The Government Employee Retirement System, which is underfunded and projected to liquidate all its assets by 2023, is giving away about $1.1 million as a Christmas present or "bonus" for government retirees who will soon cease receiving full pensions.
The money is not part of the pension fund or related to retiree’s government service. It is a cash gift to former government employees from the V.I. government – or rather, thousands of small cash gifts. In 2008, the V.I. Legislature enacted legislation creating the cash Christmas gifts for retirees. The law’s title says it serves to "allow for a cost of living increase in the annuitants’ pensions," and in its internal explanation cites inflation. Contradicting its own title, the law has no connection to cost of living or inflation and is not a pension increase. It is a small cash sum, paid out shortly before Christmas.
The legislation, sponsored by then-Sens. Shawn-Michael Malone and Carlton "Ital" Dowe, actually calls for $2.27 million from lottery revenues to be spent on the cash gifts to retirees, but has been limited by available lottery revenues.
GERS Administrator Austin Nibbs told a Senate committee on Nov. 16 that GERS would be sending out checks to each retiree, with "a gross amount of about $153.35, and net just over $110." He was testifying against two bills affecting GERS, one of which would create a second type of cash bonus for some GERS pensioners, arguing that the funds should instead be used to shore up the ailing trust fund. Nibbs said he did not object to the annual Christmas gifts because the funding source was not the government’s general fund, but lottery revenues. (See related links, "Senate Hits Pause on Unfunded Mandates.")
Monday, Nibbs announced that the annual VI Lottery bonus checks have been processed and issued for 7,084 eligible retirees.
Retirees age 60 and older who have been on the retirement payroll for one year, and all disability annuitants who have been on the payroll for one year, can expect to receive a payment, either by check or direct deposit, according to GERS.
In his 2016 State of the Territory address, Gov. Kenneth Mapp said "this year, one of my administration’s top priority will be the challenges plaguing the Government Employees Retirement System." But with a month to go in the year, the administration has not offered a plan, nor is it clear that a complete fix is still possible. (See "GERS Collapse Will Come, Retirees Better Start Planning," in Related Links below.)
The Senate passed modest reforms last year, which have helped to slow the speedy liquidation of all of GERS assets, but it removed the most significant part – removing the cap on contributions at the $65,000 income level – at Mapp’s own request, on the grounds that the government could not afford the increased contributions.
At the Nov. 16 hearing, Nibbs testified that GERS had to liquidate $140 million from its trust fund to pay retiree benefits two years ago. Last year it sold another $90 million in assets.
Several years ago, the Senate passed legislation devoting $7 million per year in remitted federal excise tax revenues to GERS. But only one payment has been made to date and this year’s V.I. government budget assumes those funds will be used to help fill its deficit.
In recent years, the Senate has passed several bills that give small amounts of money to GERS, including using some of the revenues from an oil well the government acquired in a tax case. It is currently considering legislation to devote what could be up to $1 million a year in rental income from houses at the former Hovensa refinery to the cause. If it does, the government will need to find another source of funding for maintenance of those houses. (See "EMS Phone Surcharge May Go Up to Help 911 Service," in Related Links below.)
If its funding shortfall is not addressed, around 2023 GERS will be forced to cut pension payments to less than half their current amounts, according to GERS officials.