79.6 F
Cruz Bay
Thursday, March 28, 2024
HomeNewsArchivesPension Reform Now Would Pay Off Handsomely in 29 Years, Say GERS...

Pension Reform Now Would Pay Off Handsomely in 29 Years, Say GERS Officials

If pension reforms are enacted now, the $1.8 billion unfunded liability threatening to end pension payments in 10 years would gradually improve to a healthy, sustainable balance in 20 years, retirement system officials told the Senate during budget hearings Wednesday. But the Legislature has to act soon and does not seem to be in a hurry, Government Employee Retirement System Administrator Austin Nibbs told the Finance Committee.

Nibbs said he had been raising the alarm that GERS will go broke and cease being able to pay out benefits without reforms at every budget and oversight hearing "for six and a half years now." During the 29th Legislature, the GERS submitted pension reform legislation that became a bill, but it was never voted out of the Rules Committee, he said. Then, last year, Gov. John deJongh Jr.’s pension reform task force made recommendations and deJongh submitted a bill.

"To date there has been no action taken on the bill," he said, emphasizing that there were only three months remaining before the 30th Legislature ended.

"It is our hope that this body will address and pass a comprehensive pension reform bill during the 30th Legislature. The cash flow deficits and the unfunded liability increases every day this body fails to address and pass the measures necessary to stabilize the system," Nibbs said.

Nibbs said the GERS actuary projected that if the bill is passed now, assuming a conservative 7.5 percent rate of return, the pension’s finances should improve by "$2.8 billion, resulting in a positive asset position of $1.3 billion as of Oct. 1, 2031."

Nibbs said the GERS portfolio saw a return of 7.9 percent on investment in 2013, and 9.3 percent annually since 1981.

Finance Committee Chairman Clifford Graham said there was still time and it would be addressed. "Pension reform is something we will get done before the end of the year," he said.

Many of senators’ questions focused on recent retirees who have not begun receiving pensions due to missing employer contributions. Before 2005, GERS allowed retirees to receive pensions at levels higher than their actual contribution levels, if employer contributions were missing, Nibbs said.

A number of retirees were held up due to a dispute with Government House over an estimated $47 million in employer contributions potentially due the system. The central government disputed that total and negotiated a settlement with GERS. That dispute was settled but has not been executed, Nibbs said.

GERS has been billing agencies for missing contributions. "For members retiring in 2012 and through present, the amount of missing employer contributions billed and received through July 31 is $5.2 million and $3.4 million respectively," he said.

Meanwhile, all government agencies and autonomous agencies are up to date with current contributions, with the exception of the Gov. Juan F. Luis Hospital, which "has not remitted to the GERS its deductions for employee contributions and its share of employer contributions since pay period Feb. 21, 2013," Nibbs said. The hospital has begun making payments for former employees who retired. The amount due is difficult to estimate, but hospital officials have said it is in excess of $3 million, he said.

Discussing GERS’ alternative investment program, Nibbs said, "Contrary to what has been reported in the media, the GERS Board of Trustees did not fund a $15 million loan to Tibbar Energy USVI." Instead, the board authorized Nibbs to hire a financial consultant for due diligence work, he said. That work has been completed and the financial consultant report with recommendations will be completed this month.

Reports in the media were prompted by a press release GERS issued June 20, saying, "The board also approved the following: … To loan Tibbar Energy USVI LLC $15 million with an interest rate of 10 percent and a term of 10 years. …" The press release indicates that Nibbs sent it [GERS Press Release]

The market value of the GERS portfolio shrank by $72.2 million last year, to $907.7 million as of July 31, Nibbs said. The portfolio earned $6.3 million in income and gained in value by $67.1 million, but to make current pension payments, GERS sold off $145.6 million in assets, Nibbs said.

GERS was before the Senate to discuss its 2015 operating budget. Since a 1998 act of the Legislature, GERS has financed its own operations instead of having the government pay administrative costs. The total budget for GERS is projected at around $20.5 million, he told the senators.

Of that, $7.5 million is for wages and salaries, $2.3 million for employer benefit contributions, and $6.4 million for "other services and charges," such as software licenses and professional contracts. Utilities are budgeted at $1.1 million.

The committee also approved an appropriation transfer request of $100,000 from the Department of Finance to allow for the purchase of a replacement generator for the St. Thomas complex. Voting for the transfer were Sens. Myron Jackson, Judi Buckley, Terrence "Positive" Nelson and Graham. Sen. Nereida "Nellie" Rivera-O’Reilly voted no. Sens. Clarence Payne and Donald Cole were absent. Non-committee members Sens. Diane Capehart and Tregenza Roach were also present.

Print Friendly, PDF & Email
Keeping our community informed is our top priority.
If you have a news tip to share, please call or text us at 340-228-8784.

Support local + independent journalism in the U.S. Virgin Islands

Unlike many news organizations, we haven't put up a paywall – we want to keep our journalism as accessible as we can. Our independent journalism costs time, money and hard work to keep you informed, but we do it because we believe that it matters. We know that informed communities are empowered ones. If you appreciate our reporting and want to help make our future more secure, please consider donating.