Gov. Kenneth Mapp is proposing legislation to increase employer contributions to the Government Employees’ Retirement System that may add a year to the failing pension plan’s life. The changes would increase the government’s contribution by nine percent over three years. In the upcoming fiscal year the government’s employer contribution would increase three percent, from 20.5 percent up to 23.5 percent of payroll, then another three percent in 2020 and again in 2021.
The government also plans to use V.I. Housing Finance Authority and federal disaster-relief community development block grant funds to buy “nonperforming” assets from GERS. Mapp’s letter to the Legislature does not specify. Officials told senators the assets in question are land holdings.
Under the proposal, the Government’s highest paid employees will contribute more to the system. Employees earning more than $65,000 per year will pay into the GERS up to the salary cap imposed by Social Security, a tradeoff against the additional contributions, the Government’s highest paid employees will qualify for pension benefits at a new cap of $75,000.
If enacted, the administration projects these measures will extend the life of the pension plan by about a year. To do so, the government will have to pay both the new contributions and past due contributions from many months over the past year and a half when the government did not pay the employer contributions it is already required to pay.
The budget Mapp submitted May 31 includes $8 million for overdue government pension contributions and $11 million for this year’s proposed increase in employer contributions. But in late March, Finance Commissioner Valdamier Collens filed a statement in federal court putting the delinquent amount at almost $36 million and in late April GERS officials cited the same number. If the delinquent contributions are not paid, insolvency will occur sooner than initially projected. At a May 5 budget hearing, Collens told senators the government had paid some of that balance and would complete payment by the end of July.
“It was $40 (million) and we brought it down to $15 million,” Collens said. GERS Administrator Austin Nibbs confirmed the payments in an email, adding that the government still owed contributions for Nov. 23, 2017, Dec. 7, 2017, Dec. 21, 2017, and Feb.1, 2018.
In his letter to the Legislature, Mapp said for the last 17 years the GERS has paid out more in benefits than it has received in contributions.
“Unless we act and make the tough decisions, the GERS will be insolvent by 2024, if not sooner. This cannot happen, and, as governor, I will not sit back and allow it to happen,” Mapp said.
The GERS financial crisis did not develop overnight and, without a one-time infusion of $2 billion, it will not be solved overnight, Mapp said. He said his administration will continue to consider other comprehensive solutions to preserve pensions for retirees and employees while working to extend the viability of the system.
“I am committed to working with the members of the 32nd Legislature of the Virgin Islands to comprehensively address the long-term needs of the GERS, including having the plan’s sponsor take more responsibility and oversight control of the system’s actions to ensure that the decisions made are in the best interest of the retirees and those who work toward being vested into the system. My administration is committed to seeing this through,” Mapp said.
Mapp first promised a solution to the pension crisis back in 2016.
“My finance team and I will work with members of the GERS board, its consultants, its administrator and our financial advisors to present a comprehensive plan to the community and retirees on how we believe we can fix this vexing problem once and for all,” he said that year.
Before Mapp, Gov. John deJongh Jr. set up a pension reform commission that produced a series of reform proposals. The Legislature did not act on them during deJongh’s tenure and Mapp later made a number of very similar proposals, some of which were enacted. (See Related Links, below.)
Editor’s Note: This has been updated to include information from the Mapp administration that the nonperforming assets it is interested in are land holdings and new information that the V.I. government has begun paying past-due employer contributions.