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GERS Funding Questions Persist at Latest Senate Hearing

April 30, 2007 — Little new information came to light during Monday's Committee of the Whole meeting where senators continued to question whether the governor's recent supplemental budget would harm the Government Employees' Retirement System.
Members of the governor's fiscal team came to the hearing armed with several documents to back up appropriations included in the bill. But when senators asked once again about GERS, the dejá vu began.
The same concerns were aired during last week's Committee of the Whole hearing, which was intended to give members of the governor's fiscal team the opportunity to explain and justify the bill's various components. However, questions over a few of the proposed appropriations prompted senators to request additional information and call another meeting to continue discussion on the bill.
At both forums, fiscal representatives explained that the bill will not take money away from GERS. But some senators asserted on Monday that they could not proceed with a final vote without receiving testimony from the agency's board of trustees or other top officials.
Consequently, after about four hours of debate, it was not clear whether the bill will soon go to the full Senate body for consideration or get further scrutiny from the Senate's Finance Committee.
As currently written, the bill is designed to balance this year's executive budget and fund some of the government's outstanding financial obligations without appropriating additional money from the already-overextended general fund.
Instead, to cover the expenses, about $14 million would be taken from a $40 million appropriation included in the miscellaneous section of the fiscal year 2007 budget. The remaining amount, some $26.1 million, would go directly to the cash-strapped GERS to cover various expenses. (See "Questioning Governor's Financial Conclusions, Senate Requests More Information.")
Senators have continued to say that cutting the appropriation would result in less funds going to GERS, currently plagued with an estimated $1.2 billion unfunded liability.
However, Nathan Simmonds, the governor's senior fiscal-policy advisor, has said that the money was specifically earmarked to meet initial debt-service requirements on a proposed pension-obligation bond.
Since the bonds will not be issued in the immediate future, the funds could instead be used to finance the appropriations in the bill and maintain other appropriations included in the FY 2007 budget, Simmonds explained Monday.
"And because there has been no bond issued at this point, there has been no need to consult with GERS about the use of these funds, which were never intended to go directly to the system itself," he added.
Gov. John deJongh Jr. will soon submit another proposal to deal with the unfunded liability, which includes another appropriation of "about $40 million or more" in the FY 2008 budget, Simmonds said.
In the meantime, using the money to fund the current supplemental budget proposal would keep the government's FY 2007 appropriations in the $850 million range — enough to maintain this year's executive budget and another appropriations bill recently passed by the Legislature, Simmonds said.
According to acting Office of Management and Budget Director Debra Gottlieb, the proposed bill would also go toward funding some of the government's critical needs — including several unpaid bills that have lapsed from previous administrations — and allow the territory to operate within the current $804 million in projected revenues.
The fiscal team will continue to monitor the current revenue stream in hopes that collections will start to pick up soon, Simmonds said. But he also reminded senators that the government is still running on a $46.5 million anticipated revenue shortfall, which would hamper OMB's ability to fully fund FY 2007 budget appropriations.
Even so, senators said they would like to have additional testimony from GERS representatives to determine whether another plan has been put in place to address the unfunded liability.
"I would like to get some clarification from GERS, to know how they feel about this, and whether they're exploring a different avenue or path to deal with this unfunded liability, or the recent shortfall in revenues," said Sen. Louis P. Hill.
Sen. Terrence "Positive" Nelson added that the bill should be vetted through the Finance Committee, of which he is the chair. "I don't think anything in here is that urgent," he said. "And I don't think you all have come prepared to justify these requests, or have had much conversation about how this is going to impact, or help, GERS."
Other senators said they would also like to continue to delve into some of the government's outstanding obligations, which include several unpaid contracts, utility bills and years' worth of vendor payments.
"Hearing some additional testimony would be the most appropriate thing for the Senate to do before passing this bill," Hill said.
Present during Monday's meeting were Sens. Liston Davis, Carlton "Ital" Dowe, Juan Figueroa-Serville, Neville James, Norman Jn Baptiste, Hill, Shawn Michael-Malone, Nelson, Basil Ottley Jr., Usie R. Richards, Russell and James Weber III.
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