The future of the Government Employees Retirement System may require intervention by the Legislature, a federal judge said Thursday. The judge presiding over a hearing held Thursday in U.S. District Court told lawyers representing the government and the pension system to submit briefs to help him prepare a legal opinion.
Five witnesses addressed different aspects of the $1.3 billion dollar deficit that threatens to send the GERS into insolvency by 2024. A 1984 consent decree case was reactivated by order of the court a few months ago after lapsed employer contributions mounted to $43 million dollars in 2016.
But after hearing testimony over the course of four hours District Court Judge Curtis Gomez said neither the government nor the GERS legal team had made persuasive arguments addressing all aspects of the case.
“What we have here is a gap,” Gomez said.
Pension system lawyers felt the government should be compelled to pay prior obligations ahead of other expenditures. But the government team, led by Assistant Attorney General Carol Thomas-Jacobs, asked where in the ’84 consent decree was the government directed to make employer contributions to the fund.
Some mechanism would have to be devised to clarify the process. The result, Gomez said, would be a “mutually agreeable, enforceable remedy.”
For some retirees, a solution could not come soon enough. GERS Director of Member Services Shoran Sasso testified that there are 350 retirees who are waiting to receive payments because of underfunded pensions. One has been waiting since 2012. Sasso said most of those who were left with insufficient funds in their government retirement accounts worked in semi-autonomous agencies.
That changed in 2016, she said. That was the year that retirees from central government agencies began presenting petitions to collect monthly payments. Those applications were delayed for the same reason as the semi-autonomous retirees.
“I have a retirement pending as far back as 2012,” Sasso said. “It’s not just the semi-autonomous agencies.”
Of those who retired in 2018, four are receiving annuities, she said. There are 85 people on St. Croix and 126 on St. Thomas who are not. Retirees are being told they have between eight months and one year to wait before payments appear.
The financial strain leads to many tearful calls to Sasso’s office. There also are some angry calls, filled with harsh language.
It’s very stressful on the staff, she said, adding that she tries to answer many such calls herself.
“People call up. They cry. They say they can’t send their children to college. They can’t pay their bills, they can’t pay their health insurance. They’re losing the house. They’re losing their car,” Sasso said.
Close to half a dozen witnesses testified at Thursday’s evidentiary hearing. Finance Commissioner Vladimier Collens tried to assure the court that paying into the pension fund has always been a priority for the government.
That statement prompted the judge to ask how long the commissioner thought that would last. How long would it be, before a new priority came along and GERS became less than a top priority?
GERS Executive Director Austin Nibbs sparred with government attorney Angel Tavares about the system’s support for efforts by the Mapp Administration to provide further funding. Tavares asked why Nibbs asked that an item to consider sale of the Havensight Mall on St. Thomas be taken off the agenda for the July meeting of the GERS board.
Because the offer would have brought in $25 million, and that was not enough. Nibbs said. Havensight’s most recent appraisal valued the property at $43 million. GERS is making about $2 million a year on the shopping center, and a few years ago the Mapp administration asked the system to invest $350 million to upgrade the property.
Then, he said, they wanted to take $25 million for Havensight. “The proposal was never discussed with us. No one came before the board,” he said.
Aldwin Frias, an actuary from Segal Consulting, spoke about the factors playing into an underfunded pension system
Jorge Baez, an economist, questioned the wisdom of the GERS’ non traditional investments. Baez suggested the system lost $100 million as a result. That figure was produced through an analysis into the GERS alternative investment plan.
The judge asked if the witness was offering an opinion and could he qualify as an expert on alternative investments. Tavares suggested that some of the pension system’s problems were self inflicted.
But Aldwin Frias, an actuarial accountant with the firm Segal Consulting offered a different analysis.
“If the plan had been fully funded through ADEC, they would have about $1.6 billion more in assets and currently be fully funded,” Frias said.
Attorney Robert Klausner, representing GERS, said something had to be done while there was still time.
“A plain reading of the consent decree says there will be a defined employer’s contribution,” he said. “I worked on the Detroit bankruptcy, which was a tragedy in the making. And this one is too,” he said.
Maybe GERS could make an accounting of the grand total each employee paid into the system from their paycheck (the gov’t share notwithstanding-that will never be paid). Add compounded interest, and pay out that amount to each retiree. The retiree could then reinvest the amount and have something coming in each month from a private dividend investment account, or ladder CDs (interest rates are rising). Of course this would require GERS to divest itself of all investments and properties, and he dissolved. Many cities and towns are being faced with outsized retiree pensions, as well as medical insurance, and it’s obviously unsustainable.
Makes sense. A payoff for those who choose a lump sum payment. I think it should be an option. It would definitely lower the long term payouts. Also, new employees can invest in a 401k or a roth ira. When they retire they don’t have to wait for the government to give them a check. Future retires should be at least 60 when retiring. Presently there are some people that can retire in 20 years. If someone starts work at 20, they can retire at 40. That means if they live to 80, they would of been receiving a check for 40 years!!!!Crazy!!
I think selling GRS’s real estate to the government or to anyone else is a mistake. Get people who know what to do to run these places properly. Stop leaving your tenent get away with not paying their rent on time or giving them large discounts or no rent. They make enough money during ugh season to sustain themselves during the slow season. If they can’t, they need to get out.
Just thought of a quick way to make a few million and have the government pay for it. Rent office space to the government . The luitenent governor’s office and upstairs of the of the Emporium rents for 500,000 a year with no generator backup. Just think how much money GRS can make if they set aside some buildings for government office space. GRS probably makes a 100,000 a year max for their primest property. Get rid of the grocery store, get rid of deadbeat tenent’s and rent to the government. Rent payments to landlords is public information. Get the amounts and you can start negotiating. Also, very important, do not manage it yourself!!!Hire an outside company to collect and manage the buildings. We all know how the government can fine money to pay others but can’t find money to pay their own people ( and their investments)
You make very good points Katie. Come to think of it, the GERS building on water front St Thomas is a huge structure that appears to be under utilized. There is abundant parking under and around the building. Why couldn’t the Lt Gov office, as well as Excise tax, be located there? If need be, the playground out front (never have seen a child there, maybe because there is no shade from the blazing sun?) could be turned into parking space. The Labor dept is adjacent to GERS, and is very decrepit, perhaps they could share the building. Not sure what the heck Percy’s Bus Stop is (for sure it is a ridiculous eyesore in full view of inter-island ferry passengers), but if it IS a restaurant, then the additional employee traffic would have somewhere to eat, along with the other food choices at Petrus Plaza. I don’t know why people cannot, or will not see possibilities?!
Unbelievable! GRS gave tenents at Havensight a 30 percent discount on their summer rent. Prime real estate and GRS is giving discounts!!!No wonder they are crying that they don’t have money. Poor investments, cheap rent, government holding on to money taken out of people’s paychecks to use for God knows what. Did GRS ask the government to pay interest on the government employees retirement monies they were holding on to? What about the insurance claims for damages? Well? Come on. Really? They need to clean shop. Same nonsense over and over and over again.