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GERS: 'We Are In Serious Trouble'

Feb. 19, 2009 — Economic conditions have worsened the already bad financial condition of the Government Employee Retirement System, GERS Chief Financial Officer Joseph Boschulte told the governing board at their monthly meeting Thursday.
"GERS assets were at $932 million at the beginning of the year and are now $907 million so that's roughly a $25 million loss since January 1," Boschulte said after the meeting, when asked to put a number on GERS' recent market losses.
Market losses and the current global crisis add insult to the injuries GERS already faced. The GERS system has a long-term built-in deficit of over $1 billion due to a series of benefit increases that were not matched by increased employee or employer contributions to the retirement plan. (See "GERS Chief Raises Alarm On Unfunded Liability.")
The system’s portfolio had a market value of $1.3 billion at the beginning of fiscal 2008, but was down to $970 million Oct. 10, and would be falling rapidly even if the market were holding steady. (See: "Nervous GERS Trustees Meet Amid Global Financial Crisis.")
For the fiscal year ending Sept. 30, 2008 GERS took in $149.9 million and disbursed $216 million, leaving the system a one-year deficit of $66.1 million.
"We are seeing the system has a liability each month," Boschulte said last October. "In the past the interest and gain on investment was enough to cover the responsibilities of the system … Right now the only way (to meet the obligations) is to draw down the system's assets because we are not getting the return on the investments." (See "GERS Liquidating Some Assets to Make Current Payments.")
Since Jan. 1, GERS has cashed in $14 million of its investments to meet current accounts, and expects to cash in another $4 million of its principal in March, Boschulte said Thursday.
"We are in serious trouble," Trustee Yvonne E. Bowsky said. "Between the unfunded liability and what is happening in the market, left unattended you have three or four more years before the system fails."
Trustee Carver Farrow recommended the board and top GERS officials meet with Gov. John deJongh Jr.'s financial team, members of the Legislature and GERS actuaries to try to hammer out an effective response.
"All of us need to be on the same page," Farrow said. "There is no time for grandstanding, politics or anything else."
Trustees and staff discussed when and how to meet.
Adding one more twist to the fork, as the economy worsens it is becoming more difficult to quickly liquidate assets in order to meet current account payments, Boschulte said. GERS plans to meet March 11, 12, and 13 on St. Croix to address its asset allocation strategy with an eye on how to better deal with the system's current needs.
On an upbeat note, GERS has no exposure whatsoever to either the Bernard Madoff frauds or the developing Allen Stanford fraud scandal, Boschulte said.

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