In what may be one of the most momentous bills in recent history as it relates to the survival of the Territory’s pension system, Senator Donna Frett-Gregory has a Bill (BR) in the works that seeks to raise the roughly $ 40 million Exercise tax revenue that the territory can collect again to secure a credit facility to shore up the battered public servant pension system.
As the VI District Court in Nov. 2018 issued a judgment The imposition of excise taxes left the area without the revenue it believed needed to meet budget projections for two years. But the government not only survived without the $ 40 million, it raised government employees’ salaries and went without the funds for two years.
Last year, Ms. Frett-Gregory realized that one day these funds could be available and used to secure a bond large enough to back GERS with a credit facility (loan), the Senator said during a Interviews with the consortium spoke Monday afternoon.
In the 33rd electoral term in 2020, she submitted BR # 20-1363, which according to Ms. Frett-Gregory became BR # 21-0010 in the 34th electoral term.
“I realized that the excise duty matter will be closed shortly when judge [Robert] Molloy came on board, and I immediately realized that we are living in multiple households with no excise money and I said you know what we were talking about CEFR, this is a way for us to fill the bucket to address bankruptcy problems with CEFR I have that since the 33.
Meanwhile, depending on the severity of GERS ‘situation, Ms. Frett-Gregory said the $ 40 million could be used to cash in the system until a credit facility can be secured. “The most appropriate use of the funds right now is to address the problems with the government employee pension system,” said Frett-Gregory, who currently serves as Senate President.
While the Senator was unable to immediately determine the size of a $ 40 million line of credit, an amount of hundreds of millions of dollars is expected.
Ms. Frett-Gregory also encouraged senators to support Governor Albert Bryan’s legislation Legalize recreational marijuana in a controlled marketwhich Bryan said could raise up to $ 20 million annually – funds he said could be used to secure a GERS backing credit facility since GERS is billions of dollars in the red is more than one Infusion of cash needed to restore the pension system.
The Senate President’s move is significant in that it could add extra life to the GERS, which needs further reforms but is about to collapse. In April, US ratings leader Moody’s said GERS would likely collapse in 2023 after assets were depleted and forced to cut pension benefits by 50 percent, a move the company deemed politically unthinkable and instead the the driving force behind a sovereign default would be restructuring.
Moody’s assessment was part of its response to a third district court ruling in mid-April that found the Virgin Islands government failed to purchase $ 43 million from a. responsible for $ 60 million lawsuit filed by GERS The verdict is positive for GVI, Moody’s said, but the $ 43 million savings won’t help solve a much bigger problem – a $ 5.3 billion pension system liability from Moody’s.
Moody’s Senior Credit Officer Thomas Aaron and Managing Director Timothy Blake stated: “[The ruling] little change in the imminent bankruptcy of GERS in the next few years. The USVI almost certainly cannot afford to pay pensions directly to retirees if GERS depletes its assets and is unlikely to be able to politically cut benefits while it pays full debt servicing to the bondholders.
Moody’s said unless the pension system would use up its assets by fiscal year 2024 starting September 1, 2023 if no cash is injected.
Governor Bryan proposed a debt restructuring plan last year that he said would have saved hundreds of millions of dollars. Although he claimed the funds saved would have been used to fund GERS, the governor also said some of the savings would have been used for other priorities, including infrastructure.
Eventually, Senators rejected the plansome maintaining their stance that the measure was not in the best interests of the territory; some argued that contrary to what has been said, the refinance would not safely result in the GERS bailout, while others, including Senator Kurt Vialet, argued that the deal – which dissolved the Territory’s $ 150 million Debt Service Reserve Fund – would have an impact on future generations as they defer payments and put a heavy toll on the Virgin Islands in ten years.
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