chief Financial Officer shall become the Chief Financial 
        Officer.
  (b) Transfer of Functions.--
          (1) In general.--Upon the appointment of a Chief Financial 
        Officer under subsection (a), the functions of the Director of 
        the Office of Management and Budget established under the laws 
        of the Virgin Islands shall be transferred to the Chief 
        Financial Officer. All employees of the Office of Management 
        and Budget become employees of the Office of the Chief 
        Financial Officer.
          (2) Documents provided.--The heads of each department of the 
        Government of the Virgin Islands, in particular the head of the 
        Department of Finance of the Virgin Islands and the head of the 
        Internal Revenue Bureau of the Virgin Islands shall provide all 
        documents and information under the jurisdiction of that head 
        that the Chief Financial Officer considers required to carry 
        out his or her functions to the Chief Financial Officer.
  (c) Duties of Chief Financial Officer.--The duties of the Chief 
Financial Officer shall include the following:
          (1) Assume the functions and authority of the office of the 
        Office of Management and Budget established under the laws of 
        the Virgin Islands as transferred under subsection (b).
          (2) Develop a report on the financial status of the 
        Government of the Virgin Islands not later than 6 months after 
        appointment and quarterly thereafter. Such reports shall be 
        available to the public and shall be submitted to the Committee 
        on Resources in the House of Representatives and the Committee 
        on Energy and Natural Resources in the Senate.
          (3) Each year certify spending limits of the annual budget 
        and whether or not the annual budget is balanced.
          (4) Monitor operations of budget for compliance with spending 
        limits, appropriations, and laws, and direct adjustments where 
        necessary.
          (5) Develop standards for financial management, including 
        inventory and contracting, for the government of the Virgin 
        Islands in general and for each agency in conjunction with the 
        agency head.
          (6) Oversee all aspects of the implementation of the 
        financial management system provided pursuant to section 3 to 
        ensure the coordination, transparency, and networking of all 
        agencies' financial, personnel, and budget functions.
          (7) Provide technical staff to the Governor and legislature 
        of the Virgin Islands for development of a deficit reduction 
        and financial recovery plan.
  (d) Deputy Chief Financial Officer.--Until the date that is 5 years 
after the date of the enactment of this Act, the position of the 
Director of the Office of Management and Budget of the Virgin Islands 
shall--
          (1) have the duties, salary (as specified in subsection 
        (f)(3)), and other conditions of the Deputy Chief Financial 
        Officer in lieu of the duties, salary, and other conditions of 
        the Director of the Office of Management and Budget of the 
        Virgin Islands as such functions existed before the appointment 
        of the Chief Financial Officer; and
          (2) assist the Chief Financial Officer in carrying out the 
        duties of the Chief Financial Officer.
  (e) Conditions Related to Chief Financial Officer.--
          (1) Term.--The Chief Financial Officer shall be appointed for 
        a term of 5 years.
          (2) Removal.--The Chief Financial Officer shall not be 
        removed except for cause. An Acting Chief Financial Officer may 
        be removed for cause or by a Chief Financial Officer appointed 
        with the advice and consent of the Legislature of the Virgin 
        Islands.
          (3) Replacement.--If the Chief Financial Officer is unable to 
        continue acting in that capacity due to removal, illness, 
        death, or otherwise, another Chief Financial Officer shall be 
        selected in accordance with subsection (a).
          (4) Salary.--The Chief Financial Officer shall be paid at a 
        salary to be determined by the Governor of the Virgin Islands, 
        except such rate may not be less than the highest rate of pay 
        for a cabinet officer of the Government of the Virgin Islands 
        or a Chief Financial Officer serving in any government or semi-
        autonomous agency.
  (f) Conditions Related to Deputy Chief Financial Officer.--
          (1) Term; removal.--The Deputy Chief Financial Officer shall 
        serve at the pleasure of the Chief Financial Officer.
          (2) Replacement.--If the Deputy Chief Financial Officer is 
        unable to continue acting in that capacity due to removal, 
        illness, death, or otherwise, another person shall be selected 
        by the Governor of the Virgin Islands to serve as Deputy Chief 
        Financial Officer.
          (3) Salary.--The Deputy Chief Financial Officer shall be paid 
        at a salary to be determined by the Chief Financial Officer, 
        except such rate may not be less than the rate of pay of the 
        Director of the Office of Management and Budget.
  (g) Resumption of Functions.--On the date that is 5 years after the 
date of the enactment of this Act, the functions of the Chief Financial 
Officer shall be transferred to the Director of the Office of 
Management and Budget of the Virgin Islands.
  (h) Sunset.--This section shall cease to have effect after the date 
that is 5 years after the date of the enactment of this Act.

