Proposed 25-Percent CNMI Pension Cut Temporary: Inos

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Governor says ‘graduated system’ will restore benefits

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, August 2, 2013) – Gov. Eloy S. Inos assured yesterday that the proposed 25-percent cut in retirees’ pension is only a "deferment" and not a "permanent reduction," especially for those receiving the least amount of pension. It remains to be seen whether lawmakers will rally behind the administration in the ongoing Northern Mariana Islands Retirement Fund settlement.

A deferment—as opposed to a permanent cut—in pension is not an impairment of retirees’ constitutional rights, as the administration puts it.

"If reduction is the way to go, it will come from the back end. And restore the reductions in a manner that the folks with the least annual benefits, those impacted the most by the reduction, will get the most restoration," Inos told Saipan Tribune at yesterday’s opening of the two-day CNMI Women’s Summit at the Pedro P. Tenorio Multi-Purpose Center in Susupe.

Inos acknowledged that lawmakers have raised a legitimate concern about the impact of such a deferment on retirees who get $6,000 to $10,000 in pension, for example.

"So a guy with the $6,000 [pension] obviously would get hit on the first round, because of the 25 percent. But once we put together the funding to pay them back, from my standpoint, they would be restored to the fullest so they will still be 100 percent as opposed to the guy who’s making $100,000. Maybe that guy will probably not get any restored at all. So in the end you have a graduated [system]," the governor added.

House Special Committee on Retirement Issues Rep. Mario Taitano (Ind-Saipan) separately said he is "keeping an open mind" about the tentative deal reached by the parties in the Betty Johnson lawsuit.

"I’m saying it’s too soon to propose to cut. There’s already enough money to last the Fund for two years. If we could postpone the 25 percent, the better, until we get a clearer picture," Taitano said.

The 25 percent deferred pension will be restored when there is a new source of funds or when the pension agency reaches some level of financial stability.

"We call it just deferred, that’s what it is," the governor said.

That is why besides the $20 million in general fund remittance to the Fund in fiscal year 2014—double the $10 million in 2013—the administration is also eyeing floating a pension obligation bond plus new revenue-generating measures from the Legislature.

"It’s not [permanent], and in the end, if things are good they will be made whole for everything they’re supposed [to receive], that they deserve," the governor said.

Lawmakers, including Reps. Christopher Leon Guerrero (Cov-Saipan), Roman Benavente (Ind-Saipan), and Lorenzo Deleon Guerrero (Ind-Saipan), said the smaller the pension a retiree receives, the smaller the cut should be, if it is the only solution to prolonging the Fund’s lifespan.

Retirees receiving $10,000 or less, for example, should either be exempted from the cut or receive only a minimum cut, lawmakers said.

But the governor clarified that because it is a class action suit, the temporary cut or deferment has to apply "across the board."

"We cannot have different benefit reduction for certain people in that same class. We’re going to have to establish a new class and that could create lots of problems because you got different people with different interests. Our idea is to go through that one set of reduction across the board," Inos said.

Taitano is considering asking for another meeting with the governor and committee members.

Inos said the administration is trying to strike a balance "so that all parties’ concerns would be addressed—from retirees to active employees to the taxpayers in general who have to foot this thing at the end of the day."

"We’re still trying to strike an acceptable balance," he said.

Although the Legislature’s express support to the terms of the tentative deal is not a requirement, the administration would like a unified government effort to address the Fund’s issues.

An earlier estimate stated that the Fund will cease to exist by March 2014.

The government owes the Fund some $300 million in unremitted employer contributions.

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