Fund under state of emergency

Gov. Benigno R. Fitial declared yesterday a state of emergency for the financially troubled NMI Retirement Fund, suspending the power of the pension agency’s board of trustees and administrator, and transferring this executive power to Finance Secretary Larrisa Larson.

Fitial said his executive order shall become effective immediately upon the federal bankruptcy court filing its judgment dismissing the Fund’s Chapter 11 bankruptcy filing.

The Fund emergency declaration will remain in effect for 30 days, and could be lifted or extended for another 30 days.

Fitial’s executive order re-organizes and transfers the Fund’s statutory authority, powers, duties, functions, and responsibilities to Finance.

The governor made it clear that he intends to enable the Fund to continue to provide necessary services to retirees.

“This declaration and executive re-organization is necessary to protect the health and safety of our senior citizens, businesses, and all other CNMI residents and visitors as well as further the interests of efficient administration and effectiveness of government,” Fitial said in his five-page Executive Order 2012-06.

The NMI Retirement Fund is the first public pension agency on U.S. soil to file for Chapter 11 bankruptcy. The case was later dismissed by the federal court.

It is also the third agency in the CNMI now under the governor or his designee’s control in recent period.

Fitial also declared a state of emergency for the Commonwealth Healthcare Corp. and the Commonwealth Utilities Corp.

Reactions to Fitial’s sequestration of the Fund were swift. Lawmakers called on the administration to work with the Legislature and all parties involved in putting more money into the Fund so that pensions can still be disbursed beyond two years.

“The executive order and transfer takes care of operational matters. The bigger problem remains—after two years, there may not be pension benefits for present retirees regardless of what will happen with the Social Security negotiations and with or without the executive order,” Senate President Paul Manglona (Ind-Rota) told Saipan Tribune.

Delegate Gregorio Kilili Sablan (Ind-MP), for his part, said the “state of disaster emergency” declaration fails to pass constitutional muster.

He said this is because the law spells out very clear examples of “disasters”—the occurrence or imminent threat of a widespread or severe damage, injury, or loss of life or property resulting from any natural or man-made cause, including, but not limited to, typhoons, tornadoes, storms, floods, high waters, wind-driven waters, tidal waves, earthquakes, fires, oil spills, or other water contamination requiring emergency action to avert danger or damage, volcanic activity, epidemic, air contamination, blight, drought, infestation, or explosion.

“The administration’s fiscal irresponsibility does not rise to the level of physical calamity contemplated by our laws,” Sablan said.

The CNMI government owes the Retirement Fund some $317 million in unpaid employer contributions and interest as of March.

Rep. Frank Dela Cruz (R-Saipan), who earlier said it should be the central government that should be placed under a state of emergency and not the Fund, CUC, or CHC, said yesterday that this action by the governor was “inevitable.”

“The lieutenant governor had made it clear that action must be taken immediately so that payments for legal attorneys representing the Fund will cease. Restructuring of the Fund operations is in order and I believe that the Department of Finance is capable [of] handling the day-to-day operations,” Dela Cruz said.

He said employees of the Retirement Fund will need to be transferred to Finance.

Existing money managers and actuary will still be retained but this time under the Department of Finance and Executive Branch, added Dela Cruz, chairman of the Saipan and Northern Islands Legislative Delegation’s Committee on Public Utilities, Transportation and Communications.

Lt. Gov. Eloy S. Inos has been leading the administration’s efforts in addressing the Fund crisis.

Fitial said a state of disaster emergency for the CNMI exists because of the imminent threat of disruption to the economic and societal health of the CNMI “that would be caused by the failure of the Retirement Fund.”

Rep. Frank Dela Cruz said the Executive Branch and Legislature must immediately begin the process of coming up with answers “both as it pertains to the plight of the retirees as well as the active government employees who are in the defined benefit plan.”

“Again, I must emphasize that this dialogue must be made immediately and that actions are made in the best interest of both retirees and active employees,” he added.