SEC. 2. ESTABLISHMENT OF COMMISSION.

  (a) Establishment.--There is established a commission to be known as 
the ``Virgin Islands Chief Financial Officer Search Commission''.
  (b) Duty of Commission.--The Commission shall recommend to the 
Governor not less than 3 candidates for nomination as Chief Financial 
Officer of the Virgin Islands. Each candidate must have demonstrated 
ability in general management of, knowledge of, and extensive practical 
experience at the highest levels of financial management in 
governmental or business entities and must have experience in the 
development, implementation, and operation of financial management 
systems. Candidates shall not have served in a policy making or 
unclassified position of the Government of the Virgin Islands in the 10 
years immediately preceding appointment as Chief Financial Officer.
  (c) Membership.--
          (1) Number and appointment.--The Commission shall be composed 
        of 9 members appointed not later than 30 days after the date of 
        the enactment of this Act. Persons appointed as members must 
        have recognized business, government, or financial expertise 
        and experience and shall be appointed as follows:
                  (A) 1 individual appointed by the Governor of the 
                Virgin Islands.
                  (B) 1 individual appointed by the President of the 
                Legislature of the Virgin Islands.
                  (C) 1 individual, who is an employee of the 
                Government of the Virgin Islands, appointed by the 
                Central Labor Council of the Virgin Islands.
                  (D) 1 individual appointed by the Chamber of Commerce 
                of St. Thomas-St. John.
                  (E) 1 individual appointed by the Chamber of Commerce 
                of St. Croix.
                  (F) 1 individual appointed by the President of the 
                University of the Virgin Islands.
                  (G) 1 individual appointed by the Chief Judge of the 
                Virgin Islands Territorial Court.
                  (H) 1 individual, who is a resident of St. John, 
                appointed by the At-Large Member of the Legislature of 
                the Virgin Islands.
                  (I) 1 individual appointed by the Advocates for the 
                Preservation of the Retirement System.
          (2) Terms.--
                  (A) In general.--Each member shall be appointed for 
                the life of the Commission.
                  (B) Vacancies.--A vacancy in the Commission shall be 
                filled in the manner in which the original appointment 
                was made. Any member appointed to fill a vacancy shall 
                be appointed for the remainder of that term.
          (3) Basic pay.--Members shall serve without pay.
          (4) Quorum.--Five members of the Commission shall constitute 
        a quorum.
          (5) Chairperson.--The Chairperson of the Commission shall be 
        the Chief Judge of the Territorial Court or her designee and 
        shall serve as an ex officio member of the Commission and shall 
        vote only in the case of a tie.
          (6) Meetings.--The Commission shall meet at the call of the 
        Chairperson. The Commission shall meet for the first time not 
        later than 15 days after all members have been appointed under 
        this subsection.
          (7) Government employment.--Members may not be current 
        government employees, except for the member appointed under 
        paragraph (1)(C); and
  (d) Report; Recommendations.--The Commission shall transmit a report 
to the Governor and the Resources Committee of the House of 
Representatives and the Committee on Energy and Natural Resources of 
the Senate not later than 60 days after its first meeting. The report 
shall name the Commission's recommendations for candidates for 
nomination as Chief Financial Officer of the Virgin Islands.
  (e) Termination.--The Commission shall terminate 210 days after its 
first meeting.

SEC. 3. FINANCIAL MANAGEMENT SYSTEM.

   It is hereby authorized to be appropriated such sums as necessary 
for the installation of a Financial Management System, including 
appropriate computer hardware and software, to the Government of the 
Virgin Islands. Upon becoming available, the financial management 
system shall be available to the Chief Financial Officer and, after the 
date that is 5 years after the date of the enactment of this Act, the 
Director of the Office of Management and Budget of the Virgin Islands, 
to assist the Chief Financial Officer or the Director of the Office of 
Management and Budget of the Virgin Islands, as the case may be, to 
carry out the official duties of that office.

SEC. 4. DEFINITIONS.

