Virgin Islands proposes steps to help pension system
The U.S. Virgin Islands governor said he was taking steps in his proposed budget to prop up the faltering employees’ retirement system.
Gov. Kenneth Mapp presented his proposed fiscal year 2019 budget to Virgin Islands Senate President Myron Jackson on Wednesday.
The island’s fiscal year starts on Oct. 1 and the Senate Financial Committee expects to start hearings concerning the budget next week.
Mapp said without action the pension system would be insolvent by fiscal year 2024.
In his budget the governor proposed increasing the employer contribution to the system by three percentage points each year in the coming three fiscal years. It is currently at 20.5% of payroll.
Second, Mapp said Virgin Islands Housing Finance Authority and Community Development Block Grant-Disaster Recovery should be used to purchase nonperforming assets that the pension system currently owns. This would provide liquidity to the pension system.
Third, Mapp said his proposal would require the government’s highest paid employees to contribute more to the pension system. On the other hand, the benefit cap for pension benefits will be raised to $75,000.
Mapp said he expected these steps, if adopted, would shift the insolvency date back by one year to fiscal 2025. “I will soon announce additional strategies to move insolvency further out by at least another three years to 2028,” he said.
“The U.S. Virgin Islands economic outlook along with the government’s five-year plan drastically changed on September 7th and September 19th 2017 with Hurricanes Irma and Maria,” Office of Management and Budget Director Julio Rhymer told Mapp in a letter. “These storms not only changed the landscape of the Virgin Islands community but ha[ve] created an opportunity for rebirth of the U.S. Virgin Islands through the assistance of the federal government.”
In the aftermath of Hurricanes Irma and Maria, the federal government mobilized to help, Mapp said. “Today, the people of the U.S. Virgin Islands are enjoying one of the closest and most productive relationships with our national government that we have in our history. This close working relationship has brought us an unprecedented opportunity to rebuild and restore our infrastructure to withstand future storms and to protect our citizens.”
To successfully spend the federal dollars, Mapp said the local government must be successful in recruiting good employees. Accordingly, he proposed 3% across the board increases for employees. In addition, he is proposing further salary increases of police officers, teachers, nurses, social workers, correction officers, Department of Health environmental officers, emergency management technicians, Head Start teachers, and school nurses.
The proposed fiscal year 2019 assumes no debt financing and no new taxes, the governor said.
He said he hoped to be able to reduce the Water and Power Authority's rates in coming years.