Minority bloc vows to block retirement bills

Unconvinced by the administration’s proposals, the House minority bloc said it would lobby hard against the passage of the retirement writeoff and loan bills.

House minority leader Arnold I. Palacios said both the $124-million writeoff of retirement liabilities and $40-million retirement money loan for the Commonwealth Utilities Corp. are “not options.”

“The writeoff is not an option. Neither is the loan. It’s not something that we should do. We’ve always been opposed to this from Day 1. We’ll continue to oppose these. The administration proposals are not acceptable,” said Palacios yesterday.

He said that Republicans and even Democrats in the House would not support the proposals.

“As far as the Republicans are concerned, who mainly consist the minority bloc, and even the Democrats, don’t think that the legislation being put forth by the administration is acceptable. I know that the minority bloc is not going to support it,” he said.

Two Democrat congressmen, Justo S. Quitugua and Bobby Guerrero, are currently aligned with the House leadership.

Palacios, meantime, said the leadership’s recent move to take out the $40-million loan from the original writeoff bill, indicates that “there’s dissension even among the leadership” on how to handle the matter.

“So they took it out. But regardless how it’s done, it’s the same animal,” said Palacios.

The House minority bloc earlier labeled the administration’s bill a “raid” rather than a rescue of the Retirement Fund.

It said that the proposed Defined Benefit Plan Rescue and Reform Act of 2006” is unconstitutional for three reasons: it violates the contractual relationship between the members and the government; it impairs the Fund’s capacity to pay benefits; and it violates the Fund board’s fiduciary duty over investment options.

For its part, the administration said that the bill, along with a complement measure, Defined Contribution Plan, are long-term solutions, and would not mean nonpayment of pension and retirement benefits.

Governor’s special assistant for management and budget Tony Muna said that the unfunded liability would eventually be paid out.

Right now, the administration said that the Fund could temporarily tap proceeds from investments to meet retirees’ obligation.

Muna said that to continue with the current setup would bankrupt the Fund.

“We’re trying to put a brake on something that’s out of control. That’s the nuts and bolts of it,” Muna said, referring to the government’s generous retirement system, which he said has created an unfunded liability of $552 million as of Oct. 2004.

He said the bill aims to retire this liability by writing off the current liability [$124 million], suspending the employer’s contribution temporarily, and converting the defined benefit plan to defined contribution plan.

This way, he said that the liability would stop growing as all new members and eligible employees would be under a defined contribution plan.

He said the government has no capacity to pay the debt right now.

The $124 million liability was created due to the central government’s failure to pay retirement obligations (not enough remittance for employer contribution), 30 percent early retirement bonus, prior service credit, and other legislated benefits for retirement members.

Meantime, the $40-million loan for CUC, which was originally part of the writeoff bill, was recently taken out and introduced as a separate bill in the House.

The proposal asks the Fund to purchase $40 million government revenue bonds to fund the financially bankrupt CUC.

The CUC remains under the emergency control of the administration mainly for its continued lack of finances to buy fuel and maintain its engines.

Earlier, Fund board chair Joseph Reyes said there is a possibility for the proposed $40 million investment.

He said that based on the rules, the Fund can invest up to 15 percent of its investment assets in the local economy.

The Fund’s total assets in the stock market reached $447 million as of March 31, 2006. Right now, the Fund’s local investments totals about $13 million in housing and government building construction.

The Fund, however, is strongly opposed to the writeoff proposal, warning that it would incapacitate the program.