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GERS Questions Need Answers

Bill 29-0123, the Economic Stability Act of 2011, was signed by Governor John deJongh on July 7th with a number of line item vetoes. The Bill was the Legislature’s attempt to save the 600 jobs for their constituents – VI government employees.

In signing the bill, the Governor indicated that the legislation was “a fair start, but more must be done moving forward.” Among the line items vetoed by the Governor were:

  • The 2-year hiring freeze for the Judicial branch and Legislative Central staff
  • The $7-million appropriation for the Government Employees Retirement System (GERS)
  • The measure that would prohibit retirees from re-entering government service
  • The measure to hire two additional tax collectors

The original bill forwarded to Government House by the Senate Majority included an 8% pay cut for most government departments for the next two years, excluding those employees who make below twenty-six thousand dollars. The unions are currently working on an injunction to stop the 8% pay reduction, so the intent of the Act may be lost.

The law contains strong measures to encourage workers with 30+ years to retire. One such measure is a $10,000 bonus. As the long-time watchdog over the GERS retirement program, AARP objects to this incentive. The new law directs the Governor to borrow money for the bonus “from any public fund or private lending institution, including the Government Employees Retirement System (GERS).” AARP asks, can GERS afford to make this loan?

Having reviewed the new law, numerous questions arise. First, Act 6794 requires that any change of this magnitude be accompanied by a feasibility study to determine the impact on GERS. Was a study performed, and if yes, what were the results? Why haven’t they been made public if they exist? Given the circumstances, must we give an incentive to get workers to retire?

Since GERS’ $1.3 billion in unfunded liabilities were caused by early retirements, will this law set the retirement system up for another unfunded liability? It’s commonly known government agencies have, for years, failed to pay their retirement portions for employees which has caused employees wanting to retire to either take out loans to pay the government’s portion or remain working. What will happen to these individuals for whom the government has failed to pay their portion? Will the government be in the fiscal condition to pay their portion for these employees now?

Also in the new law, employees can take a two year leave of absence while the government pays the employees’ and government’s shares of both health insurance and GERS payments. Will the government have to borrow additional money to make these payments? If the government can’t make these payments, will these individuals go without health insurance coverage? Will the government pay their family coverage as well?

And finally, now that the $7-million annual payment from the Internal Revenue Matching Fund to GERS has been vetoed, what will happen as the employee to retiree ratio continues to change? AARP VI is looking for answers and we hope you are too!

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