Senators on Tuesday heard hours of detailed testimony on a bill terminating one Matching Fund Securitization Corporation and creating another, then said “no” to the proposal.
Although financially complicated, it could be seen as a method of refinancing that would save the government money, millions of dollars that could be used to prop up the Government Employees’ Retirement System. Some compared it to a homeowner refinancing her home at a lower interest rate; others did not like that analogy for the complicated financial government procedure.
Nathan Simmonds, director of Finance and Administration for the Public Finance Authority, said he could not see how there could be opposition to the measure since it saved the government money.
However, senators were against it, and in a Special Session, after hearing testimony, they voted 10 to five against approving the measure.
On Monday at a press conference, Gov. Albert Bryan Jr. promoted the measure. He said he wanted the Legislature to pass the proposal and put the resulting savings toward the Government Employees’ Retirement System.
Senators appeared to take offense at this notion on two fronts. First, there was nothing in the measure specifying that the savings would go to GERS and, second, the measure would not save GERS but only fend off insolvency for a couple more years.
Sen. Oakland Benta said he did not like what he saw as a threat of cutting retirees’ annuity checks in January if the measure was not passed. He said that the cut was not going to happen. The GERS board recommended to the Senate that it cut retirees’ annuities in January by 42 percent. It has made the recommendation several times this year. Board members have said a cut now would avoid a 71 percent cut in retirement benefits later, which will have to be made if nothing is done soon. Jenifer O’Neal, director of Office of Management and Budget, noted that it was the Legislature’s responsibility to make any cuts in retirement checks if necessary, and also its responsibility to guide when any savings be spent.
Gov. Bryan said in a news release on Monday, “If you do not want to give any money to the GERS, then say that and vote to refinance the debt, save the money and lower our debt payment annually, but we cannot afford to lose this opportunity by simply doing nothing.”
Sen. Kenneth Gittens said, “GERS should not be the poster child for this measure.” He added, “Something is not adding up.”
Sen. Allison DeGazon, one of the senators who voted for the measure, said, “These things are real; we are going to have to deal with them.”
Sen. Kurt Vialet had other concerns. He said he worried that this method of refinancing was just “passing the burden onto the next generation.” He said there were different ways of restructuring the measure, but each time legislators mentioned a different structure to the administration, “they ran into a brick wall.”
Sen. Janelle Sarauw questioned the cost of the measure. She learned that, although over $300,000 had already been paid in contracts, the two major consultants would only be paid when the transaction was completed.
The governor said on Monday that most Virgin Islanders he talked to were not against refinancing the debt. He pointed out the debt already exists, and his administration is not talking about borrowing any more with this proposal. He added the proposal was not a complete solution for GERS, but one of many initiatives, including the collection of excise taxes; pursuing the gasoline excise taxes; development of internet gaming; taxation on adult-use of cannabis; expansion of the rum distillery industry; and restructuring of the benefits plan for active and new government employees.
Simmonds said he expected the measure to generate “substantial savings.” He added, “We wouldn’t do it unless it generates the savings we suggest.”
Senators also had questions about what interest rates the financial team hope to tie in and how it calculated the projected savings. There were also questions about the new Matching Fund Securitization Corporation and who would run it.
This was the third time the measure had been presented to the Senate.
A measure like the one discussed this week was passed by the Senate in September. However, that measure had a sunset clause.
A lawsuit filed in V.I. Superior Court on Sept. 22 by the Russell Law Firm of St. Croix on behalf of the Government Retirees United for Fairness, or GRUFF, and government retiree Hugh Clarke, stopped the marketing of the transaction.
The injunction was dismissed on Sept. 28 by Judge Douglas Brady, but it was too late to salvage the bond deal.
Bryan said at the time, “It did take me by surprise because the people who stand to benefit the most were disrupting the process. The source of that, though, is years and years of mistrust for government officials and just a lot of misinformation about what we were trying to do.”
All 15 senators attended the session.