The Fund’s unfunded liability is more than $500 million while the government’s unpaid contributions has reached over $160 million.
“The Fund is in dire fiscal emergency due to years of unpaid employer contribution as well as overly generous benefits mandated by law without proper funding sources. The practice of using the Fund as a political tool to secure votes was recognized with the passage of Public Law 15-70,” said Guerrero in his letter to the Legislature.
The law requires a referendum before benefits of government retirees can be increased.
A measure, however, was introduced in the Senate to allow the Fund to pay its members’ pensions proportionate to their deficient employer contributions.
Senate Bill 16-36 was introduced after the Fund board of trustees adopted a resolution to stop the processing of retirement applications for members who work for agencies with deficient employer contributions.
All government offices and agencies, except those that are autonomous, are deficient in their pension contributions because of the passage of a law allowing the CNMI government not to remit payments to the Fund in fiscal years 2006 and 2007.
Guerrero said S.B. 16-36 is an example of “politics injected into the Legislature’s attempt to alleviate people’s suffering.”
He added, “[Its] Section 3, grants an added benefit to elected officials which is in direct violation of Public Law 16-70 since this section does not identify a funding source and is not subject to a referendum. In addition, it seeks to extend the refund period from six months to two years. These two amendments are absolutely unacceptable in the Fund and the board’s position.”
These provisions were the amendments proposed by the House of Representatives.
Guerrero said these inserted sections have no funding.
“The two provisions are exacerbated by the more than 25 percent difference between the actuarially and the legislatively set employer contribution rate (37 percent versus 11 percent). These two provisions, all unpaid employer contributions and monies not remitted to the Fund are perfect examples of how the Fund continues to be deteriorated by legislation,” the Fund chairman said.
The Fund disburses close to $59 million in pension checks every year. However, only half of this amount is paid by the government, thus, the agency continues to dip into its investment portfolio to meet the shortfall.
According to Guerrero, S.B. 16-36, as amended by the House, “will adversely affect the pension trust and the Fund and the board request the…legislation not be passed by the House at all.”
