The solution is money. The problem is where to get it, and how.
The Fund’s current and former officials have proposed floating a pension bond. In 2005, then-Administrator Karl. T. Reyes said $200 million would be enough. In the current Legislature, at least three bond proposals have been introduced, the most notable of which is Sen. Frica Pangelinan’s Senate Legislative Initiative 16-10 which was “merged” with Rep. Heinz S. Hofschneider’s similar proposal, H.L.I. 16-12.
S.L.I. 16-10 will allow eligible government employees to retire, and once they do, their positions will remain vacant, which should result in annual savings of $5 million that will then go to bond payments. The initiative will also prohibit the creation of new retirement benefits.
The supporters of the proposal are aware of the complications involved in floating a bond in light of the CNMI government’s financial condition. The CNMI might be saddled with a high interest rate, and this is assuming that it can get anyone to buy its bond in this global economy.
This is why the proponents of S.L.I. 16-10 will also ask the feds to guarantee the bond. They say this has been done before in the 1980s when the CNMI, with the approval of the U.S. Congress, pledged its seven-year, $140 million CIP funding to float a bond. That was before the CNMI had a congressional delegate.
But the chamber of commerce fears that, in the long-term, taxpayers will be burdened by this public debt. Maybe. But as the liberals’ favorite economist famously said, “The long run is a misleading guide to current affairs. In the long run we are all dead.”
While we worry about the long-term the Fund is approaching insolvency, and may be gone soon.
The chamber, incidentally, could have made a better case for its argument if it ended its letter to the lawmakers after explaining why it opposes the bond proposal. Instead it went on to say that while the chamber believes “recent Fund board members have been working diligently to address the issues facing the Fund, it is not clear that recent Legislatures have accepted their responsibilities in this regard.”
This is like comparing apples to onions. Fund officials can demand money owed to the agency, and you can say they’re doing their job if they to do that. Lawmakers and the administration, on the other hand, have to worry not only about the Fund, but also government payroll, CUC, public education, public health, public safety, payments to vendors, etc.
But then again it’s an election year and it’s not surprising to hear the chamber praising the Fund and damning the Legislature. You know what I mean.
So what, in any case, is the alternative to floating a bond?
No one wants to say it out loud. But here it is: Force this bankrupt the government to pay the Retirement Fund. How? By laying off people, raising taxes and fees, reducing pension benefits, selling government assets, etc. The CNMI’s elected officials will never agree to any of those things, so it should be the court, preferably the federal court, that should step in and gut this government. See, for example, how the federal court “solved” Guam’s Ordot Dump problem. Take note: the amount that GovGuam has to pay, $158.6 million, is less than what the CNMI government owes the Retirement Fund, which is over $190 million and counting. Compared to Guam’s economy, moreover, the CNMI’s is already staring into the abyss.
Now should the CNMI’s elected officials allow this scenario to unfold or should they do something now to at least stop the bleeding?
CNMI voters can, and should, blame their officials, past and present, for the Fund’s dismal state, but they can’t wash their hands of this mess which didn’t exactly happen overnight but was the accumulated result of all the laws and policies approved by their elected officials, in broad daylight, and with the hearty approval of voters who also believed that this pyramid scheme of a pension system could go on forever.
The CNMI can either continue the ongoing blame game or, for once, try to solve the problem before the court steps in and “fix” it. And by “fix” I mean “burning down the house to get rid of termites.”
A legislative initiative, compared to a court mandate, has to go through the democratic process. Lawmakers have to hold hearings; they have to debate and vote on the initiative; and, once they passed it, there will be more public discussions before the people vote on it in November. You get to decide.
The proponents of S.L.I. 16-10 want a thorough review of their proposal. They want to consult the experts. They want to see a cost-analysis attached to the initiative. They want to hear from you. They want to solve the problem now instead of worrying about long-term scenarios while nothing gets done and the problem gets worse.
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