  For the purposes of this Act, the following definitions apply:
          (1) Chief financial officer.--In sections 1 and 2, the term 
        ``Chief Financial Officer'' means a Chief Financial Officer or 
        Acting Chief Financial Officer, as the case may be, appointed 
        under section 1(a).
          (2) Commission.--The term ``Commission'' means the Virgin 
        Islands Chief Financial Officer Search Commission established 
        pursuant to section 2.
          (3) Governor.--The term ``Governor'' means the Governor of 
        the Virgin Islands.
          (4) Removal for cause.--The term ``removal for cause'' means 
        removal based upon misconduct, failure to meet job 
        requirements, or any grounds that a reasonable person would 
        find grounds for discharge.

SEC. 5. NO ABROGATION OF POWERS.

  Nothing in this Act shall be construed to permit the Governor and 
Legislature of the Virgin Islands to dilute, delegate, or otherwise 
alter or weaken the powers and authority of the Office of Management 
and Budget established under the laws of the Virgin Islands.

                          PURPOSE OF THE BILL

    The purpose of H.R. 3589 is to create the Office of Chief 
Financial Officer of the Government of the Virgin Islands.

                  BACKGROUND AND NEED FOR LEGISLATION

    H.R. 3589 is intended to ensure that the growing deficit of 
the United States Virgin Islands (USVI) will be addressed. The 
bill establishes a framework for choosing a Chief Financial 
Officer (CFO) who would temporarily be in place to control 
spending by the territorial government.
    Multiple factors in the past 15 years have led to a long 
period of economic instability in the USVI. These include the 
economic costs throughout the public and private sector of 
rebuilding after six hurricanes, as well as the gradual decline 
in the tourism industry. Further, the government workforce in 
the USVI is substantial and many services that are delivered 
more easily on the mainland are replicated on the Islands, a 
practice which has been mirrored in other U.S. insular areas.
    Currently, the USVI carries approximately $1 billion in 
debt. Over time, and under numerous administrations on both the 
federal and territorial levels, the budget deficits became new 
debt by the end of each year, with little action taken to 
recover the local economy.
    In October 1999, Congress passed legislation amending the 
Revised Organic Act of the Virgin Islands authorizing the USVI 
to issue general obligation bonds for ``any public purpose 
authorized by the Virgin Islands Legislature.'' The enactment 
of the legislation, Public Law 106-84, allowed the USVI to 
issue $300 million in bonds to fund working capital. Nearly 
half of the bond went towards paying past due income tax 
refunds and government vendors. The issuance of these bonds has 
only exacerbated the territory's economic difficulties, and 
fundamental restructuring of debt that was to take place and 
bring about fiscal stability has not occurred.
    In accordance with Public Law 106-84, the USVI Governor 
also entered into a Memorandum of Understanding (MOU) with 
then-Secretary of the Interior Bruce Babbitt, establishing 
mutually agreed financial accountability and performance 
standards for the fiscal operations of the USVI. Though the 
Government of the USVI was to implement a short-term recovery 
plan that included mandates for large reductions in local 
expenditures, this MOU has not resulted in economic recovery.
    To address this problem, this legislation will establish a 
CFO to oversee all government expenditures and serve a 
temporary term of five years. The CFO would be authorized to 
disapprove spending inconsistent with budgets approved annually 
by the Virgin Islands Legislature. The practical applications 
stated in the legislation, according to some, contradict those 
powers delegated to the USVI under its Revised Organic Act, the 
law that provides for specific areas wherein self-governance is 
encouraged. The Committee intends the legislation to reflect 
the framework for fiscal restraint that was enforced in the 
District of Columbia in the late 1990s under the District of 
Columbia Financial Responsibility and Management Assistance Act 
of 1995 (Public Law 104-8).
    The Committee notes that USVI Governor Turnbull does not 
support this legislation, a sentiment that has been echoed by 
other elected officials within the Virgin Islands Legislature. 
Specifically, the Governor wrote to Chairman Richard Pombo on 
July 13, 2004, to express his opposition to the Committee 
marking up H.R. 3589. Within this correspondence, he states 
that ``H.R. 3589 would severely impair the authority of elected 
Territorial officials, and place excessive power in the hands 
of a single unelected person who would remain unaccountable to 
the people and their elected officials in the Virgin Islands 
for the full five-year tenure of his or her term of office.''

                            COMMITTEE ACTION

    H.R. 3589 was introduced on November 21, 2003 by 
Congresswoman Donna M. Christensen (D-VI). The bill was 
referred to the Committee on Resources. On June 16, 2004, the 
Full Committee held a hearing on the bill. On July 14, 2004, 
the Full Resources Committee met to consider the bill. Mrs. 
Christensen offered an amendment in the nature of a substitute 
to remove the role of the Secretary of Interior in choosing and 
overseeing the CFO directly and allow for a local Commission to 
select the CFO while retaining the independence of this officer 
from the territorial government. It was adopted by unanimous 
consent. The bill, as amended, was then ordered favorably 
reported to the House of Representatives by unanimous consent.

