Cohen: Compact funds’ use in CNMI under review

The Babauta administration’s request to use Compact money to retire the government’s deficit is being reviewed “but it may not be possible,” said visiting Department of the Interior deputy assistant secretary for insular affairs David Cohen.

“We have to examine the statute to see if that’s permissible. There may be problems. We will certainly consider it but it may not be possible,” he said in an interview.

He said DOI will soon get back to Gov. Juan N. Babauta, who raised the issue with him recently in Washington D.C. “It won’t take long. We just need to double check if that’s permissible. There are legal implications to consider,” he said.

Babauta earlier asked the department to allow the CNMI to use its annual Compact fund share to settle its deficit, which now amounts to $101 million.

Babauta said Cohen “wants to help us but he wants to review the provisions of the law. I agree fully to be sure it’s allowable.”

The CNMI expects to get $5.1 million in Compact money this year and every year in the next 20 years.

The Compact legislation provides that $30 million will be divided each year for the next 20 years among the Northern Marianas, Guam, Hawaii and American Samoa to help these jurisdictions deal with the effects of migration from the Federated States of Micronesia, Palau and the Marshall Islands.

Babauta’s position on the use of the funds is backed by members of his newly created CNMI Blue Ribbon Committee, which includes House Speaker Benigno Fitial and Senate President Joaquin Adriano.

The committee earlier conducted a feasibility study on leveraging the Compact impact funding as a way to address the deficit problem.

Of the total deficit, the government said that over $77 million represents the Retirement Fund’s unfunded liabilities.

As of Sept. 30, 2003, the outstanding debt included $8.8 million for PSS-CIP bonds and Judicial Building loan; $2.1 million in 2003 land compensation/CIP bonds; $12.8 million in unpaid utilities; and $9.2 million in reserves for future disbursements.

Babauta said what actually inflates the deficit is the so-called unfunded liabilities or financial obligations that have not been appropriated by the Legislature for 10 to 15 years now.

Meantime, a bill was recently introduced in the House of Representatives asking the governor to allocate the entire Compact funds instead to the Public School System to address its classroom, transportation, and supplies needs.

The bill was authored by Babauta’s party mate, Rep. Joseph Deleon Guerrero.