7,000 GUAM RETIREES IN RISK OF LOSING PENSION

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Government proposes suspending payments to fund

By Oyaol Ngirairikl HAGÅTÑA, Guam (Pacific Daily News, May 19, 2011) - Retirement Fund officials are warning lawmakers: If the government of Guam suspends contributions to the Fund, local government retirees will not get their monthly pension checks.

And GovGuam may face yet another retirement lawsuit.

"About 7,000 retirees will not receive their paychecks once this bill is passed," Joe T. San Agustin, chairman of the GovGuam Retirement Fund board of trustees, said during the public hearing of Bill 184 yesterday at the Legislative Building’s public hearing room.

In addition, the Fund will halt processing of all retirement applications, San Agustin stated.

"The Fund forewarns the government that if any agency ceases to make its monthly contributions, those agencies will be in default," he said. "Finally, the Retirement Fund is considering legal avenues to halt the implementation of Bill 184 if enacted."

The Calvo administration has proposed suspending biweekly employer payments to the Retirement Fund for part of this fiscal year because of its contention that the government overpaid the Fund about US$15 million in previous years. The suspension of the employer contributions is proposed under Section 3 of Bill 184. The bill is a fiscal 2011 supplementary budget request and seeks authorization from the Legislature to spend more than US$36.6 million beyond GovGuam’s current spending authorization.

Retirement Fund officials testified during yesterday’s public hearing against passing the bill in its current form, and encouraged lawmakers to remove Section 3 from the bill.

But without the section, the administration’s plan to fund a shortfall could fall by the wayside, leading lawmakers to ask if the administration should "go back to the drawing board."

Vice Speaker Benjamin Cruz also asked the administration and Retirement Fund officials if they talked to each other before the bill was introduced.

San Agustin said the Retirement Fund hadn’t been approached by the administration, but noted that Retirement Fund officials "are willing to work with the administration."

Sen. Aline Yamashita said, in light of the lack of communication, the administration and Retirement Fund can take "two steps back" and discuss the bill.

The suggestion is one that environmental services technician Geronimo Pahecho, a 32-year Guam Memorial Hospital employee, said might be the best solution.

"Of course we want to pay the shortfall, but people like myself would also like to be able to retire when the time comes," Pahecho said.

San Agustin said the Retirement Fund disagrees that it owes GovGuam money. Instead, GovGuam owes money to the Fund, in part because of the missed rate of return of investment when agencies such as GMH stopped paying into the Retirement Fund for years, he said.

San Agustin said GMH didn’t pay into the Fund for about 10 years from 1996, and each year that payment wasn’t paid, the rate of return was, on average, about 10 percent a year.

Acting Director of Administration Benita Manglona explained that over the past few years, the government of Guam paid interest due to the Retirement Fund, according to a press released issued by governor’s spokesman Troy Torres.

The government overpaid its share to the Retirement Fund, amounting to US$15.4 million in taxpayers’ funds and that money wasn’t meant for the Retirement Fund, according to the release issued by Torres.

This allowed the Retirement Fund to use the cash and accrue interest on top of the interest payment, the governor’s office release stated.

"Senators, it’s like having a bill to Guam Power Authority of US$100, but you pay US$125 instead. You will expect that GPA will credit that overpaid US$25 to your account, not take it," Manglona said, according to the release.

Manglona said the government isn’t asking for the Retirement Fund to give the money back, according to the release.

The governor’s office wants to offset the amount the Retirement Fund owes to taxpayers by suspending future payments to the Fund until the amount is offset.

In response to the budget discussion, Gov. Eddie Calvo said the offset would help address the hospital’s debt to the Retirement Fund.

"The Retirement Fund should understand and be compassionate for the patients of Guam Memorial Hospital. The hospital is struggling with this US$7.3 million debt to the Retirement Fund hovering over its operations," Calvo said.

Without Section 3 of the bill, the administration also has said it would be difficult for it to address the shortfall that is affecting other agencies, including US$1.7 million in overtime payments due to Department of Corrections officers and a US$5.8 million budget shortfall for the Guam Fire Department.

Various agencies testified in favor of the bill, including the Guam Department of Education, the Department of Revenue and Taxation and the Guam Economic Development Authority.

Guam DOE Superintendent Nerissa Bretania Underwood noted that Bill 184 includes a US$1.3 million appropriation that would bridge the payment gap for the health insurance costs for education department staff.

"The financial analysis performed by the Education Financial Supervisory Commission clearly indicates that the Department of Education does not have sufficient appropriations to cover this increase in benefits," Underwood stated. "As Guam DOE prepares for the new school year, I would like to make resources necessary for a smooth opening available to our schools."

The administration also hopes the bill passes to ensure payment for GovGuam employees and retirees and their dependents. The current appropriation is expected to last GovGuam until some time in June.

As lawmakers and the administration’s financial team discuss a budget bill that was meant to address the US$36 million budget shortfall, discussions headed toward one of the larger supplemental spending items -- the government’s health insurance contract.

Unless GovGuam figures out how to pay for the US$11.4 million budget shortfall for its health insurance contract, then more than 23,000 GovGuam employees and retirees -- and their dependents -- will be left without insurance come June, which is when the current budget appropriations for health insurance will run out.

During an oversight hearing yesterday afternoon, lawmakers and the administration turned their discussions to the health insurance contract, which was negotiated last summer.

Manglona said the Legislature’s Office of Finance and Budget knew of the increase in medical, dental and life insurance contracts before negotiations ended in July 2010 and well before the Legislature passed the fiscal 2011 budget, which didn’t take the increased health insurance cost into consideration.

Leonora Candaso, an Administration Department employee who was on the negotiation team last year, said the team informed Office of Finance and Budget Director Chris Budasi of the increase. Candaso told senators that Budasi said the administration should "proceed, and the Legislature would find a way to fund it."

In a telephone interview, Budasi responded by saying he didn’t tell the negotiation team that the Legislature would find the money.

"I told them I do not speak for the committee and I do not speak for the Legislature. There was never a promise for the funding," Budasi said. "What was said that day was taken out of context -- maybe Ms. Candaso remembers it differently. But people were there who would remember what I said."

Candaso also said there were other people who heard what she heard.

The Calvo administration, which took office in January, has been trying to find ways to fund the health insurance budget shortfall.

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