Jan. 3, 2006 – The news of the insolvency of the GERS should not come as a surprise to anyone who has a vested interest in the system. For several years now, the administrator and members of the GERS have warned the members of the Legislature that the system is broken. They have tirelessly warned that the unfunded liability is growing to unmanageable proportions, but as usual, the legislators swept the matter under the rug. Now the bump under the rug has become a stumbling object leading to the insolvency of the system.
Anyone who has been vested in the system (past and present) should be concerned that it is possible that one day, there would be no annuity for anyone. There is generally little or no concern by some who might feel that as long as they are receiving an annuity check every two weeks, there is nothing to fear. Wrong. When the GERS finds it necessary to go to the bond market, that action raises a red flag. Going to the bond market for funds to ensure that there are resources to satisfy annuities should remind us of the grocer who borrows money to satisfy his payroll. At that point the grocer is bankrupt and reorganization is necessary. Since the system was created in 1959, this is the first time it will become necessary to sell bonds to shore up the cash needed to satisfy the system's obligations. And in anticipation of the legislature's action, the bonds should be sold on the full faith and credit of the Government of the Virgin Islands.
Much reform of the system is needed immediately. Some members of the legislature and the governor are playing games with system and are afraid to enact the necessary changes to put it on the right track to recovery. The directors of the GERS have recommended amendments, which include raising the contributions by two percent for current employees and a commensurate amount for the government. Legislators feel that if they raise employees' contributions, they will not be favored in the ballot box. But the same employees who they think they are protecting will be the same ones who will be hurt when the system goes dry. The annuity system of the GERS is similar to the Social Security system wherein the current employee cadre pays for those who already made their contributions.
Members of the system (current and retired), should initiate a letter writing campaign and exert pressure on the governor and members of the legislature to do the right thing (work with the GERS to institute reform immediately.) Much credit should go to Senator Hill for his determination and tenacity in pushing whatever little has been done.
Editor's note: Eric Dawson is a former V.I. commissioner of the Economic Development and Agriculture Department, four-term member of the V. I. Legislature, (1973-1979; 1985-1987). He has also served as program manager for the U. S. Small Business Administration, Small Business Development Centers, Washington, D.C. We welcome and encourage readers to keep the dialogue going by responding to Source commentary. Letters should be e-mailed with name and place of residence to email@example.com.