ON WATER, THE PRESIDENT'S BUDGET CONTAINED ONLY $ 1.1

MILLION FOR FY 89 FOR CONTINUATION OF THE WATER PROGRAM WE

STARTED FIVE YEARS AGO. THIS WAS EXTREMELY DISAPPOINTING.

IMPROVEMENTS THAT NEED TO BE MADE TO THE EXISTING SYSTEM BY 1990

WERE ESTIMATED AT $17 MILLION. DURING THE PAST FIVE YEARS $7.3

MILLION IN FEDERAL ASSISTANCE HAS BEEN PROVIDED IN MEETING THIS

TARGET. DESPITE THE DISCREPANCY, THE GOVERNOR FULLY COOPERATED

WITH THE OFFICE OF TERRITORIAL AND INTERNATIONAL AFFAIRS IN

PARING DOWN HIS REQUEST FOR AN AMOUNT, $3 MILLION, THAT O.T.I.A.

APPEARED TO SUPPORT.

AS THIS COMMITTEE REALIZES, SINCE IT HAS BEEN SUPPORTING

THESE ANNUAL APPROPRIATIONS, WE CANNOT SUSTAIN A TOURISM BASED

ECONOMY WITHOUT A RELIABLE WATER SUPPLY SYSTEM.

AGAIN, MR. CHAIRMAN, I THANK YOU FOR THIS OPPORTUNITY TO

TESTIFY AND TAKE PLEASURE IN NOW INTRODUCING THE GOVERNOR OF THE

VIRGIN ISLANDS.

VIRGIN ISLANDS IMPROVED ECONOMIC CONDITION

Mr. MURTHA. Welcome, Governor.

Mr. FARRELLY. Thank you, Mr. Chairman. I appreciate the generous credit from our venerable delegate. I wish to introduce to the Chair sitting on my left Jacquelyn Dennis who is not only the Executive Director of LEPC, but she was the coordinator of our local Drug Policy Board and thus the lead person on the plan that everyone seems to be in agreement as to what has to be done.

I certainly appreciate the opportunity not only to have met you informally, but to appear formally before this Committee and to say that about a year ago, when I had just three months' experience, I asked the Committee to take note of our sad state of affairs. Our finances were in a deplorable state. We were $80 million in debt. We owed employees $37 million in retroactive salaries. And so, in short, I inherited a mess.

But we were not intimidated by the size and complexity of that mess. We got to work. Sweepingly, we organized our government. We paid off the $80 million deficit, including the $37 million in retroactive pay. We consolidated functions in the executive branch, and I was able to report in September that the territory's economy was healthy and revenues were up. That is the positive side of the picture.

Earlier this year my colleague and the subcommittee chair, Delegate de Lugo, invited me to testify before his subcommittee on the President's budget. There wasn't much to testify about, as it turns out. It was $1.1 million for water distribution, zero for drug interdiction.

I told the Interior Committee and testified before the de Lugo subcommittee that our economy was expanding, tourism was accelerating, the unemployment rate was going down, and we had paid off the accumulated government debt. I will not waste your time, sir, with debating whether our economy is exceptionally strong or to detail the reasons for the elimination of the government debt. But it seems to me that the good guys, as Leo Durocher once said, finish last. Having worked hard, we were rewarded for our hard work by simply being denied any money for drug interdiction and by severely limiting the monies due for our water supply system. I was astounded, sir, because the Committee report said that the United States insular areas are in a very real sense the Nation's insular borders in the Caribbean and the drug traffickers know this. And they use the Virgin Islands for transshipment of deadly narcotics from other countries to the mainland. And one of the consequences of this activity has been an increase in local drug abuse, and drug related crime has pushed violent crime rates many times higher than we would wish to acknowledge.

VIRGIN ISLANDS DRUG PROGRAM NEEDS

And so, Mr. Chairman, I cannot emphasize too strongly that the drug problem in the Virgin Islands is staggering. And it is twofold. The report, as I said, speaks of transshipment, hundreds of miles of shoreline and dozens of beaches where boats can land and have landed with impunity. In one instance, the Coast Guard was called and picked up something like 30 kilos of coke that was being trans

shipped. Thus, Mr. Chairman, the narcotics flow through our islands and end up, for example, on the streets of the Nation's Capital.

The second aspect of the drug problem is what it does to the Virgin Islands people. When those drugs pass through, the debris from that trade falls on our streets and into the hands of our people. Thus, there is no question that much of our violent crimes are caused by persons who are on drugs or that the escalating number of burglaries and robberies are committed by people trying to support their habit.

