For decades the predicted crash of the Government Employees’ Retirement System has hung over the territory. The crash would profoundly affect 16,000 households.
For years nobody had a solution, but now, everyone seems to have one.
Sen. Kurt Vialet, chair of the Legislature’s Subcommittee on GERS, Restructuring, Solvency, and Economic Development announced in December a bond bill to address the insolvency was submitted to legal counsel in August.
That announcement came three days after Gov. Albert Bryan announced he had sent the Senate a legislative proposal to restore solvency to the System.
Former Sen. Ronald Russell, now a member of the GERS Board of Trustees, presented another solution to the trustees at a special meeting Friday.
Russell urged the trustees to pass a resolution indicating to the legislature that it should consider issuing a “pension obligated bond.” He said it was a “more direct way” to solve GERS’s dilemma than other proposals.
Russell pointed out that in Dec. 2006, the Senate came close to authorizing the issuance of such bonds. The bonds at that time would have raised $600 million. The Governor’s proposal would inject $4 billion into the System over 30 years.
The Governor’s legislation creates a new entity called the “Matching Fund Special Purpose Securitization Corporation,” an entity separate from the Government.
The legislation enables the opportunity to increase revenues that can be dedicated to the GERS through the issuance of a GERS Bond by the PFA or other entity as an in-kind contribution.
Nellon Bowry, chairman of the GERS board, speaking to Russell about the Governor’s proposal, said, “As far as I am concerned, the proposal makes the System sustainable, and that is what we want.”
Russell responded, “I have not seen any analysis of why a pension obligation bond is not wise.”
Trustee Andre Dorsey supported Russell and said he had not seen the details of the Governor’s proposal. Dorsey and Russell voted in favor of the resolution, but three members of the board – Dwane Callwood, Leona Smith, and Bowry voted against it. Members Vincent Liger and Michael McDonald were absent.
Russell then put forth a resolution that the Trustees recommend to the legislature all the funds, not yet obligated, from excise taxes collected on Virgin Islands rum be designated for the GERS. That resolution also only gained support from him and Dorsey.
In Sen. Vialet’s announcement, he said, “The subcommittee asked the PFA to explore options that would utilize the $108 million in current debt service plus the $10 million Internal Revenue Matching Fund that is given to GERS plus an additional $40 million that we expect to collect in excise taxes. We then switched out the excise tax with IRMF.”
Bowry said the Trustees would be getting a presentation on the Governor’s plan, and he believed it would be “taking insolvency off the table.”
The System now pays 8,000 former government employees an annuity. Another 8,000 present employees are paying over 10 percent of their salary to GERS.
The Governor’s press release on the bill he sent to the Senate said, “The proposed legislation should finally address a problem that has vexed the territory for years.”