They are trying to find the fastest and safest way to resurrect the dying company. Aside from reducing its operating expenses, which we will be discussing in the very near future, the Retirement Fund needs to collect its accounts receivables to increase its revenues for investments, pay its operating expenses, pay pensions to retirees and set aside some money for future retirees. A large amount of these receivables are due from the commonwealth government: over $300 million and counting.
Recently, House Legislative Initiative 17-1 passed the Legislature and will be on the ballot on Nov. 2. In the view of various individuals with financial and business backgrounds authorizing our government to issue a pension obligation bond should the TIMING IS RIGHT, I believe, is the most prudent approach to SOLVE the $300 million receivables that our government owes the Retirement Fund.
Why am I voting YES on H.L.I. 17-1? The government will be able to catch up in paying its liabilities to the Retirement Fund instead of paying very minimal at a time and not even reducing the principal amount due. All the payments our government is making now goes to interest cost and nothing to reduce the principal amount due. Our government could not afford to make large payments to the Retirement Fund because there are other priorities to fund, such as education, health, public safety and other social services. Issuing a pension obligation bond is similar to refinancing the government loan, making it longer to repay the loan at affordable terms and conditions.
As an example, the commonwealth government issued a $140 million bond for infrastructure here in the CNMI because the government did not have a large amount of money to finance these projects. In addition, the commonwealth government issued a $16 million bond for Public School System projects. The $140 million bond and $16 million bond were fully paid. In 2000, a $60 million bond was issued for local matching of infrastructure projects and in 2003 our government issued a $40 million bond for land compensations/prison facilities. Both these bonds were refinanced in 2007 at lower interest rates. The original $60 million bond was paid off this year.
The government always meets its bond payments. In other words, our payment record with the bond market is good.
Should the Retirement Fund receive the funds from the pension obligation bond, the Retirement Fund will invest these new funds and will continue to pay retirees’ and future retirees’ pensions.
What are the sources of funds to pay the pension obligation bond? The sources are the money the government sets aside as employer’s contribution, and taxes regularly remitted to the Retirement Fund. Instead of paying the Retirement Fund with these funds, the government will remit them to the bond holders.
There are safeguards required before the CNMI government issues the pension obligation bond. For one, there will be a detailed financial analysis regarding the repayment ability of the government.
Therefore, voting YES on H.L.I. 17-1 is favorable to both the government and the Retirement Fund. Voting YES provides the government authorization to issue a pension obligation bond should the TIMING and COST of underwriting bonds are favorable. It does not mean that the CNMI government will issue the pension obligation bond tomorrow. Voting YES to H.L.I. 17-1 should go with a YES vote on H.L.I. 16-13, to stop the Legislature from passing laws that increase benefits to retirees and active members which also increase the unfunded liabilities of the Retirement Fund.
Your support is highly appreciated.
JUAN M. SABLAN
As Teo, Saipan
