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Wednesday, June 19, 2024
HomeNewsLocal newsSenate Hears New and Old Proposals for GERS

Senate Hears New and Old Proposals for GERS

Sens. Kurt Vialet and Janelle Sarauw talk during Tuesday’s Finance Committee hearing. (Photo by Barry Leerdam for the V.I. Legislature)

Sen. Janelle Sarauw asked Tuesday why the Government Employees’ Retirement System of the Virgin Islands kept a consultant firm on contract for seven years when all she heard from the consultant was that the system needed “a significant infusion of cash.”

Testifying Tuesday before the Senate Finance Committee, GERS Administrator Austin Nibbs did not back away from the need for an infusion of about $2 billion into the system. However, he did mention that the system’s board was also recommending another proposal made by the consultant – Segal. In that proposal, Segal recommended cutting annuities to retirees by 42 percent.

Sen. Athneil Thomas was not buying that.

“I don’t think myself or any of my colleagues will allow a 42 percent cut,” Thomas said.

According to Nibbs, GERS pays benefits to 8,699 retirees and beneficiaries. The average monthly paid in benefits is $21.4 million. He said the total amount paid in benefits from Oct. 1, 2019, to July 31, 2020, was $213.5 million.

With the active membership, the 8,881 paying into the system – 6,148 from the central government and 2,733 from semi-autonomous agencies – is less than a 1 to 1 ratio between the actives and the retirees. The system is bleeding.

But none of this is new to the senators. The system started paying out more than it was taking in back in 1996. Nor was there anything new in Nibbs’ statement, “Based on the current funding of the system, the system will become insolvent by 2024 or sooner.”

What was new to the discussion was a proposal made by Gov. Albert Bryan Jr. at a news conference just hours before Nibbs appeared before the Senate.

Bryan said he was calling the Senate into a special session to consider a bill that would create a revenue stream of $85 million annually to the territory.

“While shoring up the Government Employees’ Retirement System remains a priority for the use of the funds, there are several potential uses and needs for the funds that will become available because of the refinancing,” the governor said.

Nibbs said he wanted to see more details of the proposal before he was ready to comment on it. Sen. Novelle Francis Jr. said he would give Nibbs a copy of the proposal that he had just received, and they would get together to discuss it.

Nibbs told senators that the system’s members’ loans program that quit issuing loans several years ago was presently worth $39.5 million.

When he was asked why the loan program, which had been making money, was shut down, Nibbs said the system did not want many outstanding loans if it went into insolvency.

The blame for the system’s financial problems has often been laid on the board of trustees – claiming the board made bad investments. Nibbs denied those claims.

“Over the years, there has been a misconception that the board has made bad investments. This is so far from the truth,” Nibbs told the lawmakers. Over the past 20 years, the market rates of return have been positive 16 out of 20 years. In many of the years, the returns were well above the assumed rate of return of 7 percent or 8 percent, and as high as 17.6 percent in 2003, 10.6 percent in 2004, 11.8 percent in 2005, 14.1 percent in 2007, 14.5 percent in 2012, 9.1 percent in 2013 and 11.2 percent in 2017.

“The negative returns were a result of market conditions in 2001, 2002, 2008 and 2015,” Nibbs said.

The proposed budget for the system in 2021 is $19.4 million. Nibbs told senators the system plans to cut personnel through attrition and hopes to bring its budget down to $14 million in a few years. Presently the system has 67 employees on St. Thomas and 16 on St. Croix.

Senators at Tuesday’s Finance Budget Hearing were Sens. Vialet, Marvin Blyden, Donna Frett-Gregory, Myron Jackson, Sarauw, Thomas, Dwayne DeGraff, Allison DeGazon, Francis and Oakland Benta.

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