The central government’s finance team appeared before the Senate Budget, Appropriations and Finance Committee Tuesday to present their final testimony on the territory’s $1.76 billion proposed budget.
The wrap-up meeting came after months of budget hearings during which individual department heads defended their budget requests for the upcoming fiscal year — or explained why their recommended allotments were insufficient — and several developments have reshaped the territory’s financial outlook since Gov. Albert Bryan Jr.’s financial team first presented the 2026 executive budget to the Legislature in June.
One seismic shift came in June when the Government Employees’ Retirement System moved forward with a planned 3% increase to employer contributions, effective Oct. 1. The GERS’ board approved the increase in September 2024 but later delayed implementation for nine months because the government’s precarious fiscal state at the time would have left it unable to meet its obligation to the system. That hasn’t changed, Management and Budget Director Julio Rhymer Sr. told lawmakers Tuesday.
When asked by Sen. Novelle Francis Jr. if the government could absorb the cost of the increase, Rhymer simply answered, “No.”
Francis asked if anyone from the executive branch had communicated that to GERS.
“The governor was expected to reach out to GERS and have the discussion,” Rhymer said.
“We’ll be doing the same as well,” Francis said.
Appearing before the Senate Finance Committee last week, GERS Administrator Angel Dawson said the increase was necessary even with the long-sought permanent extension to the rum cover-over rate — from $10.50 to $13.25 per proof gallon — which the territory secured in July after years of lobbying the federal government. The system relies on cover-over revenues via a funding note, and Dawson said there’s still a risk that payouts will be lower than anticipated because of lower demand for rum. He presented lawmakers with two scenarios last week: either employer contributions stay where they are and the system becomes insolvent from 2033-2039 — at which point it would need $290 million in government funds to pay benefits — or the increase is implemented, and the system would only be insolvent from 2036-2038. In the latter scenario, GERS would still need $89 million from the central government to pay benefits.
Dawson put the annual cost to the government at $13 million, but on Tuesday Rhymer said the estimated cost was “$4-5 million.”
Lawmakers and testifiers spent little time discussing the legislative mandate to increase salaries for the government’s lowest-paid employees to $35,000 per year. Senate Majority Leader Kurt Vialet introduced the bill in June amid an acrimonious back-and-forth between the Legislature and executive branch earlier this year over the implementation of raises for top government officials. Bryan decried the move, stating that it “will place a massive burden on our finances, and — perhaps most concerning — will undoubtedly add to the inflation woes Virgin Islanders are already facing, potentially negating the very increase it intends to provide.” Lawmakers later overrode his veto of the measure.
Vialet asked V.I. Personnel Division Director Cindy Richardson Tuesday if her department is ready to apply the raises.
“We’ll do what we have to do,” Richardson said. “I mean, once the agency puts them in, we’ll do what we have to do.”
Another of the summer’s more tense legislative sessions came in early August when lawmakers unanimously rejected a bill establishing a special committee to issue a request for proposal for self-funded health and dental insurance plans. The measure appeared to sidestep the Government Employees Services Commission Board, whose chair, Beverly Joseph, said the self-funded model offers more flexibility and cost control but exposes the government to risks in the absence of reserve funds, experienced third-party administrators and a reliable payment structure for high-cost claims.
Rhymer said during prepared testimony that the GESC Board will meet Thursday to make its final decision and that the board’s proposed option “would cost the government $10.4 million and introduce critical changes.” According to Rhymer, an employee’s premium for single coverage would increase by $12.13 and a family’s by $21.25.
“However, with this plan structure change, employees will see high deductibles with increases from $500 to $2,500 for individuals and from $1,000 to $5,000 for families,” he said. Rhymer said Health Reimbursement Accounts will also be introduced, and co-payments will increase. “Please note that members will only be able to access care within the Cigna Open Access Plus network and will no longer have the option to see out-of-network doctors.”
The hearing came one day after leadership from the West Indian Company vexed lawmakers by failing to disclose the financial data they needed for this year’s budget markup, leading Francis to call that hearing an “exercise in futility” before telling the agency to come back with the required information.
On Tuesday, Sen. Hubert Frederick noted to Nathan Simmonds, the V.I. Public Finance Authority’s director of finance administration, that WICO owes the government approximately $10 million in Payments in Lieu of Taxes.
“Is WICO a public corporation owned by the government of the Virgin Islands,” he asked, “or are they a private company?”
Simmonds said the PFA “believes that WICO is a public organization” and acknowledged that the authority owns a hundred percent of WICO’s shares.
“‘Nuff said,” Frederick replied. “We need to collect our PILOT from WICO, then. That’s it. If we own it, we need to collect every dime, and that money needs to go to the general treasury so we can pay our bills.”
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