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No Quick Fixes Revealed for GERS Debt Woes

The insolvency of the Government Employees’ Retirement System and figuring out what can be done to pay down some longstanding retroactive wage debt was the main topic of discussion during Thursday’s Budget and Appropriations Committee hearing.
No new solutions really came forward, except for a suggestion from Sen. Carlton "Ital" Dowe to pool life insurance policies, which the Public Finance Authority has been exploring in an attempt to create a steady funding stream for the system.
For years, GERS officials have said the system is paying out more in benefits than it’s collecting in contributions, and on Thursday GERS Administrator Austin Nibbs said the current employer/employee contribution rate would have to be increased by 17.5 percent in order for the system to keep up.
To top it off, the government has requested a 3-percent reduction in its required contributions so it can save some money, but Nibbs said that move would hurt GERS even more, adding an extra $40 million onto the current $1.3 billion unfunded liability over the next two decades.
Otherwise, senators talked about what’s being done to finally pay down some outstanding retroactive wages, particularly those owed to retirees who could be eligible for an increase in benefits.
Senators also delved into the system’s investment portfolio, whose value Nibbs said has dropped by nearly $21 million since the last time GERS gave the Senate an update. As of the end of June, the portfolio’s value was $999 million, he added.
The topic of GERS bled into testimony provided later by Public Finance Authority representatives, who told senators that the bond market currently isn’t the best place right now to capitalize on the $600 million pension obligation bond authorization given by the Senate a few years ago.
The pension obligation bonds were once offered up as a top solution to the unfunded liability problem, but Gov. John deJongh Jr. ended up holding off on the bond issue when he took office because he said it created too much additional debt for the territory.
At the time the authorization was given, it was said that the bonds would most likely be funded by contributions from the General Fund. It is unclear at this point whether that is still the proposed structure, but PFA head Julito Francis said during Thursday’s hearing that the market hasn’t changed much over the past couple of years, and explained that the authority is looking into some other options for funding GERS.
The PFA’s budget is not funded by the General Fund, but instead from a contribution from the Internal Revenue Matching Fund, and fees the authority collects upon the closing of bond financings. The projected PFA budget for FY 2011 is $6.9 million, which will cover employee salaries, transportation, casualty and property insurance and administrative expenses, such as attorney and advisory fees.
Present during Thursday’s hearing were Sens. Craig W. Barshinger, Dowe, Wayne James, Terrence "Positive" Nelson, Nereida Rivera-O’Reilly, Sammuel Sanes, Patrick Simeon Sprauve and Michael Thurland.

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