OAG says PSS does not understand high court’s ruling

Gov. Ralph DLG Torres and Finance Secretary David Atalig said the Public School System and Education Commissioner Dr. Alfred Ada do not understand the CNMI Supreme Court’s ruling on how to determine between general revenue and special revenue.

Torres and Atalig, though the Office of the Attorney General, said PSS is asking the Superior Court to declare five funds and associated sources of revenues as “general” rather than “special.”

In Torres and Atalig’s opposition to PSS’ motion for summary judgment, assistant attorney general John P. Lowrey said the five funds include revenues collected from taxes on gross revenue set aside to make payments under a settlement agreement; revenues collected from hotel and container taxes set aside for the NMI Retirement Fund; revenue collected from e-gaming licensing fees set aside for the NMI Retirement Fund; revenues collected from e-gaming licensing fees set aside for the first, second, and third senatorial districts; and revenues collected from the jackpot tax set aside for the PSS technical education fund.

To support its argument that all five revenues are “general,” PSS makes a “hurried attempt” to apply the rather complex “special revenue” test created by the CNMI Supreme Court’s decision in the certified question petition from Torres and then-Board of Education board chair MaryLou S. Ada, Lowrey said, adding that, in the Torres and Ada petition, the high court made clear that application of its special revenue test was not a quick or cursory endeavor.

In fact, he pointed out, the Supreme Court stressed that it could not “definitively determine what revenues may qualify as special and what revenues may qualify as general” because “this relationship must be evaluated on a case-by-case basis because the particulars of a revenue’s source and the purpose turn on the unique circumstances of each fund.”

Thus, Lowrey said, determining whether a revenue is general or special is a fact-specific, case-by-case inquiry that looks at both the revenue source and the articulated purpose for its use.

“PSS has not made a designation of facts,” said the government lawyer, adding that, as a result PSS has provided no factual basis for applying the special revenue test, such as establishing the articulated purpose of the challenged revenues.

In order to determine whether something is special or general revenue, the high court created a “special revenue” test, Lowrey said, which considers the relationship between the revenue’s source and the purpose of the fund the revenue is placed into.

Lowrey said PSS has failed to establish that there are material facts not in dispute under the NMI Rule of Civil Procedures.

He said PSS has not provided the bare minimum facts necessary to establish that the revenue sources being challenged fail to meet the new definition of special revenues as established in the high court’s ruling in the certified question petition.

Finally, Lowrey said, even if the revenue sources meet the definition of special revenues, retroactively applying the new definition to the 2020 budget would invalidate actions already taken, undo vested rights and payments, and could possibly disrupt government activity on a broader scale—and that a prospective application of the definition to the 2020-2021 fiscal year is more appropriate.

PSS and Ada accuse Torres and Atalig of violating the NMI Constitution and are suing them to guarantee for PSS an annual budget of not less than 25% of the Commonwealth’s general revenue.

Ada and PSS said Torres is in violation of the NMI Constitution because he is carrying out payments and collections under Public Law 21-08—the CNMI government’s budget law—while Atalig is allegedly in violation of the NMI Constitution because every allotment and disbursement made pursuant to P.L. 21-08 is unconstitutional. PSS and Ada asked the court to declare that P.L. 21-08 unconstitutional.

In their answer to the lawsuit, Torres and Atalig, through the Office of the Attorney General, said the governor’s actions are licensed by the state of emergency declared by Executive Order 2020-04, pursuant to the CNMI Constitution, the Homeland Security and Emergency Management Act, and the CNMI Emergency Health Powers Act of 2003.

The OAG asserted, among other things, that the budgetary modifications ordered by Torres are required by the statute and that plaintiffs’ request would require the governor to violate the law and is thus illegal.

PSS and Ada then filed a motion for summary judgment.

P.L. 21-08, which established the Commonwealth government budget for fiscal year 2020 and appropriated $37,718,904 to PSS, which is approximately 16% of the budget, is unconstitutional and unenforceable as a matter of law, according to PSS and Ada in the motion.

PSS and Ada, through counsel Tiberius D. Mocanu, asserted that the earmarks, which purport to convert general revenue into special revenue do not meet the nexus test. Mocanu said the earmarks do not possess a relationship between the source and purpose of the revenue they distribute, much less a reasonable one.

Consequently, Mocanu said, P.L. 21-08’s calculation of PSS’ budget does not include general revenue to which it is constitutionally entitled under NMI Constitution.