Inos: Fund Settlement ‘Best Deal’ CNMI Could Make

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Governor also urges approval of moneymaking bills, special fund

By Haidee V. Eugenio

SAIPAN, CNMI (Saipan Tribune, August 8, 2013) – Gov. Eloy S. Inos said yesterday that the tentatively approved settlement agreement in the Betty Johnson-Northern Mariana Islands Retirement Fund case was the "best deal" the Commonwealth government could enter into considering its finances. He called on the Legislature to pass revenue-generating bills and create a "special fund" that will help restore the 25 percent deferment in retirees’ pensions.

That special fund will also be a source of interest payments for active members seeking a refund on their contributions.

The special fund and the required general fund remittances to the pension agency are separate matters, but both need strong cooperation between the Executive Branch and the Legislature.

A retiree himself, Inos hopes that retirees will not opt out of the settlement agreement.

"They’re not going to be part of the settlement. They are not going to benefit from the settlement fund," Inos said.

But he said the decision rests with the retirees.

"We’re asking them to basically make that decision and hopefully the decision that they make is the right decision. Right now the only certainty is the settlement and the fund that would be provided under the settlement, provided that the government meets the minimum contribution requirements on an annual basis," he said.

The U.S. District Court for the NMI’s tentative approval of the Fund settlement deal comes barely six months since Inos became governor on Feb. 20.

Much work still needs to be done, Inos said.

The governor said he acknowledges that not everyone is happy about the deal but said the consequences of not entering into the agreement would be "more devastating."

He said the bigger task ahead is "to make sure that we meet the payment requirements."

In fiscal year 2014, for example, the government is supposed to remit $25 million to the Fund. That is much more than the $10 million it has set aside under the fiscal year 2013 budget.

The governor and Lt. Gov. Jude U. Hofschneider met with members of the House of Representatives and the Senate yesterday morning.

That was to update them on the status of the settlement deal and to ask for their continued cooperation in prolonging the Fund’s lifespan while at the same time ensuring that retirees and active members get what they deserve.

Rep. Lorenzo Deleon Guerrero (Ind-Saipan), one of those in that meeting, said lawmakers also believed that "there’s nothing else the government could do but to enter into a settlement agreement so we can sustain retirees and active members."

"The major challenge is the 25 percent across-the-board pension cut and the payments to the Fund," Deleon Guerrero told Saipan Tribune.

He said the worst-case scenario is placing the Fund under receivership.

Rep. Ray Tebuteb (Ind-Saipan), who was also in that meeting, acknowledges that the Legislature and the administration have to continue working together to see the settlement through.

"Time is of the essence," he added.

Hours later or at past 1:30pm yesterday, Inos and Hofschneider held a news briefing on the Fund settlement agreement, along with Attorney General Joey Patrick San Nicolas and assistant attorneys general Reena Patel, Teresita Sablan, and Gil Birnbrich.

The governor said he had invited Fund officials to the briefing but no one showed up. The settlement deal requires some actions from the Fund as well.

The hearing for the settlement deal’s final approval is set for Sept. 30, 2013.

The 25 percent pension deferment or temporary cut will begin after the final approval.

He said the creation of a settlement fund would not necessarily obviate the need for a Retirement Fund.

[PIR editor’s note: Any class member who wishes to opt out of the settlement agreement has been given until 5pm on September 20 to request exclusion, says Judge Frances Tydingco-Gatewood.]

Revenue-generating bills

In his meeting with lawmakers yesterday, the governor said revenue-generating bills from the Legislature are key to restoring retirees’ full pension, especially those receiving only $6,000 a year.

He said the two revenue-generating bills that could clear the Legislature are the electronic gaming at hotels and video lottery terminals.

The Saipan casino gaming bill, he said, might take longer to be acted on as lawmakers continue to gather as many public input as possible.

Inos said he does not see imposing new taxes. He said it would have to be new revenue base.

Interest payment

Active members of the Fund who want to withdraw their contributions may receive their refunds soon under Public Law 17-82.

"The parties agreed that interest will not be included in the withdrawal. The government has decided that portion will also be paid outside of the settlement and again it would also be paid out of any fund that will be generated for the purpose of making whole the Retirement Fund. That is the reduction of 25 percent, which will be paid out of additional resources as well as the interest that will not be paid along with the withdrawals under Public Law 17-82," the governor said.

Inos said the Legislature agreed to set aside a special fund wherein revenues generated from revenue-generating measures will be put in, to help restore the pension deferment.

Lawmakers reiterated yesterday that it is not fair to defer pensions across the board, especially if there are many who receive $10,000 or less and others, $80,000 and above.

But because it’s a class action suit, the 25 percent pension deferment will have to be uniform.

"My feeling is that those with $6,000 would probably have to be made whole 100 percent. A guy who’s making $100,000 would probably be, rather than stick him with 25 percent, we probably increase to 30 percent, 35 percent," Inos added.

‘We tried our best’

Inos said the government tried its best "to come up with an amount that we felt was realistic and practical, given the economic situation up here and the way we looked at how the economy would perform in the future."

"We need a lot of work to be able to meet the required contribution and so we went ahead and agreed to the amounts required with the caveat that we the central government, as well as the Legislature, would need to work together to try to come up with that because the consequences of not entering into an agreement…could be more devastating and so we believe that entering the agreement, is the acceptable way to ensure that we’ve got some certainty and it’s a matter of us doing our best to make sure that we meet the payment requirements," he added.

If the government does not meet its obligations under the deal, there is a stipulated judgment of $779 million that will be enforced.

Inos said the government will try its best to meet its obligations under the deal.

"But I think it’s better that we enter into an agreement now knowing what will happen when things happen, as opposed to not entering into an agreement. We know that if we don’t enter into an agreement, the money in the Fund would be gone in about a year, a year and a half and nothing left from that point on. So we felt that this was the best deal that we could enter into considering the circumstance that we’re in financially and so forth," he said.

The governor also reminded that the Fund is not the only critical matter that needs to be addressed, citing the needs also of the Commonwealth Healthcare Corp., the Commonwealth Utilities Corp., and the Public School System.

"I understand not everybody would be happy with this. People would feel that they were being cheated…but we tried our best. I just hope that we have no opt outs… For your information, I am staying in. I think that’s the best thing to do," he added.

The governor added that the Fund will affect every member of the community.

Inos and Rep. Lorenzo Deleon Guerrero separately said there will be townhall meetings starting next week so that the administration, in cooperation with the Legislature, can reach out to retirees and other community members about the settlement deal.

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