The Government Employees’ Retirement System contributions from employees are much lower than the monthly payout to retirees. Currently, there are around 8,000 government employees and nearly 9,000 retirees. The deficit usually runs about $10 million monthly. The deficit for November, according to Assistant Chief Financial Officer Denise Jeremiah, was $10.8 million.
To plug that hole, the GERS Solvency Plan was passed in February of 2022. However, concerns popped up again at a GERS Board of Trustee meeting on Dec. 19 about how the calculations in that plan are playing out.
The plan allowed the government to refinance the Rum Cover-Over Matching Fund bonds and put the savings from better interest rates into GERS. Trustee Nellon Bowry pointed out at the meeting that the payment this year was $123 million, short $34 million of what was expected. He asked System Administrator Angel Dawson if GERS was expecting to get that $34 million.
Dawson replied that he was not making an official statement, but work was being done, and he was optimistic.
System trustees have raised concerns before that the plan might be flawed because there is no guarantee that the rum cover-over funds will be as high as predicted.
The United States Congress has guaranteed to return $10.50 per proof gallon of excise tax it collects on territory rum to the territory.
Congress has, most years, in a process it calls a “tax-extender,” bumped the amount up to $13.25. The higher number is what was used in the plan’s calculation. Congress has not bumped the number up this year.
Delegate to Congress Stacey Plaskett has stated that she believes it would have been more fiscally prudent to use the $10.50 figure in the plan.
Recently, some beer brewers have reportedly been angered by the rum cover-all, calling it a rum subsidy. The Cato Institute, a conservative think tank, has called for the program to be abolished.
The argument is that, while well-intentioned, rum cover-over doesn’t go to build “schools, roads, and bridges,” according to the Beer Institute, but funds giant liquor companies like Diageo and Bacardi through heavy local tax breaks. This pits Puerto Rico and the Virgin Islands — the world’s largest rum producers — against each other in a lose-lose battle, long-time critics have said.
But that argument seems askew as the territory is using those funds to fund payments to retirees.
Another issue that keeps coming back to the trustees is the GERS loan program.
Dawson brought up for discussion a bill being proposed in the Senate that would set September of next year as a deadline for reinstituting the program, and loans would be dispersed at 8 percent interest.
Board Chair Dwane Callwood said the board’s position would be that it supported the deadline because plans were to start the program “even earlier” but not let the Legislature set the interest rate. He said because the market is always changing, the board needed flexibility as far as the rate went.
Board members Callwood, Bowry, Leona Smith, and Vincent Liger attended the Dec. 19 meeting.
