[House Report 113-110]
[From the U.S. Government Publishing Office]


113th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    113-110
======================================================================
 
 TO CREATE THE OFFICE OF CHIEF FINANCIAL OFFICER OF THE GOVERNMENT OF 
               THE VIRGIN ISLANDS, AND FOR OTHER PURPOSES

                                _______
                                

 June 17, 2013.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Hastings of Washington, from the Committee on Natural Resources, 
                        submitted the following

                              R E P O R T

                         [To accompany H.R. 85]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Natural Resources, to whom was referred 
the bill (H.R. 85) to create the Office of Chief Financial 
Officer of the Government of the Virgin Islands, and for other 
purposes, having considered the same, report favorably thereon 
without amendment and recommend that the bill do pass.

                          PURPOSE OF THE BILL

    The purpose of H.R. 85 is to create the Office of Chief 
Financial Officer of the Government of the Virgin Islands.

                  BACKGROUND AND NEED FOR LEGISLATION

    The U.S. Virgin Islands (USVI) is an organized, 
unincorporated territory of the U.S. It is an unincorporated 
territory because Congress has selected only certain provisions 
of the U.S. Constitution to apply to the territory. The USVI is 
an organized territory due to federal legislation--an Organic 
Act. The first USVI Organic Act was enacted in 1936 and a 
revised Organic Act was approved in 1954. The Organic Act is 
analogous to a state constitution and is intended to serve as a 
basic charter of government for the territory until the USVI 
adopts its own constitution. The Organic Act made comprehensive 
and complete provisions for the legislative, executive and 
judicial branches of government, including imposing limitations 
upon them. Only Congress can make changes to the Organic Act, 
whereas, if the USVI adopts its own constitution, changes could 
be made locally without Congressional action. To date, the USVI 
has held five constitutional conventions, the latest in 2004. 
However, none of the efforts have resulted in the adoption of a 
constitution.
    The Organic Act did not authorize or establish a chief 
financial officer for the USVI government. It does require the 
Governor to present, at the opening of each regular legislature 
session, a message on the state of the USVI and a budget of 
estimated revenues and expenditures. The Governor is also 
required to establish and maintain accounting and internal 
control systems to allow for the full disclosure of financial 
actions and provide for the accountability and accounting of 
all funds, property and other government assets. The USVI 
created an Office of Management and Budget to perform these 
functions.
    The Assistant Secretary for Insular Affairs of the 
Department of the Interior testified in the 112th Congress that 
territories are facing deficit situations which arise due to 
disputes between the executive and legislative branches over 
revenue projections. This ``estimation discrepancy'' leads to 
revenue management issues, resulting in the accumulation of 
harmful debt over a period of years and the charges on such 
debt interferes with the territory's ability to solve current 
fiscal issues.
    According to a 108th Congress Natural Resources Committee 
report (H. Rept. 108-645), several years of hurricane damage, 
the decline of tourism, and the replication of services more 
easily provided in the mainland had led to economic instability 
in the USVI. H.R. 3589 was introduced in the 108th Congress to 
establish a Chief Financial Officer (CFO) to control spending 
in the territory to lessen the annual budget deficits that were 
growing the territory's overall debt. H.R. 3589 passed the 
House of Representatives by voice vote. Bills in the 109th and 
110th Congresses (H.R. 62 and H.R. 2107, respectively) which 
were similar to H.R. 3589 also passed the House of 
Representatives by voice vote and without objection.
    As the issue evolved over the years, and due to concerns 
raised by the Department of the Interior, USVI Governors 
(Governor Turnball and Governor de Jongh) and local officials, 
language that was seen as giving the CFO excessive power was 
removed. In the 112th Congress, the House of Representative 
passed the modified version of the bill, H.R. 3706, by voice 
vote. While the USVI Governor still opposed the bill, the 
Department of the Interior stated, ``In the view of the 
Department of the Interior, the duties contained in H.R. 3706 
would constitute only de minimus interference with self-
government in the Virgin Islands, while addressing other issues 
of mistrust between the executive and legislature and possibly 
the public. Thus, the Department of the Interior has no 
objection to the enactment of H.R. 3706.''
    With regard to USVI revenues and expenditures, Governor de 
Jongh provided in his testimony during the 112th Congress that, 
``expenditures have declined from a total of $960 million in FY 
2008 to an estimated $832.5 million in FY 2012. Meanwhile, 
during the same period, revenues declined from $928.7 million 
in FY 2008 to $801.7 million in FY 2012.'' According to the 
2009 Annual Audit, the latest audit the Department of the 
Interior has for the USVI, federal funding sent to the USVI 
totaled $247 million, which in that year included American 
Recovery and Reinvestment Act funding (compared to the 2008 
audit with a federal grant figure totaling $167 million). The 
USVI also receives annual funding from the Office of Insular 
Affairs at the Department of the Interior that is not included 
in the annual audits. In 2012, the USVI received $6.6 million 
in grant funding and a rum tax remittance of $256 million.
    The USVI is no different than the other U.S. territories 
with regard to challenges it faces in developing its economy, 
and increasing its revenues. Economic constraints including 
geographic isolation, limited land resources, small population, 
limited pool of expertise, and locations subject to severe 
storms (hurricanes and typhoons) can make it difficult to 
attract or keep businesses. The Department of the Interior's 
Office of Insular Affairs, through its annual appropriations 
and coordination with other federal agencies, works to empower 
the territories to overcome these constraints and develop 
opportunities for business development and revenue growth. The 
Natural Resources Committee annually oversees these efforts and 
the progress of each territory.
    H.R. 85 was introduced by Delegate Donna Christensen on 
January 3, 2013. The bill text is the same as H.R. 3706, 
introduced in the 112th Congress. The bill would require the 
Governor of the Virgin Islands to appoint a CFO, with advice 
and consent from the USVI legislature, picked from a list 
created by a USVI Chief Financial Officer Search Commission. If 
the legislature does not confirm the Governor's choice within 
90 days, the Governor can appoint an acting CFO. If a CFO has 
not been appointed within 180 days, the Commission, by majority 
vote, is required to select an acting CFO. If the acting CFO 
then serves 180 days without further action, the acting CFO 
becomes the CFO. The acting CFO could be removed for cause, or 
if the legislature confirms a CFO through advice and consent.
    The duties of the CFO would be: to develop and report on 
the financial status of the USVI government; to prepare and 
certify each year spending limits for the annual budget, 
including estimates of all revenues brought in by the 
territory, without regard to sources, and whether or not the 
budget is balanced; and to revise and update standards for 
financial management, including inventory and contracting for 
the USVI government and each agency. To do this, USVI 
department heads are required to provide all documents and 
information requested by the CFO.
    The CFO would be appointed for a 5-year term and would be 
paid at a rate determined by the Governor, but not less than 
the highest rate of pay for a cabinet officer or any CFO 
serving in a government or semi-autonomous agency. The bill 
would require a referendum to be held closest to the 4th year 
of the 5th year term, to allow the voters to determine if the 
CFO position should be permanent.
    The USVI Chief Financial Officer Search Commission would be 
comprised of eight members appointed no later than 30 days 
after enactment of this Act. Its charge would be to recommend 
candidates for nomination for USVI CFO. The Commission members 
are required to have business, government or financial 
expertise. One individual would be appointed by each of the 
following: the governor; the president of the legislature; St. 
John St. Thomas Chamber of Commerce; St. Croix Chamber of 
Commerce; President of the USVI University; Central Labor 
Council of the USVI; St. John at-large Member; and the 
President of AARP Virgin Islands. The Chairperson of the 
Commission would be the Chief Justice of the USVI Supreme Court 
or his designee. Current government employees would be 
prohibited from being appointed, except in the case of the 
Central Labor Council appointment. The Commission would be 
required to meet 15 days after all the members are appointed 
and report its recommendations no later than 60 days after its 
first meeting. The Commission would terminate upon the 
nomination and confirmation of the CFO.

