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HomeNewsArchivesGovernor Unveils Plan to Pay Off $1 Billion GERS Liability

Governor Unveils Plan to Pay Off $1 Billion GERS Liability

Aug. 3, 2007 — Paying off the more than $1 billion unfunded liability of the Government Employees’ Retirement System is going to be a three-part process, says the governor, whose plan to handle the debt includes the issuance of $500 million in pension-obligation bonds.
Gov. John deJongh Jr. made his plans official Friday, combining the floating of the bonds with a three-percent increase in employer contributions and additional appropriations from the General Fund, according to a Government House news release. For fiscal year 2008, the extra funds total about $20 million, which will go directly to GERS to minimize the system's continuous cash shortfall.
Though GERS employees do not categorize their monthly net deficits as a loss, many have explained that the system frequently pays out more in benefits that it collects in contributions. Over the years, residents and government officials have categorized this pattern as the continual "hemorrhaging" of the system. Officials have predicted that GERS will collapse in approximately 20 years if steps are not taken to reduce the losses and pay off the debt.
In the past, GERS board members and financial advisors have come up with several different scenarios to address the unfunded liability, including the floating of approximately $600 million in pension-obligation bonds and an increase in employee contributions into the system. In December, senators approved the authorization for a bond issue up to $600 million, which was signed into law a few days later by then-Gov. Charles W. Turnbull.
At recent press conferences, however, deJongh emphasized that he does not immediately want to increase the costs for government employees. Instead, a hike in employer contributions — from 14.5 to 17.5 percent of employees' gross pay — is included as enabling legislation in the FY 2008 budget, along with $10.5 million to cover the anticipated expense.
Howard Rog, GERS' actuary, also said during a recent board meeting that deJongh has kept close to the problem, meeting with the system's advisors on a regular basis to come up with a concrete plan for the unfunded liability. (See "Executive Branch Working on Plan to Reduce GERS Debt in Three Decades.”)
“Addressing the unfunded liability is a top priority of my administration,” deJongh said, according to the news release. “With financial disbursements continuing to outpace employee and employer retirement contributions, it is a matter of financial health that we address the funding options needed to bring resolution to the immediate fiscal pressures and quell the concerns of our Virgin Islands pensioners.”
Using 30-year amortizing bonds would save the government "considerable amounts" annually, he added.
"It is the goal of my administration to maximize on investment and cost-saving measures in total so that we can begin to move towards a healthier financial and fiscal situation,” deJongh said. “One that provides security for our retired workers, adopts cost-effective management practices and implements sound investment policies as part of our strategy to make continuous improvements moving forward.”
Since the details of the plan are still in the works, it is still unclear whether the pension-obligation bonds will eat up what's left of the territory's general obligation-bonding capacity, which Public Finance Authority officials now peg at around $50 million.
"It's a work in progress," deJongh spokesman Jean P. Greaux Jr. said Friday evening.
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