The Virgin Islands received nearly $31 million less in rum cover-over payments for 2025 than it received in 2024, as announced by the U.S. Department of the Interior on Thursday.

The anticipated rum tax rebate for 2025 amounted to $181,068,638, which was $30,970,946 less than the $212,039,584 sent for 2024. The amount received in 2024 was $14 million less than what was allotted in 2023. Links to more information about these figures can be viewed here for 2024 and here for 2023.

According to the territory’s Revised Organic Act, essentially acting as the constitution, any excise tax collected on rum produced in the Virgin Islands and exported to the mainland U.S. is transferred back to the Virgin Islands. Every year, the V.I. government provides an advance estimate of these rum excise taxes to the Interior Department’s Office of Insular Affairs, to facilitate a payment by September of each fiscal year.

Adjustments to these payments are calculated and issued based on the advance amounts from rum excise taxes derived from the Virgin Islands against the actual receipts collected by the federal government. For the fiscal year 2025, the advance payment to the V.I. government was calculated using the rate of $10.50 per proof gallon.

The rate had been capped at $10.50 since 1984, with brief fluctuations.

The rate changed to $13.25 in 1999 but required annual approval by Congress, making the territory’s financial planning uncertain. The federal Bipartisan Budget Act of 2018 set the per-gallon rate to $13.25 for five years following the back-to-back Category 5 hurricanes of September 2017, but that expired at the end of December 2021.

Governors and congressional delegates have long pushed for a higher rate, with Gov. Kenneth Mapp advocating shortly before the storms.

The per-gallon rate is crucial as legislation was signed into law in February 2022 to use the cover-over funds to stabilize the Government Employees’ Retirement System, projected to run out of funds by October 2024, according to GERS actuary Segal and Company.

Angel Dawson, the administrator of GERS, communicated that his estimates showed a significant reduction in the rum cover-over revenue, amounting to $47.4 million less than the previous year.

“We do not possess specific details about this issue yet. Nonetheless, it warrants attention for GERS, which anticipates receiving about $158 million on October 1 through a ‘funding note’ from the yearly cover-over revenue,” Dawson explained via text on Friday evening. “It seems GERS will face a shortfall again. Our actuaries predict we can sustain liquidity until at least 2036 with our current financial setup. However, they also suggest that our capacity to maintain retiree payments could become critical between 2037 and 2039 should the funding note fall short for another two years.”

Dawson highlighted that GERS achieved an investment return of $124 million in less than two years, which is a 31 percent increase from $400 million in September 2022 to $524 million by July.

“However, as I presented to the Virgin Islands Legislature just last week, our marketable assets could have been at least $34 million higher if we had received the complete allocation from the ‘funding note’ last year. When considering the time value of money and lost opportunity for investment income, the actual loss would have been even more significant,” Dawson added.

Neither the offices of Governor Albert Bryan Jr. nor Delegate to Congress Stacey Plaskett responded to requests for comment about the Interior Department’s announcement.

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The Virgin Islands received nearly $31 million less in rum cover-over payments for 2025 than it did in 2024, the U.S. Department of the Interior announced Thursday.

The estimated rum tax rebate for 2025 was $181,068,638 — $30,970,946 less than the $212,039,584 the territory was sent for 2024, which was $14 million less than allotted in 2023.

Under the territory’s Revised Organic Act, which serves as the territory’s constitution, any excise tax collected on rum manufactured in the Virgin Islands and exported to the mainland United States is transferred to the Virgin Islands. The government of the Virgin Islands provides an advance estimate of rum excise taxes to the Office of Insular Affairs at the Interior Department each year to facilitate a payment by September of every fiscal year.

Adjustments are made based on the initial estimates from rum excise taxes originating from the Virgin Islands versus the actual receipts collected by the federal government, as stated in a release. The fiscal year 2025 advance payment to the Virgin Islands government was calculated at a rate of $10.50 per proof gallon.

This rate has been fixed at $10.50 since 1984, although there were temporary changes.

The rate was increased to $13.25 in 1999 but required annual congressional approval, which made financial planning for the territory challenging. The Bipartisan Budget Act of 2018 established the per-gallon rate at $13.25 for five years after the consecutive Category 5 hurricanes in September 2017, but this provision expired at the end of December 2021.

Governors and congressional delegates have long pushed for a higher rate, with Gov. Kenneth Mapp making such a plea just weeks before the storms.

The per-gallon rate is of particular importance since legislation was signed into law in February 2022 to use the cover-over funds to stabilize the Government Employees’ Retirement System, which was forecast to become insolvent by October 2024, according to GERS actuary Segal and Company.

Angel Dawson, administrator of GERS, said his calculations had an even deeper cut to the rum cover-over. He puts the figure at $47.4 million less than last year.

“We do not yet have any details regarding this matter. However, it is of concern to the GERS, which is scheduled to receive approximately $158 million on Oct. 1 under a ‘funding note’ paid by the annual cover over revenue,” Dawson said by text Friday evening. “From all appearances, the GERS will, once again, be short-changed. While our actuaries project that we will remain liquid through at least 2036, given our present financial structure, they also forecast that the system’s ability to continue paying retires will be threatened between the years 2037 and 2039 if we were to experience just two more years of funding note shortfalls.”

GERS put together a $124 million investment return in less than two years, increasing 31 percent from $400 million in September 2022 to $524 million in July, he said.

“However, as I testified to the Virgin Islands Legislature just last week, our marketable assets would have been at least $34 million higher had we received the full amount pledged under the ‘funding note,’ last year. Given the time value of money and the accompanying lost investment revenue opportunity, in actuality the amount would have been even greater,” Dawson said.

Neither the offices of Gov. Albert Bryan Jr. nor Delegate to Congress Stacey Plaskett responded to requests for comment about the Interior Department’s announcement.