The U.S. Virgin Islands has been approved for $212,039,584 in rum cover-over payments — some $14 million less than it received last year — the U.S. Department of the Interior announced Thursday.
The money is an advance of the 2024 estimated rum tax-cover overpayment due to the USVI, the department said in a press release that also announced $76,195,730 in advance federal income tax Section 30 payments to Guam. Both payments will be made this week, it said. Last year, the territory received $226.1 million.
“The Office of Insular Affairs continues to work closely with the U.S. Department of Treasury to ensure that these critical funds for the governments of both Guam and the U.S. Virgin Islands are calculated and transmitted as quickly as possible,” Assistant Secretary for Insular and International Affairs Carmen G. Cantor said in a statement.
Under the territory’s Revised Organic Act, any excise tax collected on USVI-manufactured rum imported into the mainland United States is transferred to or “covered over” to the USVI. The V.I. government submits an advance estimate of rum excise taxes to the Interior Department’s Office of Insular Affairs on an annual basis so that a payment can be made by September of each fiscal year.
Any adjustments are calculated and paid based upon amounts advanced from rum excise taxes derived from the USVI and actual receipts collected by the federal government, according to the release. The fiscal year 2024 advance payment to the USVI government was calculated using the $10.50 per proof gallon rate, as provided for under current law.
The federal Bipartisan Budget Act of 2018 raised the per-gallon rate to $13.25 for five years following the twin Category 5 hurricanes of September 2017, but that expired at the end of December 2021, and subsequent efforts by V.I. government officials to restore the higher rate have failed.
Neither the office of Gov. Albert Bryan Jr. nor Delegate to Congress Stacey Plaskett responded to requests for comment about the Interior Department’s announcement.
The per-gallon rate is of particular importance since legislation was signed into law in February 2022 to use the cover-over funds to stabilize the Government Employees’ Retirement System, which was forecast to become insolvent by October 2024, according to GERS actuary Segal and Company.
It did so through the creation of a new entity — a Matching Fund Special Purpose Securitization Corporation, separate from the government — that refinanced the V.I.’s outstanding matching fund revenue bonds at lower interest rates, with the resulting revenues being used to fund the GERS pension system through a Special Purpose Vehicle, or SPV.
Bonds issued through the SPV would fund GERS with anywhere from $82 million to $140 million per year for the first 20 years, while the debt service is paid on refunding the bonds, and $158 million each year for the remaining 10 years, according to the legislation.
However, the calculations were based on the expired $13.25 per-gallon rate — a move that Plaskett admonished in a statement last August.
“I believe it may have been more fiscally prudent to have used the rum cover-over amount at the $10.50 for recent bonding or valuation purposes, recognizing that the cap was expiring in December,” the delegate said.
“As a member of the Ways and Means Committee, which has jurisdiction over all tax-writing measures, we would have been happy to share our evaluation of the legislative process and dates of expiration. Be that as it may, we are where we are now and I’m happy to work with all parties to support our Virgin Islands’ financial needs and believe that through the extender process we will get the $13.25 rate and retroactive funding,” Plaskett said.
Under Guam’s Organic Act, federal income taxes derived from active members of the U.S. Armed Forces and pensions paid to retired civilian and military employees of the United States or their survivors, who reside in, or who are domiciled in Guam, are annually “covered-over” to the Guam Treasury to support the operations, activities, and programs of the local government.
The Guam government submits an advance estimate of these income taxes to OIA on an annual basis so that a payment can be made by September of each fiscal year. Any adjustments are calculated and paid based upon amounts advanced for income tax collections and actual income taxes collected, the Interior Department said.