Retirement Fund not comfortable with alternate plan
It's considered a step in the right direction, but there's still debate between the Calvo Administration and the Government of Guam Retirement Fund on just how the government can save millions of dollars by cutting spending.
By KUAM News
Guam - It's considered a step in the right direction, but there's still debate between the Calvo Administration and the Government of Guam Retirement Fund on just how the government can save millions of dollars by cutting spending. And it's proving to be a difficult task to get the parties to reach a compromise.
It appears an agreement alternative to the Retirement's Fund's alternative to the governor's spending cuts proposal isn't getting a good reception from the Fund's director, Paula Blas. "I'm going to have to re-speak to my trustees again but they were very, very firm and they remain firm in not proposing an early retirement program or even trying to extend the amortization on its own," she said.
Bureau of Budget and Management Research director and a former Retirement Fund director John Rios and Vice Speaker B.J. Cruz earlier this week sat down to work on a compromise to the governor's spending cuts proposal, which included provisions related to the Retirement Fund.
The compromise? An agreement on a smaller early Retirement Fund program limited to employees who are within five years of retiring and a ten-year temporary extension of the amortization period. Said Cruz, "I think it's important that both sides continue to exchange ideas on how they want or think they can resolve this," with Rios adding, "It's a smaller scale - it's a smaller early retirement, but it's something we were willing to compromise."
By reducing the pool of eligible employees, the cost to the general fund would be $4.2 million. "We're estimating payroll savings at about $18 million, so if it's going to cost us $4.2 million payment to the Retirement Fund and we save in payroll about $18 million, there should be enough to pay on an annual basis," Rios added.
In looking over the alternative to their alternative, the Retirement Fund did its own analysis. Blas says while a reduction in the contribution rate for a five-year period is realized, however on the sixth year, that contribution rate spikes over a 9% increase. "So that's close to almost $40 million dollars-plus, in additional contributions that need to be made to the Fund in the sixth year, is that something that the General Fund can actually sustain," she explained.
"Yes, there were against it and said there would cost and there would be no savings for the Government of Guam," noted Rios, adding, "but what they haven't looked at is the payroll savings that we will have, and so that's where the savings would be on our side."
One thing's for sure - all three agree that cuts need to be made. Cruz meanwhile will plan a meeting for all three next week. "So I think it's to everybody's best interest that we find something that the Retirement Fund can support and fulfills there fiduciary responsibility and still provide the government with some kind of savings," he stated.