In the News
Plaskett Cites Liquidity Concerns in V.I.’s Failure to Pay GERS
St. Croix, March 8, 2017
Virgin Islands Daily News
Plaskett cites liquidity concerns in V.I.’s failure to pay GERS
By JOY BLACKBURN Senior/Investigative Reporter
Mar 8, 2017
V.I. Delegate to Congress Stacey Plaskett raised concerns Tuesday about the depth of the V.I. government’s liquidity crisis after reports surfaced last week that the executive branch had stopped making mandatory employer and employee contributions to GERS.
The Daily News reported March 1 that officials with GERS — the Government Employees’ Retirement System — said that the executive branch has not sent the cash-starved pension system the required employer and employee contributions associated with payroll since December.
Central government employees confirmed that the Finance Department nonetheless continues to withhold money from their paychecks for their contributions.
On Tuesday afternoon, GERS administrator Austin Nibbs said that in addition, for the last two pay periods, the central government has also not provided GERS with employee loan payments, which the government also deducts from employee paychecks.
After a week of silence on the issue, on Tuesday night, Government House spokeswoman Cherie Munchez sent a written response to Daily News inquiries saying that the Finance Department had “reached out to GERS” about entering into “an arrangement to clear the open amount due since January 2017.”
She said she did not have details on the loan payments Nibbs said had not been paid.
Finance Commissioner Valdamier Collens did not return Daily News messages on Tuesday. Munchez did not respond to questions about why the executive branch has not been paying GERS. Last week, neither Collens nor Munchez responded to questions about the problems.
Plaskett said in a press release Tuesday that she sent letters to Gov. Kenneth Mapp and to senators about the issue.
“If the reports are true, the diversion of any payments due on behalf of employees, whether they be pension fund deposits, or income tax withholdings, is an indicator of the liquidity crisis facing the territory,” she wrote.
“And, as it relates to our retirees, the news is most troubling as we have a commitment to uphold when it comes to honoring what is owed to our seniors, who depend on the obligations that are due to them. As you are aware, failure to meet the required employer contributions for GERS will tremendously exacerbate the system’s operational deficit,” she said.
Retirement system officials said last week that the money the central government is withholding from GERS may hasten insolvency, which is expected to happen sometime in 2023. Insolvency will occur once GERS has liquidated all its assets and can only provide pension payments from whatever contributions come in.
By law, the V.I. government deducts employees’ GERS contributions from their paychecks and is supposed to transfer that money on to GERS. In addition, the government’s set-rate contribution as employer is equal to 20.5 percent of the employee’s pay. Both employee and employer contributions are supposed to be transferred to GERS within 10 days of payroll, Nibbs said.
On Tuesday, Nibbs said that for five payrolls, the executive branch has not sent employer and employee contributions to GERS. For two pay periods, the executive branch has not sent employee loan payments to GERS, according to Nibbs.
He had sent a letter to the executive branch, but at that point, had gotten no response, he said.
The government is required by law to fund the retirement system adequately, as determined by an actuary. The set-rate contributions the government is supposed to make in connection with payroll only pay part of the actuarially-determined contribution. The government would have to pay far more to fulfill its obligation to GERS just for this year.
For decades, the V.I. government has underfunded the retirement system, leaving GERS teetering on the brink of insolvency.
The failure of the central government to provide the contributions since December means GERS has had to liquidate even more of its assets than it usually does to make required annuity payments to government retirees.
That was acutely apparent in January, when GERS’ schedule of receipts and disbursements showed that the system took in only $6.4 million — but had to pay out $23.7 million, leaving a $17.3 million deficit for that month.
February’s numbers may look worse, considering the missing loan payments.
The V.I. government is in a fiscal crisis.
The government had planned first in December and then in January to borrow money to make ends meet this year and next, but not enough investors were interested.
The Legislature last week passed controversial tax measures that Mapp had pushed hard for, claiming that they would be money generators. Notably, though, those measures are not expected to bring an immediate cash infusion into government coffers. It was not clear how the government is planning to meet its obligations in the immediate future.
In her letters Tuesday to Mapp and to V.I. senators, Plaskett offered her assistance “in working to improve our territory’s financial situation” and said that the financial emergency requires an “all-hands-on-deck” approach.
Plaskett spokesman Richard Motta said Plaskett had not yet gotten any response on Tuesday afternoon.