New law allows tax offsets, credits for unpaid government judgments

A Senate bill that became law on Sunday without the acting governor’s signature allows the governor to negotiate a settlement and resolution of judgments against the CNMI government, including offsets and credits on any tax obligation by the claimants or members of their immediate family.

Acting governor Jude U. Hofschneider, meanwhile, vetoed a local bill appropriating and re-appropriating over $180,000 in developers infrastructure tax for a host of Saipan projects because of “deficiencies” in the legislation.

Senate vice president Victor Hocog’s (R-Rota) Senate Bill 18-26 became Public Law 18-37 on Feb. 23, after the 40-day period lapsed without the governor’s action.

The Judgment Settlement Act of 2013, introduced in June 2013, was co-sponsored by Sens. Frank Cruz (R-Tinian), Joaquin Borja (Ind-Tinian), Ray Yumul (Ind-Saipan), and Jovita Taimanao (Ind-Rota).

Under the new law, the governor is authorized and empowered to negotiate a settlement and payment of judgments entered against the government.

“Such settlement may include offsets and credits on any tax obligation or other obligations of the claimants or members of their immediate family or third parties who may have such obligations and payments of cash from the Commonwealth General Fund or other funds set aside for payments of judgments, including all other settlement methods, authorized by law, other than cash as agreed by the parties,” P.L. 18-37 says.

The government has at least $27 million in unpaid judgments. The oldest among at least 17 existing judgment is over 10 years old and continues to accrue interest.

The lowest judgment is $34,250, while the highest is over $5.9 million. Some judgments do not accrue interest, while others do. In at least one case, the accrued interest has already surpassed the principle judgment, doubling the government’s debt in that case.

Rep. Ray Tebuteb (Ind-Saipan), during earlier deliberations on the bill, said the measure gives away “too much power to the governor and may become more political to benefit certain individuals, groups, or business rather than actually assisting in judgments.” He said the governor already has the power to negotiate.

An identical bill was passed in 2011 but then governor Benigno R. Fitial vetoed it, noting that claimants would be allowed to circumvent the legislative appropriation power “while impacting the General Fund by offsetting and crediting tax obligations.”

Vetoed bill

In other news, the acting governor vetoed on Feb. 18 House floor leader Ralph Demapan’s (Cov-Saipan) House Local Bill 18-19, House Draft 1, appropriating and re-appropriating a total of over $180,000 in developers infrastructure tax because of “deficiencies” that needed to be addressed.

Hofschneider, in his two-page veto message, said he recognizes the need to appropriate and re-appropriate funds on Saipan but “the deficiencies identified herein must be addressed before HLB 18-19 is enacted into law.”

Section 2 of the bill, for example, proposes to appropriate $19,000 from the developers infrastructure tax fund for “various infrastructure improvement projects” in Precinct II. The acting governor said the phrase “various projects” lacks the specificity that is required by law.

The acting governor said it is essential for the Legislature to identify specific infrastructure improvement projects in order to assist the expenditure authority in clearly directing funds to where the funding is needed.

“Otherwise, this bill may create a risk for funding to be used for purposes other than what is intended by law, and the necessity for more funding to complete those same projects,” Hofschneider told Saipan and Northern Islands Legislative Delegation chair Rep. Ray Tebuteb (Ind-Saipan) and House Speaker Joseph Deleon Guerrero (Ind-Saipan).

The acting governor noted almost similar concerns in other sections of the bill.