The $2.5 million was appropriated by the Government in 1988, with an additional authorization of $1.5 million. And we ask for your intervention inserting the requirement of that disbursement. We have submitted a plan. We have worked hard. The plan was effective. The coordinators of the Federal Government both in the territory and in Washington thought it was well thought out and designed to help us get a handle on the drug problem. I, therefore, repeat, sir without being repetitive, I can't stress too strongly the urgency for the $2.5 million and the additional appropriation for Fiscal Year 1989 of the $1.5 million.

I would also be honest with the Committee and say that the plan will not get rid of narcotics tomorrow, but certainly we have to start somewhere. And the sooner we start, the better.

VIRGIN ISLANDS WATER INFRASTRUCTURE NEEDS

I also support, sir, the appropriation by the Committee of the $3.1 million for renovation of water transmission lines. We need not waste your time in detailing the fact that we are encouraging the development of the tourist trade. The tourist trade is developing nicely but, of course, it would be inhibited by the lack of an infrastructure item such as water. So, I think that speaks for itself. We, in response to a request from the Department of the Interior, asked for bare-bones needs of $9.1 million. And when we were told that funding was tight, we reassessed our needs and prepared a drastically reduced funding request for $2.7 million. It is now $1.1 million. So, from $9 million down to $2.7 million down to $1.1 million, all because we showed we are capable of hard work.

So, I suggest, sir, that I was flabbergasted to see $1.1 million to deal with water and the absence of the drug money. And I appreciate the opportunity to appear before you and stake our claim to those sums.

[The statement of Alexander A. Farrelly follows:]

REMARKS OF

THE HONORABLE ALEXANDER A. FARRELLY

GOVERNOR

UNITED STATES VIRGIN ISLANDS

Before

SUBCOMMITTEE ON INTERIOR AND RELATED AGENCIES APPROPRIATIONS COMMITTEE

UNITED STATES HOUSE OF REPRESENTATIVES

Washington, D.C.

APRIL 26, 1988

Good afternoon, Mr. Chairman and members of the

Subcommittee.

I thank you for asking me to be here today to express my views on the budget request for the United States Virgin Islands for Fiscal Year 1989.

Before I get to the specifics of the budget, I want to give you a bit of a progress report on the state of the Territory of the Virgin Islands.

One year ago, when I had had a scant three-month experience as the newly-elected Governor of the United States Virgin Islands, I appeared before this Subcommittee to testify on the Fiscal Year 1988 budget. I told you that the Government of the Virgin Islands was in a deplorable state; that it was $80 million in debt; that it could not run programs or deliver services with credibility, much less efficiency. I even said and I quote my self- --In short, it's a mess.

I'm happy to say that my message to you today is not nearly so gloomy.

Last June, I signed into law a sweeping reorganization plan for the Executive Branch of the Virgin Islands Government, a plan which I began working on even before I took the Oath of Office. I told the Legislature that I considered the Reorganization the first step on the road to recovery. With the cooperation of the Legislature and broad support from the public, Executive agencies, programs and functions were consolidated and steamlined, always with the twin goals of efficiency and economy in the delivery of services to our people.

In September of 1987, I was able to report to the Legislature that the territory's economy was healthy and that Government revenues were up, that the Government was in a position to pay its employees their retroactive pay increases, and that we could complete the fiscal year with the inherited deficit eliminated.

-

That is the positive side of the picture and it is also the reason for the dilemma we Virgin Islands find ourselves in today.

Earlier this year, Delegate de Lugo invited me to testify before his Subcommittee on Insular and Inernational Affairs on President Reagan's Fiscal Year 1989 budget proposals as they pertain to the United States Virgin Islands.

There wasn't much to testify about: the budget proposed $1.1 million for water distribution projects in the Virgin Islands. PERIOD.

In testimony before Delegate de Lugo's Subcommittee, the Department of the Interior spokesman stated that the economies of the territories are "exceptionally strong", that the Virgin Islands economy is expanding rapidly, that tourism is accelerating its upward movement, that we have a relatively low unemployment rate (an inaccurate statement, by the way), and that we had paid off the accumulated Government debt my Administration inherited.

We don't have time today to debate whether the economies of the territories are truly "exceptionally strong", to explore the fragility of a tourism-based economy, or to detail the reasons for elimination of the Government's debt.