Initiative seeks to transfer MPLT earnings to the Fund

A legislative initiative wanting to transfer all earnings and income of the Marianas Public Land Trust to the NMI Retirement Fund may face constitutional challenges, according to MPLT board of trustees.

Senate President Paul A. Manglona’s Legislative Initiative 17-14 proposes to amend Article 11 of the CNMI Constitution to provide for the transfer of funds from MPLT to the Retirement Fund.

Manglona (Ind-Rota) said the intention is to address the Fund’s unfunded liability that, if not resolved, will stop paying out retirement benefits before 2014.

The Fund earlier disclosed that its unfunded liability is estimated at over $900 million as of April this year. This means that for every dollar the Fund owes beneficiaries, only about 36 percent is funded.

It was also disclosed that for the Fund to be fully funded until 2045, it needs about $860 million in investment funds. As of last week, the Fund’s portfolio was valued at $264 million only and the unfunded liability continues to increase.

Manglona’s initiative will require MPLT trustees to transfer to the NMI Retirement Fund “all interest, dividends, and other gains upon the trust corpus on a quarterly basis at all times during which the Fund maintains an unfunded liability…”

The MPLT board described as confusing the language of the legislative initiative pertaining to “all interests, dividends, and other gains.” The agency’s portfolio is currently valued at $71 million.

The board’s legal counsel, Robert Torres, said the legislation will trigger Covenant issues because, for one, there is a standing agreement with regards to the interest received for the lease of property at Tanapag Harbor, which is for the development and maintenance of the American Memorial Park. MPLT, he added, also already obligated some of its monies for certain purposes.

Board trustee Pete Cruz said the legislation is also unclear because MPLT has two trust funds: the general fund and the memorial park fund.

“Which fund are they talking about? Is it the general fund where we remit the monies for government or the memorial park fund?” he told colleagues.

The bill, he said, is also unclear on which “gain” it is referring to. “Does this means that all monies that should go to the general fund will now be remitted instead to the Retirement Fund for its unfunded liability?” he asked.

MPLT executive director Bruce MacMillan said the initiative also theoretically implies that every time MPLT realizes net gains on stocks or bonds, these should be distributed. However, in the event of losses, MPLT has to absorb them.

The board believes the initiative is unnecessary because the Legislature can already give MPLT’s income on interest to the Retirement Fund through the budget appropriation every year.

Due to several questions related to the initiative, the board decided to talk the matter over with Manglona.

A 2009 court judgment had determined that the government owes the Fund over $231 million in unpaid employer contributions. The proposed remittance of MPLT revenue to the Fund aims to pay for this government obligation.