Under this plan, the pension bond, which was originally set at $200 million, will be invested and its compounded interest over time is envisioned to help the Retirement Fund reach its goal of having assets worth $1 billion by 2045.
The cash-strapped government hasn’t been able to remit payments to the Fund.
As of Sept. 30, 2007, its arrears had reached over $132 million. The figure did not include the unfunded liabilities of over $500 million.
The Retirement Fund said these arrears could have been invested in the international stock markets and other equities had the government paid the agency on time.
“Pension obligation bond financing will serve as an important third reform for the CNMI pension program,” the governor said in a letter to lawmakers. “When worldwide bond market conditions stabilize and the conditions for borrowing improve, the commonwealth needs the ability to enter the bond market and reduce its unfunded pension liability through [pension obligation bond] financing.”
Fitial added, “I ask you to support the early enactment of Senate Legislative Initiative 16-10 and its ensuing approval by the voters.”
The legislative initiative is principally sponsored by Sen. Maria T. Pangelinan, D-Saipan.
According to the legislative initiative, the CNMI government had failed for several years to contribute its actuarially required employer contributions to the Retirement Fund and the issuance of pension obligation bonds, or POB, could eliminate the deficit and grant the agency a substantial sum of money to invest and compound returns over time.
The CNMI Constitution, however, prohibits public debt, specifically for operating expenses.
S.L.I. 16-10 seeks to amend Article 10, Section 3 of the Constitution so that pension obligation bonds can be issued for the benefit of the Retirement Fund.
Three-fourths of the members of each house of the Legislature must vote in favor of a legislative initiative so it can be placed on the Nov. 2009 ballot.
Voters will then decide whether to ratify or reject it.
Fitial said POB is a common financial relief in the U.S. to close an unfunded pension liability gap.
“Despite the difficult economy and our limited public funding, I am committed to reducing the Fund’s long-term unfunded liability,” he added.
The House of Representatives is scheduled to hold a session today while senators will hold theirs on Friday.
