For example, opponents claim that the initiative would create a new debt of the CNMI, while the next breath they lament how the CNMI has not paid anything toward the $300 million judgment to the NMI Retirement Fund, as if that were not an obligation of the CNMI. Pension obligation bonds authorized by the initiative can be used only to pay off the debt already owed to the NMIRF. The fact that the CNMI has not paid its obligation the NMIRF is the single strongest argument for the initiative, since the pension obligation bonds would simultaneously shore up the CNMI’s deferred contributions to the NMIRF and compel the CNMI to begin amortizing that debt by converting it into a “hard” debt that the CNMI cannot avoid (i.e., pension obligation bonds) from the “soft” debt that it has avoided since the 1990s, even after the Superior Court forced the issue with the judgment. No new debt would be created under the initiative.
Opponents say that pension obligation bondholders would have claim to the CNMI’s public land and assets. This is patently untrue, as these legally cannot be pledged or claimed. Bondholders would have claim only to what the CNMI pledged, which would be either a lien on a dedicated revenue source or a pledge of the general fund, or both. This is well established by law and court rulings.
Opponents question the ability of the CNMI to repay its bonds. Although a clear repayment plan has yet to be identified, bondholders simply would not lend money to the CNMI unless and until such a repayment plan were established. Leaving this unspecified gives the CNMI the flexibility to choose a revenue source or other repayment plan that works best both for the citizens of the CNMI and for bondholders.
Likewise, opponents warn of risks to the CNMI or lack of safeguards. Actually, the initiative would transfer risks from the beneficiaries of the NMIRF to bondholders without creating additional liabilities for the CNMI itself.
Opponents say that the initiative does nothing to solve future funding problems of the NMIRF, and this is true.
However, this is beside the point. The initiative does not purport to fix future funding problems, only the current deferred funding. Opponents say the CNMI Legislature could increase future retirement benefits when in fact it already has done the opposite by adjusting its retirement plan to avoid many of the pitfalls going forward that got it into this position.
The simple fact of the matter is that the CNMI made a legally binding promise to its public employees, and that obligation has been confirmed by the Superior Court. The issuance of pension obligation bonds authorized by the initiative would fund the CNMI’s obligation to its pensioners, relieve its obligation under court judgment, cease the 9 percent penalty rate, and provide funds to invest that would earn a return that would lessen the need for future contributions.
House Legislative Initiative 17-1 is far and away the most fiscally prudent, responsible and moral choice for the CNMI, giving the CNMI the tools it needs to solve its unfunded pension liability. Please join me in voting yes.
REP. STANLEY T. TORRES
17th CNMI Legislature
