CNMI Senate Blocks Finance Department Control Over Fund

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Governor ‘exceeded his authority’ in declaring emergency orders

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, June 29, 2012) – The Commonwealth of the Northern Mariana Islands (CNMI) Senate passed a resolution yesterday to block Gov. Benigno R. Fitial from placing the NMI Retirement Fund under the Department of Finance, reinstating instead a leaner three-member board. The House of Representatives, however, also has to approve the resolution in order for the amendments to the governor's executive order to take effect.

The Fitial administration described most of the concerns the Fund and the Senate raised as "without substance" and "borderline child's play."

By a vote of 6-2, the Senate adopted Senate Joint Resolution 17-19 that modifies Fitial's executive order placing the Fund under a state of emergency.

Senate President Paul Manglona (Ind-Rota) said that once the House also adopts the resolution, the amendments "will have the full force and effect of a law" because it's an amendment to an executive order.

"So we can't blame anyone else other than the Legislature if we cannot pass an amendment to the EO," Manglona told Saipan Tribune.

Manglona reiterated that the Senate and the Fund, as well as retirees, are concerned how the administration will ensure it will continue to pay the Fund when it allowed the government to owe the pension agency some $320 million in unpaid employer contributions and interest.

He said there's conflict of interest on the part of the Executive Branch if it is allowed to manage the pension agency when it owes it a substantial amount of money-one of the major factors in the Fund's financial crisis.

Press secretary Angel Demapan, when asked for comment, said the Fitial administration will consider reviewing the resolution.

"However, at the outset, most of the concerns being raised by the Fund and now by the Senate are really without substance. The Fund continues to create the illusion that assets of the Fund will be tapped for other purposes. This statement that they are making in an effort to mislead retirees and the general public is totally nonsensical and borderline child's play," Demapan told Saipan Tribune.

Only eight senators were present yesterday, as Sen. Ralph Torres (R-Saipan) was on leave following the passing of his father.

Of the eight senators, two-Senate floor leader Pete Reyes (R-Saipan) and Sen. Henry San Nicolas (Cov-Saipan)-voted "no" to the resolution.

San Nicolas believes that Fitial and Lt. Gov. Eloy S. Inos should be given a chance to implement their plans to prolong the Fund's lifespan and protect retirees and active members.

"Until I see the Fund or the Legislature has a better plan, the administration should be given the chance to implement their plan," he said, referring to transitioning non-retired members into the U.S. Social Security system and continuing to pay retirees' pension when the Fund is placed under Finance.

Reyes earlier said it would be better if the administration itself amends the EO rather than the Legislature.

Fund administrator Richard Villagomez said the Senate joint resolution incorporated most of the Fund's concerns, as well as those of Senate and House members, that were raised during the past few days' meetings. He also thanked the House for setting a time to meet with them in the next few days on the same issue, hoping that the House will also adopt the resolution.

Villagomez and Fund legal counsel Christopher Timmons were at the Senate session yesterday.

'Governor exceeded his authority'

The Senate, in adopting the resolution, said that Fitial exceeded his authority by declaring a "disaster" not contemplated by Article 3 Section 10 and 15 of the NMI Constitution and the Disaster Relief Act of 1979.

Senators cited four major reasons for amending Fitial's Fund EO, including re-confirming that the Fund's assets and property are held in trust for members' benefits.

They also wanted to ensue that the Fund's assets and property can only be disbursed to cover benefit payments and necessary trust costs, and to clarify that all assets and properties of the Fund will be kept separate from the assets of the CNMI or its agencies.

Most importantly, the Senate said their amendments will ensure "a mechanism for appointment of a board of independent trustees over trust assets with authority to collect and enforce the Retirement Fund Act against the government and its autonomous agencies."

They said vesting the powers of the Fund board and administrator in the governor pursuant to the EO "will result in an immediate breach of trust upon the effective date of the Executive Order."

Senators also said vesting of "all the statutory powers, duties, functions and responsibilities" of the Fund and its board in the Secretary of Finance "will result in a further breach of trust" and abolishing the board "will undermine the ability of the Fund to operate as an autonomous agency."

Fitial placed the Fund under a state of emergency after a federal court dismissed the Fund's Chapter 11 bankruptcy filing. The administration said the EO takes into effect when the written ruling is issued.

Board of trustees

The Senate maintained a three-member Fund board of trustees, much leaner than the seven members now required by law, which is being amended.

The board will hold the Fund's assets and property in trust for members' benefits.

One of the trustees shall be appointed by the House, one shall be appointed by the Senate, and one shall be appointed by the governor.

The appointments will not need the Senate's advice and consent.

The resolution says: "The board of trustees of the Fund as of June 27, 2012, shall cease to exist."

It also says when membership in the Fund shall fall to less than 75 percent of the membership on the effective date of the amendments, the board shall be replaced by a single professional trustee appointed by the then current board, with the advice and consent of the Senate.

The board shall also cooperate with the government's efforts to reduce unfunded liabilities, including any efforts to transfer Fund active members to the U.S. Social Security system; providing that all such efforts include a binding mechanism to replace the government's contributions to the Fund that were previously made as a percentage of covered employee salaries.

The board also has to make periodic written reports to the Office of the Public Auditor about the Fund's fiscal affairs and expenses on a quarterly basis.

Senators also capped at $100,000 per annum the Fund's spending on outside board legal counsel.

'No show'

None of the three top officials that the Senate president invited to the Senate session showed up yesterday. They were Fitial, Lt. Gov. Eloy S. Inos and Attorney General Edward Buckingham.

Manglona wanted the three or their representatives to answer questions about the administration's reorganization plan for the Fund.

Fitial, in a letter yesterday responding to Manglona, said he thanked Manglona for his invitation letter delivered to the governor's office at 4:20pm on Wednesday.

"Unfortunately, Lt. Gov. Eloy Inos and I are unable to fulfill your 'short notice' request," Fitial told Manglona.

Fitial, however, said he and Inos invite Manglona and other Senate members to meet with them "to discuss your concerns" about the Fund "and our commitment to work collaboratively toward resolving this matter."

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