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HomeNewsArchivesSenate Committee Supports GERS Reform

Senate Committee Supports GERS Reform

Sept. 12, 2005 — A Government Employees Retirement System reform bill received unanimous support in a Senate committee Monday after months of debate and testimony from the organization's representatives.
"Something needs to be done before the system collapses," said Willis C. Todmann, GERS acting administrator, at the Government Operations and Consumer Protection committee hearing. Todmann added that the system is almost $1 billion in debt — due to a large sum of money owed to the system by the government — and is not able to bring in enough money annually to continue to provide full benefits for employees. This unfunded liability is compounded by a number of other unfunded mandates imposed upon the system by the Legislature (see "GERS Debt Approaching $1 Billion Mark").
"We pay out about $130 million in benefits every year without being able to do so," Todmann said. "We've had to continually liquidate our assets in order to keep up with the benefits we supply to over 6,500 retirees and their dependents. We cannot set our own contribution rates, and we are limited by this body as to what investment opportunities we can pursue."
Todmann said that if the system collapses, there will be a negative impact for the community as well as GERS members. "If conditions don't improve, the repercussions in the community would be devastating, and much of the good life, as we now know it, would vanish immediately."
Consequently, Todmann explained that the bill would most importantly allow for a separation of GERS from the Legislature so that the system can set and adjust contribution values for the employer and employees. This would help pay off the unfunded liability and enable retirement benefits to be funded in advance of an employee's retirement date or on an actuarial reserve basis.
While this should already be happening under the Legislature's supervision, Todmann said that it is not, due to the lack of proper funding. "The GERS has suffered greatly because now, as it stands, the Legislature and the administration determine when and how much funding we should receive. Had the system been properly funded on this actuarial reserve basis, the massive unfunded liability would not exist," Todmann said.
The bill will also give GERS the ability to pursue alternative investment opportunities to bring in more money. Currently, the board is only authorized to pursue investments with class-A securities. "The board must be authorized to invest in BBB or better-grade investment securities, as well as alternative investments, which would increase investment returns," Todmann said.
The implementation of a Tier-II system of contributions, by which government employees hired during and after Fiscal Year 2006 would have a different level of benefits than employees already within the system, would also be part of the bill. While this measure would mean that new employees would have to wait longer before they receive retirement benefits, it does enable more money to be generated.
Since it is the general trend of the government to reduce the size of the workforce, the system can no longer provide full benefits without going into bankruptcy, Todmann explained in support of Tier-II legislation.
However, because the system is currently in dire straits, Todmann urged senators to make a lump sum payment appropriation of $600 million, as well as an immediate increase in employee contribution of 1.5 percent of payroll — or pay the $61 million annual shortfall in operation costs along with increasing contributions. Because the Legislature is currently the only body able to set contribution rates, Todmann emphasized that immediate action be taken (see "GERS Officials Predict Ruins Instead of Retirement").
Additionally, Todmann advocated that the system not provide any increases in benefits until the government has identified a specific funding source to take care of the debt. Todmann added that funding should also be identified in the executive budget for any future benefit improvements. "It's time to get a proper funding plan," Todmann said.
Amendments introduced by the bill's sponsor, Sen. Louis P. Hill, were also approved. Hill said the amendments would:
– add to the Tier II system by stating a member of the First Tier System – government employees hired before 2006 – who leaves government employment and becomes reemployed with the government more than five years after leaving the system would automatically become a member of the Second Tier.
– allow for a 3 percent raise in contributions over the next five years. The original version of the bill called for a 5 percent raise over the next five years. In addition, the amendment provides that GERS can increase contribution rates up to 1 percent per year.
– remove the requirement that a person receiving an annuity must be 60 years old or over.
"In addition, I've introduced an amendment that says people who have been working in the government for a long time, then placed in exempt, high-paying positions where they can retire after serving in that position for three years must now serve in that position for five years before they can retire," Hill said. He added that all amendments were agreed upon by GERS representatives.
Senators also quickly approved a bill to establish the Motor Vehicle Bureau as an entity separate from the Department of Public Safety. After being re-introduced to the Legislature in early June, this bill was tabled three years ago after Public Safety Commissioner Elton Lewis told Sen. Adlah "Foncie" Donastorg he had plans to fix to bureau. (See "Senate Considers Bill to Fix Motor Vehicle Bureau").
"We've continued to wait, and nothing has been done," Donastorg said Monday. "Up to yesterday, I was at the MVB in St. Thomas, and there were chunks of the building falling out all over the place. The facility is in ruin, and there is a lack of manpower, financial resources and supplies."
Donastorg added that Lewis was initially in favor of the bill, but a vote from Gov. Charles W. Turnbull in opposition to the measure had quickly changed his mind. "This administration seems to be operating under some kind of hidden agenda where nothing gets any better, and no one wants to change what's going on."
"Either we need to change the structure of MVB itself, or change some of the people within the police department," Sen. Ronald Russell said.
In addition to creating an autonomous agency, the bill creates an account for the MVB separate from the General Fund so that revenues generated would be able to fund the organization's operations. As a revenue-generating agency for the V.I. government, the MVB currently accumulates approximately $8 million to $10 million annually in money deposited directly into the General Fund. Because the bureau only uses between $500,000 and $700,000 per year to purchase resources for its facilities, Donastorg's bill proposes that 10 percent of the revenue generated by the MVB — or $1 million if 10 percent of revenue is not sufficient for MVB operations — be placed into the separate account.
The bill also allows the MVB to issue certificates of destruction for vehicles imported into the V.I. before Sept. 1, 2005.
All bills approved by the senators on Monday will be forwarded to the Committee on Rules and Judiciary. They would then advance to the Committee of the Whole, and if passed there, must be signed into law by the governor.
Present at Monday's session were Sens. Liston Davis, Donastorg, Juan Figueroa-Serville, Hill, Shawn-Michael Malone, Russell, Usie R. Richards, and Celestino A. White Sr.
Sen. Terrence "Positive" Nelson was absent.

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