Fund approves 19-percent cut in new fiscal year budget

The NMI Retirement Fund board approved yesterday the submission of the agency’s proposed $83 million budget for fiscal year 2013, some 19 percent lower than the current’s fiscal year’s budget of $88 million.

Fund administrator Richard Villagomez said yesterday that the large drop is due to the reduction in the money managers’ fee, which will be less than a million dollars. In fiscal year 2011, the money managers’ fee amounted to $3 million; this year, it is down to about $2 million.

Villagomez said the cut in the managers’ fee came about after the Fund’s transition to a more conservative strategy for its investment portfolio. The new asset allocation strategy, called Glidepath 2013, requires fewer money managers to handle specific investments.

The Fund’s money managers numbered more than 10 prior to the passage of the controversial Beneficiaries Derivative Act last year. The Act’s enactment prompted many to resign due to fears of litigation. That law has since been repealed.

Villagomez pointed out, however, that the less than $1 million budget for money managers does not include professional fees for actuarial and investment consultants.

Personnel

The pension agency currently has 32 personnel. The same number is reflected in budget proposal for fiscal year 2013.

The number of employees may go down to 30 once the board approves the recommendation of the management team to eliminate two legal counsel positions. Villagomez earlier requested the hiring of more lawyers as a result of more lawsuits anticipated in the wake of the passage of the Beneficiaries Derivative Act.

The board also approved yesterday the reinstatement of the comptroller position and the elimination of the accounting manager position, citing duplication of duties. The board previously eliminated the comptroller position as recommended by a desk audit conducted on the agency in previous years.

Breakdown

Of the proposed $83 million budget for next fiscal year, Villagomez said that 95 percent will be used for pension payments for members and beneficiaries; the rest will go to operation and all others.

The Fund sources its operational budget from the revenue it collects from contributions. Any shortfall in the budget is covered by drawdowns from the Fund’s investments.

Based on the fiscal condition and viability analysis of the Fund last month, the agency only had $30.4 million in total revenue in fiscal year 2011 while incurring $80.7 million in expenditures. The $50.2 million shortfall was withdrawn from its investment funds. Drawdowns in fiscal year 2011 amounted to $53 million.