ANY bill suggesting furloughs for government of Guam employees won’t get any support from Gov. Eddie Calvo.
“I will veto any measure coming from the Legislature that implements an across-the-board furlough,” the governor vowed yesterday during a special address.
“That cookie-cutter approach fails to prioritize critical services. It will jeopardize education, safety and medical functions to the entire community. The worst part is that the size of the government will remain the same,” Calvo said.
The governor was responding to one of the alternatives the Government of Guam Retirement Fund suggested for the Omnibus Reform Budget Act Bill 507-31, specifically the proposal to implement “Furlough Fridays.”
“It’s just a fancy way of saying ‘32-hour workweek’ or ‘20 percent cut in pay.’ I am opposed to it. Not only will this hurt every single employee, but it will not have the effect of reducing the GovGuam workforce,” Calvo stressed.
The governor said political leaders should understand that true savings means cutting the size of government.
“My proposal allows employees to voluntarily separate from government service. My proposal cuts the GovGuam workforce without hurting people. It will actually help those looking to retire,” he said.
Chastise
The governor also chastised the Retirement Fund for even considering the proposal “after spending the past five years losing hundreds of millions through bad investments.” Calvo said this is the reason why so much taxpayer money is going into the pension.
Yesterday was the deadline Vice Speaker B.J. Cruz set for both the administration and the Retirement Fund to submit their recommendations.
Bureau of Budget and Management Research Director John Rios said he met with Cruz in the morning to discuss the measure and he agrees with the governor’s stand against the furloughs.
Rios also had concerns with the first alternative on voluntary separation and the pension bond. “It all depends on our debt ceiling. The question is: Does our debt ceiling allow for this pension bond,” Rios said, adding he is going to submit his recommendations today to Cruz.
Meanwhile, Calvo is encouraging all GovGuam employees to call the senators to express their concerns.
“Let the senators know that there are other ways of cutting spending, like the proposals I offered to them. Let them know that they shouldn’t balance their mistakes on your backs,” he said.
The governor concluded his address by thanking Vice Speaker B.J. Cruz for his efforts to resolve the issue.
“He has been working with our team and does seem willing to compromise,” Calvo said.
Response
In response, Cruz criticized the governor’s comments in the Speaker's Weekly Address, stating the Legislature “is not in favor of 'Furlough Fridays.'”
“The ‘Furlough Fridays’ proposal is just one of three alternatives that came from the GovGuam Retirement Fund, and any inference to the contrary is a deliberate misrepresentation of the facts,” Cruz said.
According to Cruz, the Legislature agrees that the furloughs would hurt government employees and will not work with the challenges GovGuam is facing.
“But your statements, your desire to lay blame on the Retirement Fund for presenting alternatives won’t work either,” Cruz said as he reminded the governor of his commitment to work with the Retirement Fund to resolve the proposals in the spending cuts bill.
Cruz’s office will announce a hearing on the other alternatives proposed by the Retirement Fund in the next few days. The other alternatives look at savings of about $15 million and $8 million.
“The Retirement Fund presented these alternatives because they may help our cash position and lessen the burden we place on taxpayers by lowering the Fund’s demand on working people. I hope your team will come to the table constructively and continue to be a full participant in this process,” Cruz concluded.
Comments
Will put you just press my ignore button.
By the way you can do the same with me!
Guthrie you should shake hands with john smith
The proposed legislation should provide that the Executive compile a list of all employees who have already qualified for full retirement, together with those who are five years of qualifying for full retirement "on years" and "on age" as of October 1, 2012. The proposed legislation should then provide that all such employees be ranked in terms of the longevity of their service, and authorize the Executive to switch such employees from full pay to retirement pay (paid from the Retirement Fund), and grant the Executive discretion to go as far down the list as far as the Executive feels necessary to resolve GovGuam's financial situation.
Perhaps most important, mandatory retirement would clear the way for "young blood" to rise in GovGuam, and doubtless clear out a lot of "dead wood". Preventing GovGuam from becoming sclerotic would likely be the greatest long term benefit of mandatory retirement.
The Retirement Fund would not suffer the massive damage which would be visited upon it were early retirees granted five years of unfunded credited service. Although the payout of benefits would be increased if mandatory retirement were implemented, it is likely that under Pepsi's Spending Cuts Bill, many of the same employees that would be affected by mandatory retirement would retire voluntarily. Were mandatory retirement implemented, those retiring employees' drain on the Fund would NOT be augmented by five years of unfunded credited service. What's more, the Fund's accumulating liabilities to these high income employees would be capped.
Likewise, those within five years of retiring "on age" could also be required to retire early at a reduced annuity, if necessary to balance the budget. Those who have at least twenty years of credited service, and are five years of the age required by existing law to require "on age", could be required to retire early, but with their benefits reduced by three percent for every year they are under the age for full retirement "on age" at the time they retire.
The reason Pepsi's proposed 'early retirement' would be disastrous for the Retirement Fund is because those buying additional years would not be required to pay upfront the cost of the augmented benefits garnered by the additional years of service. Instead, they would only be required to sign a promissory note, by which they could pay the cost of their additional benefits over five years. Likewise, no provision is made in the bill for the Government paying the Retirement Fund upfront its share of the cost of the augmented benefits. However, those buying additional benefits would see their benefits augmented by the additional years immediately upon retirement, even though the cost of the retiree's share of the additional benefits would not be paid off for five years, and the Government's unpaid share added to the Unfunded Liability and shoved off into the indefinite future.
Pepsi ignores an obvious third alternative, a way which is both “humane” and would not destroy the Retirement Fund: MANDATORY RETIREMENT of those who have already served the 25 or 30 years required for full retirement, and, if necessary, mandatory retirement of those who are within five years of retiring "on years" or are within five years of retiring "on age".
Legislation should be enacted requiring retirement, starting with those who have already accumulated sufficient credited service for full retirement, and reaching down into the ranks of those who are within five years of retiring "on age" or "on years" if necessary to attain the savings required to balance the budget.
In exchange for payment of benefits from the Fund, existing Defined Contribution Plan members, who opt to join the Hybrid Plan, will be required to transfer the balance of their Defined Contribution accounts to the Retirement Fund. Due to the unfunded liability of the Fund, the money of Defined Contribution accounts will be used to pay benefits to current Defined Benefit retirees and OLDER Defined Contribution Plan members who opt to join the Hybrid Plan. When the YOUNGER, erstwhile Defined Contribution Plan members who opt to join the Hybrid Plan reach sixty five, they will find that all their money, as well as the rest of the Funds assets, will be exhausted. The funds will be have been exhausted by drain of benefits paid to Defined Benefit Plan members, exacerbated by the additional drain on the Fund caused by payment of benefits out of the Fund to OLDER erstwhile Defined Contribution Plan members who opt to join the Hybrid Plan.
Needless to say, the additional drain on the Fund caused by the Hybrid Plan retirees will also redound to the disadvantage of current and future Defined Benefit Plan retirees, as the Fund will bite the dust sooner that it otherwise would have.
The latest Government of Guam Retirement Fund Actuarial Study, the report dated September 30, 2011, found that 43.49 % of the Fund’s obligations were funded, down from 54.01% on September 30, 2007. This compares unfavorably to the lowest ratio of assets to liabilities of any state, Rhode Island, at 49 percent. Go to http://www.pewstates.org/research/reports/the-widening-gap-update-85899398241
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