            COMMITTEE OVERSIGHT FINDINGS AND RECOMMENDATIONS

    Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of 
rule XIII of the Rules of the House of Representatives, the 
Committee on Resources' oversight findings and recommendations 
are reflected in the body of this report.

                   CONSTITUTIONAL AUTHORITY STATEMENT

    Article IV, section 3, of the Constitution of the United 
States grants Congress the authority to enact this bill.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(2) of rule XIII of the 
Rules of the House of Representatives requires an estimate and 
a comparison by the Committee of the costs which would be 
incurred in carrying out this bill. However, clause 3(d)(3)(B) 
of that rule provides that this requirement does not apply when 
the Committee has included in its report a timely submitted 
cost estimate of the bill prepared by the Director of the 
Congressional Budget Office under section 402 of the 
Congressional Budget Act of 1974.
    2. Congressional Budget Act. As required by clause 3(c)(2) 
of rule XIII of the Rules of the House of Representatives and 
section 308(a) of the Congressional Budget Act of 1974, this 
bill does not contain any new budget authority, spending 
authority, credit authority, or an increase or decrease in 
revenues or tax expenditures.
    3. General Performance Goals and Objectives. As required by 
clause 3(c)(4) of rule XIII, the general performance goal or 
objective of this bill, as ordered reported, is to create the 
Office of Chief Financial Officer of the Government of the 
Virgin Islands.
    4. Congressional Budget Office Cost Estimate. Under clause 
3(c)(3) of rule XIII of the Rules of the House of 
Representatives and section 403 of the Congressional Budget Act 
of 1974, the Committee has received the following cost estimate 
for this bill from the Director of the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 27, 2004.
Hon. Richard W. Pombo,
Chairman, Committee on Resources,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 3589, a bill to 
create the Office of the Chief Financial Officer of the 
Government of the Virgin Islands.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Matthew 
Pickford (for federal costs) and Marjorie A. Miller (for the 
state and local impact).
            Sincerely,
                                      Elizabeth M. Robinson
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

H.R. 3589--A bill to create the Office of Chief Financial Officer of 
        the Government of the Virgin Islands

    H.R. 3589 would require the Governor of the Virgin Islands 
to appoint a Chief Financial Officer (CFO) to serve for a five-
year period, with the advice and consent of the legislature of 
the Virgin Islands. The legislation would establish a Virgin 
Islands Chief Financial Officer Search Commission to recommend 
candidates for the CFO position. The current Director of 
Management and Budget of the Virgin Islands would become Deputy 
CFO and all functions would be transferred to the CFO. In 
addition, the bill would authorize the Department of the 
Interior (DOI) to provide a financial management system to the 
Government of the Virgin Islands. Five years after enactment, 
all functions of the CFO would be transferred to the Director 
of Management and Budget of the Virgin Islands.
    Assuming the availability of appropriated funds, and based 
on information from DOI, CBO estimates that implementing this 
legislation would cost a total of $5 million in 2005 and 2006 
to install a financial management system for the Virgin 
Islands. Enactment of H.R. 3589 would not affect direct 
spending or revenues.
    The bill contains no private-sector mandates as defined in 
the Unfunded Mandates Reform Act (UMRA). H.R. 2400 contains an 
intergovernmental mandate as defined in UMRA, but CBO estimates 
that the cost of the mandate would be well below the threshold 
established in that act ($60 million in 2004, adjusted annually 
for inflation.) By requiring the appointment of a Chief 
Financial Officer, this bill would preempt powers previously 
delegated to the local government of the Virgin Islands by the 
Untied States. Because the Chief Financial Officer would assume 
the duties and the staff of an existing agency--the Office of 
Management and Budget of the Virgin Islands--CBO estimates that 
the costs imposed by this mandate would be less than $200,000 
per year.
    The CBO staff contacts for this estimate are Matthew 
Pickford (for federal costs) and Marjorie A. Miller (for the 
state and local impact). This estimate was approved by Peter H. 
Fontaine, Deputy Assistant Director for Budget Analysis.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates, as defined by 
Public Law 104-4.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law. The bill does preempt powers previously granted to 
the Virgin Islands by the United States.

                        CHANGES IN EXISTING LAW

    If enacted, this bill would make no changes in existing 
law.

                                  
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