The Senate Finance Committee held, for now, a bill to roll back pension contribution increases for judges, justices and magistrates enacted in 2011 and 2015, worsening the Government Employee Retirement System unfunded liability, during a hearing Tuesday.
The bill sponsored by Sens. Kenneth Gittens, Neville James and Sammuel Sanes would also clarify some ambiguities in the law about vesting periods and removes GERS’s authority to set contribution rates or pension amounts, putting that power in the hands of the Legislature.
Several senators raised concerns about the cost of an unfunded mandate on GERS, when the pension system is rapidly losing money. GERS Administrator Austin Nibbs also said the measure would worsen its already troubled financial position.
Nibbs told the committee the GERS has an unfunded liability of about $3.1 billion and is expected to liquidate all its assets by 2023 to pay current benefits.
Supreme Court Chief Justice Rhys Hodge and Superior Court Judge Robert Molloy both testified for the bill, arguing in part that V.I. law says judges’ compensation cannot be reduced during their term in office.
He said the V.I. law is similar to a section of the U.S. Constitution that forbade reducing federal judges’ pay during their term in office, as well as laws and constitutional provisions in several states doing the same. He and Hodge also argued that changes to their pension contributions were equivalent to changing their pay or compensation.
Sen. Clifford Graham asked what would happen to pensioners’ payments if the government does nothing and "we close our eyes and open them in 2023?"
"Members will be receiving 50 percent of their annuities or less," Nibbs said.
Graham said, "And we will be in violation of the provision that says we cannot reduce your annuity."
Sen. Kurt Vialet said, "We’re going to have to make the determination today as to whether or not, once again, the Legislature is going to enter into an unfunded liability."
"The system at a later point will point out that the mandate is unfunded and then they are going to charge the local government," he said.
Molloy cited a New Jersey Supreme Court decision that said laws against reducing judges’ pay "serve the purpose: to maintain the separation of powers and promote true judicial independence. The power to reduce a judge’s [compensation] will leave the public uncertain whether judicial decisions are animated from a desire to seek favor or from fear of retribution.”
Molloy continued, “The clause ensures judicial integrity both in perception and in action. It ensures that the judicial branch will not become subservient to the other branches and will be capable of carrying out its mission in our constitutional democracy."
Molloy cited the same case when the Senate considered a nearly identical measure in February. (See Related Links below)
Molloy did not mention that the case he cited produced outrage in New Jersey, causing its state legislature to overwhelmingly pass a bipartisan ballot proposal to change the state constitution. That same year, New Jersey voters voted 83 percent to 17 percent to change the constitution to make judges pay more into their pension funds.
Before the committee held the bill by unanimous consent, some members said they may consider enacting the less controversial parts of the measure, regarding terms of office and vesting, as separate legislation.
Senators also held a bill sponsored by Sen. Sammuel Sanes that would have spent about $2 million in revenue collected on alcohol and tobacco taxes and used it for a bonus payment to GERS retirees who make less than $25,000 per year.
Nibbs objected that the money came from the V.I. government’s General Fund, which was the source of payments to GERS.
"Any reduction (to the General Fund) would negatively impact the government’s ability to effectively and efficiently meet its financial obligations to its employees and the community at large," Nibbs said.
He also said GERS is about to give out annual bonuses to retirees, from funds from the V.I. Lottery.
"Next week, Tuesday the 22, we will be making those bonus payments to about 7,084 retirees, gross amount about $153.35, net just over $110," Nibbs said. He said he does not object to that annual Christmas "bonus" because it has a separate funding source. It is funded by roughly $1 million per year from the V.I. lottery.
That funding could alternatively be used to help shore up the GERS, so retirees are not hit as hard when the system is no longer able to make full pension payments.
The committee also held legislation establishing the office of the public surveyor to allow the committee members to study a proposed amendment.
Several other bills, including one requested by Gov. Kenneth Mapp to mandate West Indian Co. Ltd. build a residence for the governor, were initially scheduled for the hearing but were removed from the committee agenda for the day.
Present were Graham, Vialet, Sens. Marvin Blyden, Positive Nelson and Tregenza Roach. Sanes and Sen. Myron Jackson were absent. Noncommittee members Sens. Kenneth Gittens and Novelle Francis Jr. were also present.