U.S. Virgin Islands is nearing steps for its $5B pension shortfall

BY SourceMedia | MUNICIPAL | 09/21/21 11:49 AM EDT By Robert Slavin

Proposals to address United States Virgin Islands? multi-billion-dollar shortfall in pension funding are expected to be submitted to the Legislature Friday.

A subcommittee has been working on ways to manage the $5 billion problem for several months and Kurt Vialet, chairman of the Legislature?s Finance Committee. The subcommittee will submit the proposal to deal with the situation that has led the government to liquidate $100 million a year in assets to support the system by Friday.

One of the ideas will be to increase employer contributions by 10%, Vialet said. This should generate $40 million a year.

Moody?s Investors Service estimates the system has an adjusted net pension liability of $5.3 billion. Unless there is an unexpected infusion of cash or reduction in benefits before then, Moody?s projects the Government Employees Retirement System will run out of assets in fiscal 2024, which will start on Oct. 1, 2023.

As of April 1, 2019, the USVI had $716 million of general obligation debt, most of it bonds. It also had $1.04 billion of matching fund bond debt. These figures are derived from the approved fiscal 2020 budget. They exclude the debt of the Water and Power Authority, which is facing its own troubles as branches of the government are struggling for control over it.

Moody?s rates the U.S. Virgin Islands government Caa3 with a stable outlook.

On Friday, the Legislature approved a General Fund budget including $924 million of spending in fiscal year 2022, which will start Oct. 1. This is a 2.6% increase from the current fiscal year budget, which was amended to $900.3 million of spending.

The Legislature will send the budget to Gov. Albert Bryan this week. Vialet said he expected Bryan will sign it before Oct. 1.

Vialet said he was closely following the situation with the bankruptcy of the Limetree refinery on St. Croix, which until recently was the largest private sector employer on the islands. Limetree announced the closure of the oil refinery this summer.

Legislators are hoping an outside company will take over the refinery and resume operations. Some companies have expressed interest, Vialet said. The situation should be resolved by December.

The budget does not assume an outside company resumes Limetree?s operations and provides taxes associated with this, Vialet said.

The budget?s biggest categories of spending are the Department of Education with $170 million, the Police Department with $77.7 million, the Department of Human Services with $73 million, and the Division of Personnel with $44.8 million.

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