Retirement funding: Remember?

The court settlement has made it so that the Fund can (at least temporarily) go back on the retirement contract and pay retirees 25 percent lass than they are entitled. But what is being done to ensure that even the reduced payment can continue to be paid and to reinstate the full payment (hopefully, along with back payments)? The settlement has mandated that the central government pay at least $25 million into the Fund yearly. It needs to be made clear that the total yearly cost for retiree benefits and other expenses is a little over $50 million. That means that the Fund is drawing down its account by over $25 million per year, and, even if the government pays the $25 million each year, that means that the Fund will be bankrupt in about four years or less. However, the Funds needs to keep paying retirees for at least 20 (perhaps 30) years, though at some point in the future the numbers of retirees will start to decline and that will reduce the funds required to pay them. In other words, serious steps must be taken to assure the survival of the Fund in both the short and long term.
The government needs to keep pursuing the bond to fund retirement payments; it should float a bond for the total amount owed the Fund, which I believe is about $700 million. That amount should be placed into the Fund so it can be properly invested to make even more money. It is imperative that the government also keep on track to identify other ongoing funding sources. As any intelligent, informed individual should know, you cannot fund a government and its many programs without some sort of taxation. One of the main funding problems in the CNMI is the lack of reasonable taxation. Obviously, there is no sales tax, no property tax, and the income tax is quite low. As I have mentioned in previous articles, a sales tax is the fairest way to raise government revenue. The CNMI should immediately instate a 2 percent sales tax on all purchases but uncooked food and medicine. This is the fairest type of tax, as those who have more money spend more; thus, they pay more taxes. Also, due to the considerable amount of cash they spend on purchases, tourists would pay quite a bit of the sales tax.

This all brings me to another important source of funding: taxation/licensing fees on the new electronic gaming. People who rely on their retirement checks or know other who rely on them should support electronic gaming in hotels. Where else will the Fund get the money? Frankly, if you want retirement checks to keep coming you had better support electronic gaming and encourage your friends to do so. As for those who strongly oppose electronic gaming, just who are they? Have you seen the very expensive, full-page ads in the newspapers that oppose electronic gaming? Of course you have; how could anyone miss them! Who do you think is paying for those ads, and do you think they care at all whether you receive your retirement checks or not? Answer: The ads are funded by the owners of the poker houses who fear competition, and they already have plenty of money and do not care at all about your retirement checks. If the poker house owners had any common sense at all they would know that 99 percent of the people at the hotels who utilize electronic gaming will be tourists (who don’t even know about the village poker rooms and wouldn’t set foot in those dark, dirty, dangerous money pits if they did). Besides that, aren’t poker machines also electronic gaming? Full casinos in hotels (or other locations) would be even better for generating tax revenues than only electronic gaming. Once the word got out throughout Asia that Saipan has safe, easy-to-access casinos, tourism would increase and would not dip so low even during normal, yearly slow periods. Not all tourists like beaches, water sports or shopping, and casino activities would cater to some of them. More tourism means more customers for nearly all businesses, and more customers mean more jobs and tax revenue.

In short, if we plan to continue to furnish retirees with their checks we need to generate more funding, and by issuing a bond, introducing a small sales tax (which in the future, when the retirement payments start to decrease, could be used to fund other programs), and by promoting electronic gaming in hotels (and casino), we could go a long way toward being able to fulfill the retirement obligations. They are not five or even 10-year obligations but will stretch on for 20 (or more) years. People who are against electronic gaming and/or casino, the bond floating, or other reasonable ways to help save the Retirement Fund are helping to bankrupt it. People who really care about saving the Fund need to stand up and support the ways of generating money for the Fund! How else can it be saved?

Timothy Wilson
San Jose Village, Saipan