GERS still waiting for $7M from 2013 rum revenues
Published: October 18, 2013
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ST. THOMAS - The territory's retirement system has not received the $7 million in rum revenues earmarked for Fiscal Year 2013.
The money was appropriated in the V.I. Economic Stability Act of 2011. Gov. John deJongh Jr. vetoed the measure, but the Senate overrode the veto.
Government Employees Retirement System Administrator Austin Nibbs told senators Thursday during a budget hearing in the Finance Committee that by the close of the fiscal year, Sept. 30, no money had been received.
According to law, GERS is supposed to receive $7 million annually from the Internal Revenue Matching Fund, starting in Fiscal Year 2013. The matching fund collects rum revenues from the cover-over, the returned excise tax on each proof gallon of rum made in the territory and sold in the United States.
Unless Congress acts to extend the higher cover-over rate - $13.25 per proof gallon - the rate will revert to the original $10.50 per gallon.
Every year, the Virgin Islands government requests an advance payment from the Interior Department on its anticipated cover-overs, based on production estimates by the territory's two rum distilleries, Cruzan and Diageo.
Instead of paying the FY 2014 advance at the $13.25 rate, the federal government paid most of it at the $10.50 rate, resulting in about $71 million less than expected.
Neither the executive branch nor the Legislature seem to know whether or when the remaining rum revenues are coming to the territory's coffers, yet the FY 2014 budget was balanced on the expectation that the full amount is coming.
When the governor signed the budget into law earlier this week, he said he would work with the Senate to close the budget gaps.
Senate President Shawn-Michael Malone insists the budget is balanced and is confident the balance of the rum money will come.
In the Senate Finance Committee on Thursday, senators were dismayed that the $7 million for GERS had not been paid and does not appear to be budgeted for FY 2014 either.
Finance chairman Clifford Graham said if that is true, the government is facing a severe budget shortfall.
The $7 million is to be a direct contribution to the retirement system, according to the law.
Nibbs said the money is intended to help pay down the system's unfunded liability and is separate from the $47 million in outstanding employer contributions the V.I. government owes to the system.
The system's unfunded liability - the difference between what is being paid into the system in contributions and the obligation to pay out all retirement benefits - currently stands at about $1.8 billion.
Actuarial studies show that unless something major is done to shore up the system, GERS will be completely insolvent by 2023.
In an effort to save the troubled retirement system, a task force was convened and came up with a series of recommendations.
One of those recommendations is to increase the employer contribution by 2 percent for seven years and pay for it with a bond backed by rum revenues.
Nibbs said Thursday that he did not know the total dollar figure for the proposed employer contribution.
- Contact reporter Aldeth Lewin at 714-9111 or email email@example.com.