Aug. 20, 2003 – The Government Employees Retirement System is going broke.
During the agency's Fiscal Year 2004 budget hearing before the Senate Finance Committee on Wednesday, Laurence Bryan, GERS administrator, said it has a deficit of $731.7 million.
Bryan said contributions payable by the government and its instrumentalities are current, but no payments are being made on the $731.7 million in unfunded liabilities. The central government is responsible for the unfunded liability.
"GERS has sued for the collection of these funds in the District Court, and the matter is being actively pursued before the court," Bryan said.
Sen. Louis Hill could offer no encouragement. "The cash that you need right now, you're not going to get it," he told Bryan, because the government, itself facing a deficit, hasn't got it.
GERS had to liquidate short-term, fixed-income bonds this year to carry out its functions in some instances, Bryan said. He added that the agency did not have to pay any penalties for doing so, but it incurred some transaction costs.
The retirement system has three sources of revenue: contributions from government employees, contributions from employers, and return on investments.
"The system has limited potential to grow its way out of debt," Bryan said. But, he added, "when you compare it to other pension plans, we're definitely in trouble."
At present, GERS is paying out benefits to 6,052 retirees and receiving contributions from about 10,555 employees, he said. If contributions remain at the same level, he said, the system will be bankrupt in 20 years.
The Finance Committee chair, Sen. Adlah "Foncie" Donastorg, asked Bryan why the agency's interest rates on its loans are so high. GERS makes personal, auto, land, mortgage and retiree loans available to its members.
"Even the banking institutions offer less in terms of mortgage rates than you are offering," Donastorg said. "If you're not competitive, you're not convincing government employees to take their loans with you. They're going to go somewhere else."
Bryan said the agency cannot go below 8 percent interest because that is its rate of return. Donastorg said he was not convinced of that.
Donastorg also said he would like to see any annual earnings above and beyond $4.6 million that GERS derives from The West Indian Co., which operates the GERS-owned Havensight Mall, go into the General Fund.
"We are hanging on [by] the nails," Alfonso Nibbs, GERS attorney, told the committee. "I urge you not to do anything that would jeopardize the stability of the system."
The last time GERS earned $4.6 million from WICO was in 2001. Last year the earnings totaled $4.2 million. So far this year they stand at $3.1 million.
GERS does not receive appropriations from the General Fund for its operations.
Olympic Committee
In a first-time appearance before the Finance Committee, the V.I. Olympic Committee on Wednesday requested an appropriation of $200,000 for FY 2004. Hans Lawaetz, VIOC president, said that Sen. Ronald Russell, a member of the Finance Committee, had encouraged him to appear before the body.
Russell has been president of the V.I. Track and Field Federation for 21 years. And Sen. Usie Richard has been president of the V.I. Basketball Federation for 22.
Most of the senators present at the hearing responded favorably to the idea of helping to fund the committee, which sends local athletes to represent the territory not only at the Olympic Games but also at the Pan American Games, the Central American and Caribbean Games and other international competitions. "I'm going to support giving money to the federation," Sen. Luther Renee said, adding that investing in sports could help boost the economy.
The V.I. Housing Authority also was scheduled to appear before the Finance Committee with its budget request on Wednesday afternoon. Because of the federal takeover of the agency earlier in the day, that did not happen. (See "Housing Authority now under HUD receivership".)
Committee members present for the day's hearings were Sens. Roosevelt David, Donastorg, Hill, Renee and Russell. Sens. Shawn-Michael Malone and Norman Jn. Baptiste were absent.
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