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Sunday, April 14, 2024
HomeNewsLocal newsSenate Takes Second Swipe at Pension Reform

Senate Takes Second Swipe at Pension Reform

The V.I. Legislature approved a revised version of recent government pension reform during a special session Monday night.

The retirement reform bill aims to strengthen the territory’s ailing Government Employee Retirement System by reducing some benefits and increasing some payments for more recently hired Tier II government employees.

Gov. Kenneth Mapp had vetoed the bill, saying the version sent to him had drafting errors and one provision that is different from what the Legislature voted upon. The governor asked the Legislature to send a new, clean bill to sign.

For many years, the pension fund has paid out more in benefits than it takes in in revenues, accumulating a $1.8 billion unfunded liability, due to legislated mandates in years past for unfunded benefits and early retirements. That trend has been worsened by a shrinking government workforce due to budget cuts and early retirements, which have reduced the ratio of active employees to retirees.

Without reform, GERS is expected to have liquidated all its reserves and be forced to cut benefits sharply by 2025. With the reform bill, the pension would stay solvent some months or a few years longer, but the system needs both a giant infusion of cash and big contribution increases and cuts to future retirees’ benefits – if it is to survive, GERS officials, trustees, actuaries and financial advisors say.

The version approved Monday [Bill 31-0251] raises some retirement ages, adds to the types of employees eligible to join GERS and lets eligible employees join right away instead of waiting. Instead of setting pensions based on the top five years of earnings, it would set them based on career earnings, so that a few years at higher pay right before retiring would not result in potentially decades of much higher pension payments.

Several sections of the bill tinker with the types of investments GERS can engage in, allowing more risky investments in hopes of higher rates of returns on investment. GERS investments as a whole have performed well over the years, but not well enough to make up for the difference between what collects in contributions and what it pays out in benefits.

One provision of the bill increases the amount of the pension portfolio that can be invested overseas from 10 percent to 25 percent, on the advice of investment advisors who said that could enable higher rates of return.

Another section allows GERS to invest "a maximum of 15 percent of the portfolio in below-investment grade securities.” It also reduces the minimum bond rating for foreign bonds and securities from BBB to B and increases the amount that can be invested in one foreign bond from 2 percent up to 5 percent of the total portfolio.

A few senators opposed the changes.


Sen. Tregenza Roach said he opposed the changes because it has benefit cuts for Tier II employees, while increasing their contributions, which he said was unfair.


Sen. Kenneth Gittens also said he opposes the changes, saying, "I too really don’t believe in moving the goalpost after the game has begun."
"GERS is claiming to have a cash flow problem," Gittens said.
"You have a cash flow problem, GERS. Provide opportunities for employees to come in and borrow their monies," Gittens said. “You have a cash flow problem, GERS. Sell the property you have sitting out East End with no taxes coming in. Sell it to the government employees and let their property taxes be paid on it,” he continued.
“You have a cash flow problem, GERS. Sell Carambola. What are we sitting on it for? What we know about running any hotel? And I could go on and on and on," Gittens said.
Gittens suggested GERS instead take a number of actions, some of which could generate tens of millions of dollars in short-term cash flow, and others that would substitute one investment for another.
GERS is already selling off $60 to $70 million in assets per year to pay current retiree benefits. Selling land or Carambola would replace a portion of that year’s liquidated assets, making the benefit of doing so obscure.
Several senators rebutted Gittens, saying GERS was going broke and his proposals would not fix it.
"Do you have a bill now?" Sen. Kurt Vialet asked. "We need to tell (people) the truth. The system is going to collapse if nothing is done by 2024. Is that what you want?" he continued.
Vialet said, “We very good at kicking the can down the road, kick it and kick it. We have a simple task tonight. This is the same bill from two weeks ago."
Sen. Clifford Graham said, "My colleague … was absolutely correct. We’ve been kicking the can down the road again and again, until we have to act."
"Why is time of the essence?” Graham continued. “Because every day you wait, another group of people cross that (retirement) threshold and it costs the system more and more," he said.
Senate President Neville James said, "To ignore the realities we are dealing with when they are staring us in the face, I am just dumbfounded."
"If losing $150 million a year is what the system is supposed to do, let me know. … Now is the time to exercise oversight and we are running and ducking," James said.
Most senators supported the changes but said more needed to happen.
Sen. Jean Forde said the bill "is not going to be perfect. It is not going to please everyone," he said.
"I think what we have before us is by no means the end. … What we have before us is an attempt to increase the longevity of the system," Forde said.
Similarly Sen. Almando "Rocky" Liburd said the bill "is the beginning of a process."
Liburd said the government needs more employees to improve the ratio of active contributors to the system to retirees. He also said the age of retirement may need to change. The system needs a cash infusion, "but not just an infusion," Liburd said. "We have to have cash that is sustainable," he said.
Sens. Janette Millin Young and Nereida "Nellie" Rivera-O’Reilly both raised concerns that the last-minute session and its agenda were not properly called under the rules of the Legislature. Millin Young raised a point of order and asked the Legislature to act to waive the rules or address their violation. Senators voted to waive the rules to allow the two bills to go forward.
Voting to pass the revised GERS bill were Forde, Graham, James, Liburd, Vialet, Sens. Marvin Blyden, Novelle Francis, Justin Harrigan, Myron Jackson and Sammuel Sanes. Voting no were Gittens, Roach, Millin Young and Sen. Terrence "Positive" Nelson. Rivera-O’Reilly abstained.
The Legislature also overrode Mapp’s veto to enact the V.I. Taxicab Commission’s $540,000 budget. Mapp vetoed it on the grounds that it – like the Public Services Commission and, to a lesser extent, the Bureau of Motor Vehicles – is funded by fees and fines from those it regulates.
Mapp said in his veto message, “For too long, the Taxicab Commission has operated on the backs of hardworking and struggling taxi and tour operators through the issuance of fines, levies and fees."
Senators overrode another veto to appropriate $1.2 million from the Union Arbitration Award Fund to pay members of the United Industrial Workers of North America, Seafarers International Union, AFL-CIO, for retirement benefits they sued for. And they approved the government employee life insurance contract with AETNA for the upcoming year.
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