In the wake of the Senate’s vote on Tuesday against a proposed refinancing bill that would have provided immediate funding for the Government Employees’ Retirement System, Public Finance Authority board members lamented on Wednesday that “nothing is being done” to fix a “gaping wound” that now totals $5 billion.
The PFA board was set to consider a $600,000 increase in contingency fees for Squire Patton Boggs (US) LLP to provide legal services to the Authority in connection with the matching fund securitization bonds but ended up taking no action since the proposal didn’t make it off the Senate floor. According to PFA attorney Kye Walker, the original contract for the legal firm was $2 million, but the number increased after a lawsuit was filed that kept the transaction from being completed the first time it was proposed.
With the extra work, the firm contended that it had exceeded its $2 million retainer in September, though Walker said time logs showed only $1.9 million in work as of Nov. 15.
“We won’t pursue it anymore,” PFA Board Chair Gov. Albert Bryan Jr. said of the refinancing bill after Walker suggested that the board either decide to not take action on the proposed contract increase or approve a smaller amount. “The Senate made the decision to do nothing and that’s what we’ll do for the foreseeable future until they come up with a plan.”
Although financially complicated, the governor’s proposal could be seen as a method of refinancing that would save the government money, millions of dollars that could be used to prop up the Government Employees’ Retirement System. Some senators on Tuesday compared it to a homeowner refinancing their home at a lower interest rate, while others did not like that analogy for the complicated government financial procedure.
At Tuesday’s Senate hearing, PFA Finance and Administration Director Nathan Simmonds said he could not see how there could be opposition to the measure since it saved the government money.
Senators appeared to take offense at this notion on two fronts. There was nothing in the measure specifying that the savings would go to GERS and, second, they said, the measure would not save GERS but only fend off insolvency for a couple more years.
At Wednesday’s PFA meeting, board member Dorothy Isaac was vocal about the need to find a permanent solution for GERS, describing the day that retirees aren’t paid as the day the territory’s economy “tanks.”
“We cannot continue this way and expect to be able to pay people what they will continue to expect,” she said. “And when we can’t pay them, that’s when our economy will be really hard hit because people are not going to be able to pay their mortgage or buy food. Something needs to be done and it should have been done 10 years ago. I don’t understand why no one is trying to move forward to fix this problem, it’s just been putting a band-aid on a gaping wound.”
The easiest decision to make would have been to refinance the debt, Bryan explained.
“All other proposals affect retirees directly,” he said, adding that the system’s unfunded liability is bigger this year at $5 billion than the entire V.I. economy. “We wanted to figure out financial ways to add to the system.”