Pension cut looms

CNMI government retirees will not get their full pension payment starting April 15.

In an open letter to retirees, surviving spouses, and minor children beneficiaries, Gov. Ralph DLG Torres said that, starting with the scheduled payment next week, the CNMI government will not be able to get the funds needed to provide for the 25% cover payments due the retirees. That means pension checks will amount to only 75% of their required amounts.

Torres blames the pending cut on the government funds being restricted following the lawsuit filed by the Public School System, which demanded 25% of general funds, as mandated by the CNMI Constitution.

In his letter, the governor stated that he, together with Lt. Gov. Arnold I. Palacios, Attorney General Edward Manibusan, Finance Secretary David DLG Atalig, and legislative leaders, did talk with the PSS and the Board of Education about the CNMI’s current financial situation and dire situation of the economy. Torres said he “pleaded with them to help in maximizing what little resources we have available,” explaining that filing an injunction would cause a 25% cut in the retirees’ pension. Despite this, Torres said that Board of Education members Philip Mendiola-Long, Marylou Ada, and Andrew Orsini still went ahead with the lawsuit against the advice of BOE chair Janice Tenorio and vice chair Herman Atalig.

“Because of the lawsuit, my hands are tied and any ability I had to guarantee you your funds has now been stripped away,” Torres said.

Manglona: We cannot blame PSS

That decision to cut government pension is very alarming, according to Sen. Paul A. Manglona (Ind-Rota).

In a letter to the governor yesterday, Manglona said the 25% reduction will impose a financial hardship on the man’amko (elderly) who rely solely on retirement checks for a living and to pay for their medical needs.

The legislator urged the government to look at other avenues to meet its constitutional mandate to PSS while ensuring full pension for the man’amko. In fact, Manglona said, the Commonwealth has been struggling financially for years now, that the governor himself stated so in a letter in 2018 that the fiscal challenges began in 2017. “Due to the decline in revenue collection and excess expenditures, the Commonwealth had a deficit of $25,910,717 for the fiscal year ending Sept. 30, 2018 before [Super] Typhoon Yutu made landfall in the Commonwealth. This is not all. Just a year before, in [fiscal year] 2017, we had an $8 million deficit; and in [fiscal year] 2019, our deficit grew to a whopping total of $98 million.”

Manglona stressed that blame cannot be placed on the members of the Board of Education alone for the pension payment cut.

He added that legislative journal records will show that the 25% earmarking requirement for PSS had always been significantly underfunded during the budget process.

“In fact, several unconstitutional earmarking legislations, such as Public Law 20-34, were intentionally passed to make sure that PSS did not get its required 25% funding. We have always known of PSS’ 25% earmark, so we cannot now pretend that we were blindsided by the Commonwealth Supreme Court’s decision,” he added.

Manglona also highlighted government overspending and deficit accumulation, and further emphasized the need to work with reliable factual information, such as the true cost of government operations, when working on the fiscal year budget plan. “There is no doubt that our practice of omitting or knowingly under-budgeting known, unavoidable costs from the budget—including government utilities, medical referral services, Medicaid matching requirements, CHCC indigent care costs, and PSS’ 25 % earmarking constitutional requirement—has been the main reason for our government’s overspending.”

According to Manglona, based on an independent auditor’s report in August 2019, the Executive Branch exceeded its budgeted allotment by $11 million in fiscal year 2018, the Medical Referral and Medicaid local expenses exceeded allotments by almost $20 million, and government utilities by $1.8 million.

“We cannot attribute our fiscal mismanagement on the retirees, surviving spouses, minor children, or PSS. We have no one to blame but ourselves, the leaders, for the maladministration of public funds,” he added.

Approximately $11M needed

Considering that the fiscal year is halfway done, Manglona calculated that approximately $11 million is needed to cover 25% of pensions.

In an attempt to get the financial resources needed to fully fund the retirees’ pension this April 15, Manglona laid out options for Finance Secretary David DLG Atalig to examine. This includes negotiating with the Imperial Pacific International (CNMI) LLC for an advance payment on their Exclusive Casino Annual License Fee of $15 million due on October 2020, and for the long overdue mandatory Community Benefit Fund contribution in the amount of $37 million for 2018 and 2019, among other suggested reprogramming actions.

“If after exhausting all efforts at finding additional resources for the retirees’ pension and the Secretary of Finance still comes up short of the approximately $11 million needed, I strongly recommend that there be a 3- or 4-tier pension rate reduction,” he said. “For instance, the lowest tier may consist of retirees receiving less than $20,000 per annum getting minimal to no cuts at all to their full benefits.