As he had promised at a Senate Government Operations Committee meeting on an early retirement bill Thursday on St. Thomas, Office of Management and Budget director Ira Mills appeared at the committee's Friday night hearing on St. John with a prepared response and a draft of a counterproposal.
But Mills and Government House chief labor negotiator Karen Andrews came away from the Cruz Bay hearing saying they were not so committed to their alternative plan that they could not find a middle ground with the bill already before the committee.
"We aren't saying we won't work with them, even if it isn't our bill," Andrews said.
The bill before the committee, No. 23-0205, proposes to reduce the government payroll by offering incentives for early retirement. The tri-island round of public hearings under way was proposed by the bill's sponsors — Sens. Donald "Ducks" Cole, David Jones and Almando "Rocky" Liburd — to garner input from administration officials and the Government Employees Retirement System.
At the first hearing Thursday on St. Thomas, Mills said he had problems with certain provisions in the Senate bill.
Mills' draft proposal also calls for early retirement incentives but differs from the Senate bill on the size of the lump-sum payment to be offered. The Senate bill calls for 20 percent of the annual salary; Mills' proposal calls for 30 percent.
The two proposals also differ on which employees would be eligible for retirement. The Senate bill would allow employees with 25 to 29 years of service to pay for advanced service credits and reach their 30-year eligibility status sooner. Cole said if his plan is adopted and if all eligible employees were to sign up for retirement, the government could realize a savings of $2.5 million per pay period.
In his response, Mills agreed with the bill's premise that a dramatic reduction of the government payroll is needed but that massive layoffs would harm the V.I. economy.
The administration plan would allow police, firefighters, some teachers, Justice Department attorneys, corrections officers and Class III employees to opt for early retirement without restrictions called for in the Senate plan.
One of the chief objections Mills raised Thursday concerned the Senate plan's provision to exclude essential service workers from the package offered to other government employees. In his prepared response submitted to the committee Friday night, Mills said: "This is blatant discrimination against a group of personnel deemed ‘essential' by this act." He said implementation "could have serious repercussions and place undue hardships on the executive branch of the government in its efforts to streamline government operations and reduce personnel expenditures."
The two plans also differ on the length of time retired employees would have to stay off the job before opting for re-employment. Under Bill 23-0205, those opting for early retirement would have to stay out of the government service for five years. Under Mills' draft, most of those returning within five years of retirement would have to pay back the lump sum payment, their retirement payments would stop, and they would have to resume payments into the GERS. However, there are separate provisions for retiring teachers and Cabinet members.
At the St. John hearing, GERS administrator Lawrence Bryan repeated his concerns about the funding mechanism. While the recent $300 million bond issue includes $15 million earmarked to fund an early retirement plan, GERS and administration officials say the money cannot be used to make direct payments to retirees.
Mills also cited concerns of the attorneys who helped the government obtain the $300 million bond issue that any transfer of funds for reduction of the payroll not disturb the bond's tax-exempt status.
"You need to go out and float a pension bond and get it to us and find some way to use that $15 million that they have to make the payments on it," GERS attorney Alphonso Nibbs said. "This will require that it go through an intermediary agency and not a direct payment to the GERS. And if you can work out the mechanisms on that, maybe you can use that $15 million in a way-around manner. . . you can get that money clean so it can come back to us."
Bryan and Nibbs also testified that the system is already burdened by $300 million in unfunded liabilities created by two previous early retirement plans.
Given the urgency of the situation, committee chair Gregory Bennerson said, he wants to convene a working group involving all parties to the two proposals soon after the third scheduled committee hearing, set for 6 p.m. Monday on St. Croix.
Administration officials have said that if they cannot reduce the payroll to 75 percent of the budget by the end of the year, the government could face financial collapse. At the start of the current fiscal year, payroll accounted for 90 percent, Government House spokeswoman Rina McBrowne said, but it is currently down to between 83 and 85 percent. Cole and Liburd said that unless further action is taken, a crippling crisis could occur by the end of this summer.
