Dear Source:
Once again the Government Employees Retirement System (GERS) is in the news. The turmoil in the economic markets has compounded the System's existing problems. The recent Senate hearing on February 23rd is the latest in a long series of warnings.
GERS has repeatedly issued statements about the System's financial woes while failing to use the authority that was granted to the Board in Act No. 6794 ("The Retirement System Reform Act of 2005"). This act, sponsored by Sen. Louis Hill, was supported by the Advocates for the Preservation of the Retirement System (APRS).
Recognizing that the System could not continue to pay benefits at the same level as it currently does, a second tier of contributions and benefits was established for employees entering the System on or after October 1, 2005. This provision has not been implemented.
Further, the Board was given the power to determine the rate of contribution for members and employers of the system. The Board has failed to use this authority, and other provisions added to strengthen the System's financial viability have also been ignored. By delay and procrastination, there has been negligence in fulfilling responsibilities to preserve the System's solvency.
The blame for the System's financial difficulties can also be shared by the Legislative and Executive Branches of Government. The 26th Legislature ended its term with a lame duck session on December 29, 2006, passing Act. No. 6905 which had been sent to them by then Governor Turnbull and which was vigorously opposed by APRS. This act enhanced legislative pensions and demonstrated a lack of recognition of the true nature of the System's financial condition.
A positive step to improve the financial viability of GERS was the submission by Governor deJongh of Bill No. 27-0101 which was passed by the Legislature and signed into law as Act No. 6992. This act provided for increased contributions to GERS by the Government of the Virgin Islands from 14.5% to 17.5%.
At a League of Women Voters luncheon on January 26, 2009, Senate President Adlah Donastorg stated that he wanted to repeal Act 6905. I trust that he will vigorously push for a change in the Senate rules to remove the power of pre-emption that allows a single senator to block the introduction of legislation and prevented the 27th Legislature from acting on a repeal.
There is no quick fix to address the precarious financial conditions facing GERS. Pension obligation bonds are not a magic panacea nor is placing more of the portfolio in alternative investments. APRS has always opposed the alternative investment provisions of Act 6794. Turning to riskier investments in these troubled times is not a sound strategy.
A healthy Government Employees Retirement System is important to the Virgin Islands economy. The Executive and Legislative branches of government must work together cooperatively in order to truly reform GERS and place it on a solid financial foundation.
Leonard Smollett
St. Thomas
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