CNMI Government May Resort To Austerity Measures In 2014

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Inos says $12 million needed to meet obligations to settlement fund

By Alexie Villegas Zotomayor

SAIPAN, CNMI (Marianas Variety, Dec.18, 2013) – With the budget $12 million short in meeting the CNMI government’s obligations to the Settlement Fund, and absent any new revenue-generating measures, Gov. Eloy S. Inos may be forced to employ cost-cutting measures in 2014.

He told Variety yesterday, "I am looking at possibly instituting austerity measures."

He said he discussed this with members of his cabinet in a meeting Monday.

"In the cabinet meeting, I said that we are reevaluating. Right now we are short $12 million for the retirement fund," he said.

The settlement reached in federal court in the Betty Johnson case, called for retirees to get at a minimum 75 percent retirement benefits and effectively defer 25 percent.

Payment of the 75 percent will come from the Settlement Fund; the CNMI government is obligated to make minimum annual payments so the Fund can continue to pay the retirees and their beneficiaries at least 75 percent of their benefits.

The agreement states that the CNMI government will make annual payments of $25 million in 2014; $27 million, 2015; $30 million, 2016; $33 million, 2017; $45 million, 2018; $44 million, 2019; $43 million, 2020; $42 million, 2021; $41 million, 2022; $40 million, 2023; and $39 million, 2024.

But long before the signing of the settlement agreement, the CNMI Legislature and the Administration had been considering revenue-generating measures including the two recently passed measures on video lottery and electronic gaming.

Despite these new measures, the government budget comes up short.

Earlier, Governor Inos and the lawmakers said the CNMI may be facing a 30-45 percent increase in health insurance costs.

Negotiations continue with the two companies that placed bids.

Sources close to Variety said that Staywell and Pacifica Insurance were the two insurance carriers that responded to the CNMI government’s request for proposals.

Last year, with the current carrier Aetna International agreeing to renew its contract with the CNMI, the trustee ad litem was able to close a deal that resulted in $4 million in savings for the CNMI government, the employees and retirees.

But with the looming implementation of the Affordable Care Act and the rise in insurance costs, the CNMI may be facing tough decisions as it considers the two proposals before Dec. 31.

In the meantime, the government is scrambling to find the revenues.

"Anything that we can do to save money has to be considered," said Governor Inos.

He declined to comment on what specific measures he is considering.

"The idea of having an austerity measure may be what we need to do," he said.

This was not the first time that Governor Inos has raised the issue of belt-tightening measures for the government.

When he signed the budget measure into P.L. 18-18, he pointed out that absent revenue-generating measures he would be considering austerity measures.

He said, "As I have indicated in several leadership meetings with the Legislature, an additional $12 million is needed to meet our initial payment under the Settlement Agreement. Without the enactment of any new and major revenue-generating measures within the next 30 days, I may be forced to implement austerity measures which may affect personnel."

He said he would rather prevent this from happening but raised the alarm on the critical need for measures to address the commonwealth’ financial needs.

It would not be the first time that the government has resorted to cuts.

In 2010, during the term of Inos’ predecessor, former Governor Benigno R. Fitial, the government adopted the extreme measure of cutting 16 hours per pay period across the board in the executive branch, even including federally funded employees.

Governor Inos did not say whether he would adopt a similar approach.

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