The Virgin Islands received nearly $31 million less in rum cover-over payments for 2025 than it did in 2024, the U.S. Department of the Interior announced Thursday.
The estimated rum tax rebate for 2025 was $181,068,638 — $30,970,946 less than the $212,039,584 the territory was sent for 2024, which was $14 million less than allotted in 2023.
Under the territory’s Revised Organic Act, effectively the territory’s constitution, any excise tax collected on VI-manufactured rum exported to the mainland United States is transferred to or “covered over” to the Virgin Islands. The V.I. government submits an advance estimate of rum excise taxes to the Interior Department’s Office of Insular Affairs on an annual basis so that a payment can be made by September of each fiscal year.
Adjustments are calculated and paid based upon amounts advanced from rum excise taxes derived from the Virgin Islands and actual receipts collected by the federal government, according to a release. The fiscal year 2025 advance payment to the V.I. government was calculated using the $10.50 per proof gallon rate.
The rate had been capped at $10.50 since 1984, with brief fluctuations.
The rate changed to $13.25 in 1999 but needed to be approved by Congress annually, making the territory’s financial planning tentative. The federal Bipartisan Budget Act of 2018 set the per-gallon rate to $13.25 for five years following the back-to-back Category 5 hurricanes of September 2017, but that expired at the end of December 2021.
Governors and congressional delegates have long pushed for a higher rate, with Gov. Kenneth Mapp making such a plea just weeks before the storms.
The per-gallon rate is of particular importance since legislation was signed into law in February 2022 to use the cover-over funds to stabilize the Government Employees’ Retirement System, which was forecast to become insolvent by October 2024, according to GERS actuary Segal and Company.
Angel Dawson, administrator of GERS, said his calculations had an even deeper cut to the rum cover-over. He puts the figure at $47.4 million less than last year.
“We do not yet have any details regarding this matter. However, it is of concern to the GERS, which is scheduled to receive approximately $158 million on Oct. 1 under a ‘funding note’ paid by the annual cover over revenue,” Dawson said by text Friday evening. “From all appearances, the GERS will, once again, be short-changed. While our actuaries project that we will remain liquid through at least 2036, given our present financial structure, they also forecast that the system’s ability to continue paying retires will be threatened between the years 2037 and 2039 if we were to experience just two more years of funding note shortfalls.”
GERS put together a $124 million investment return in less than two years, increasing 31 percent from $400 million in September 2022 to $524 million in July, he said.
“However, as I testified to the Virgin Islands Legislature just last week, our marketable assets would have been at least $34 million higher had we received the full amount pledged under the ‘funding note,’ last year. Given the time value of money and the accompanying lost investment revenue opportunity, in actuality the amount would have been even greater,” Dawson said.
Neither the offices of Gov. Albert Bryan Jr. nor Delegate to Congress Stacey Plaskett responded to requests for comment about the Interior Department’s announcement.
