‘Higher Fund contribution means deeper cuts for govt’

The higher contribution of $10 million every year to the NMI Retirement Fund pension program would mean deeper cuts for the cash-strapped government, according to press secretary Angel A. Demapan.

The government owes the Fund over $280 million in unpaid employer contributions for many years. The amount is on top of delinquent contribution incurred in the last several months, according to Fund records.

Wilshire Associates, the Fund’s investment consultant, revealed this week that the Fund is expected to collapse in three years due to the nonpayment of these obligations to the Fund and the lack of strong support by the government as the pension plan’s sponsor.

The only way to prolong its lifespan, according to the consultant, is to increase the cash flow of the agency to prevent regular drawdowns that deplete its value. Additionally, across-the-board cuts in members’ benefits and restructuring of other liabilities are key to its survival.

During Wednesday’s hearing at the Legislature, Fund administrator Richard Villagomez said some lawmakers tossed around the idea of increasing government contribution next fiscal year from $10 million to $25 million in order to save the pension plan.

But Demapan said this idea may result in more suffering in the government’s operations.

“Should the Legislature push forward with their proposal to increase the line item appropriation to $25 million, such action would drastically change the dynamics of the fiscal year 2012 budget and would ultimately force deeper cuts on all other accounts to suffice what would be a $15 million increase in line-item appropriation to the Fund,” he told Saipan Tribune.

He said that, with the $10 million line-item appropriation in the governor’s submission of the 2012 budget, “the Fund would stand to receive payments greater than if it were to be calculated by way of percentage of payroll, given the decrease in payroll dollars in the midst of the ongoing austerity.”

Demapan said this is why the administration encouraged the Legislature to pass H.B. 17-99, which seeks to change the payment method for employer contribution. This bill has been in the Senate since February.

“The proposed action is consistent with negotiations in the ongoing lawsuit by the NMIRF to collect employer contribution funds owed them. We strongly urge the Legislature to quickly act on H.B.17-99 to support this change in employer contribution payment method,” added Demapan.