FOR fiscal year 2025, the CNMI government made a $31.3 million lump sum payment to the Settlement Fund using a loan from the Bank of Guam, Settlement Fund Trustee Joyce C.H. Tang stated in a status report to the federal court.
“Despite the economic challenges and funding issues, the Government has prioritized the payment of the [Minimum Annual Payment] to the Settlement Fund,” Tang added.
District Court for the NMI designated Judge Frances Tydingco-Gatewood scheduled a status hearing for Jan. 9 at 10:30 a.m.
Background
In 2009, retiree Betty Johnson sued the CNMI government for its failure to pay the amounts that it was required by law to remit to the NMI Retirement Fund since 2005.
Johnson said the Fund would run out of money by June 2014 and would no longer be able to pay retirement benefits.
In September 2013, the parties agreed to settle the lawsuit, and the federal court approved a $779 million consent judgment in case the CNMI government did not meet its obligations to the Settlement Fund.
The Settlement Fund was created by the federal court as part of the settlement between the CNMI government and retirees.
The federal court appointed Tang as Settlement Fund trustee on Sept. 25, 2013.
Trustee’s report
Tang’s latest report, dated Jan. 2, 2025, pertains to the operations of the Settlement Fund for the period of FY 2024 through Dec. 15, 2024.
The Minimum Annual Payment or MAP represents the 75% in annual benefit payments the CNMI government is required to pay under the settlement agreement.
In her report, Tang said, “The Government timely paid the MAP, the Group Health and Life Insurance Program payments, and the voluntary 25% benefit payments in FY 2024.”
In FY 2024, the CNMI government remitted $34 million in MAP, the report stated.
“The $34 million MAP was based on the FY 2022 Actuarial Valuation issued on October 17, 2023,” Tang said.
She noted that, “based on the recent FY 2023 Actuarial Valuation Report, the Government overpaid MAP by $1 million at the end of FY 2024.”
However, for the upcoming FY 2025, the trustee said, the CNMI government budget did not appropriate sufficient funding to fully cover the GHLIP payments and the voluntary 25% payments.
According to Tang, for FY 2025, the CNMI government’s MAP amounts to $31 million.
“The Government borrowed $30.19 million from the Bank of Guam and paid the $30.19 million MAP in a lump sum payment to the Settlement Fund on November 13, 2024. Total payments received by the Settlement Fund for FY 2025 MAP is $31.5 million. The additional $300,000 MAP payment was due to earlier MAP from the Government prior to the Bank of Guam loan disbursement,” Tang stated.
“Of the $30.19 million received from the loan, $28.41 million was deposited (net of the 75% amount for the November 30, 2024, pay period) in a Special Purpose Bank of Hawaii money market account. The funds in the Special Purpose account are invested in the Dreyfus Treasury Obligations Cash Management Fund…. All interest earned on the funds belongs to the Government. The required amounts are withdrawn on a semi-monthly basis to meet the required 75% benefit payments. The principal balance in the Special Account as of December 31, 2024, was $25.28 million,” the report said.
It added, “The Government has fully paid the FY 2025 MAP and has an excess credit of $1.3 million. The Settlement Fund has requested and is waiting on instructions from the Government regarding how it wants to apply the $1.3 million credit.”
As for the 25% benefit-voluntary payment, Tang reported that the CNMI government paid $12.6 million for FY 2024 and $3.1 million for the first quarter of FY 2025.
The trustee noted that the 25% benefit payment is not required under the settlement agreement and is based solely on the discretion of the governor and Legislature, which appropriates the funds.
According to the trustee, the CNMI government funded the FY 2024 25% payments by utilizing the governor’s reprogramming authority under Public Law 23-09 or the FY 2024 Budget Law and by legislative appropriation under Public Law 23-18.
“Similarly, the FY 2025 Budget Law does not appropriate funds for the 25% benefit payments. The Governor has utilized his reprogramming authority under the FY 2025 Budget Law to fund the 25% benefit payments,” the trustee added.
“Recently, the Governor and Lieutenant Governor met with members of the Legislature to discuss FY 2025 budget amendments, which may include legislative appropriation to fund the remaining 25% payments,” the trustee stated.