                            COMMITTEE ACTION

    H.R. 85 was introduced on January 3, 2013, by Delegate 
Donna Christensen (D-VI). The bill was referred to the 
Committee on Natural Resources, and within the Committee to the 
Subcommittee on Fisheries, Wildlife, Oceans, and Insular 
Affairs. On April 24, 2013, the Full Natural Resources 
Committee met to consider the bill. The Subcommittee on 
Fisheries, Wildlife, Oceans and Insular Affairs was discharged 
by unanimous consent. No amendments were offered, and the bill 
was then adopted and 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 Natural Resources' oversight findings and 
recommendations are reflected in the body of this report.

                    COMPLIANCE WITH HOUSE RULE XIII

    1. Cost of Legislation. Clause 3(d)(1) 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)(2)(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. 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:

H.R. 85--A bill to create the Office of Chief Financial Officer of the 
        Government of the Virgin Islands, and for other purposes

    CBO estimates that enacting H.R. 85 would have no 
significant effect on the federal budget. H.R. 85 would require 
the Governor of the Virgin Islands to appoint, with the advice 
and consent of the legislature of the Virgin Islands, a Chief 
Financial Officer (CFO) who would serve for a five-year period. 
The legislation also would require the territory to hold a 
referendum during a scheduled election on making the CFO 
position a permanent part of the Virgin Islands executive 
branch. Finally, H.R. 85 would establish a commission to 
recommend candidates for the CFO position. Enacting H.R. 85 
would not affect direct spending or revenues; therefore, pay-
as-you-go procedures do not apply.
    Requirements on the Governor of the Virgin Islands and the 
Board of Elections of the Virgin Islands are intergovernmental 
mandates as defined in the Unfunded Mandates Reform Act (UMRA). 
Based on information from representatives of the Virgin 
Islands, CBO estimates that the costs would be small and well 
below the annual threshold established in UMRA ($75 million in 
2013, adjusted annually for inflation). The legislation 
contains no private-sector mandates as defined in UMRA.
    The CBO staff contacts for this estimate are Matthew 
Pickford (for federal costs) and Melissa Merrell (for the 
impact on state and local governments). The estimate was 
approved by Theresa Gullo, Deputy Assistant Director for Budget 
Analysis.
    2. Section 308(a) of 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. CBO estimates that 
enacting H.R. 85 would have no significant effect on the 
federal budget.
    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 is to create the Office of Chief 
Financial Officer of the Government of the Virgin Islands.

                           EARMARK STATEMENT

    This bill does not contain any Congressional earmarks, 
limited tax benefits, or limited tariff benefits as defined 
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of 
the House of Representatives.

                    COMPLIANCE WITH PUBLIC LAW 104-4

    This bill contains no unfunded mandates.

                       COMPLIANCE WITH H. RES. 5

    Directed Rule Making. The Chairman does not believe that 
this bill directs any executive branch official to conduct any 
specific rule-making proceedings.
    Duplication of Existing Programs. This bill does not 
establish or reauthorize a program of the federal government 
known to be duplicative of another program. Such program was 
not included in any report from the Government Accountability 
Office to Congress pursuant to section 21 of Public Law 111-139 
or identified in the most recent Catalog of Federal Domestic 
Assistance published pursuant to the Federal Program 
Information Act (Public Law 95-220, as amended by Public Law 
98-169) as relating to other programs.

                PREEMPTION OF STATE, LOCAL OR TRIBAL LAW

    This bill is not intended to preempt any State, local or 
tribal law.

                        CHANGES IN EXISTING LAW

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

                                  
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