Passage of HB 14-369 could only compound govt’s fiscal problems

(Editor’s Note: Below is a reprint of NMIRF administrator Karl T. Reyes’ Sept. 7 letter to Rep. Justo S. Quitugua, Chairman of House Committee on Education, defending the agency’s opposing to House Bill 14-369)

Dear Chairman Quitugua:

Please permit us to comment on House Bill 14-369, “To exempt the Public School System from a rate increase of the employer contributions to the Retirement Fund; and for other purposes.”

While we are cognizant of the obvious benefit to the Public School System, we respectfully request your assistance in not permitting passage of this bill as it will have a detrimental impact to all Fund members. Moreover, there are several faulty conclusions contained in the bill.

While Public Law 13-60 did indeed authorize an actuarial study to determine its impact, authority to conduct an actuarial study is granted to the Fund by various sections of the Fund enabling act pre-dating PL 13-60, including 1 CMC §8315, re-codified as (i) and (m), and 1 CMC §8316(c). We further submit and respectfully direct your attention to 1 CMC §8362, which states in pertinent part:

Ҥ8362. Contributions to Fund: By Government.

(a) The government shall make contributions to the fund each year on an actuarially funded basis toward the annuities and benefits provided…” [emphasis added] “(b) Each autonomous agency, instrumentality or public corporation of the Commonwealth government shall contribute a similar amount as the government contribution rate of the gross salary or wages of its active employees to the fund on behalf of its employees.
(e) Any employer who fails to pay or remit contributions as required by this part shall pay a penalty of 10 percent per month or part thereof for which the contribution remains unpaid, up to a maximum penalty of 25 percent of the unpaid contribution.”

Increasing the employer contribution is critical to the viability of the retirement program. Employer Contributions partially or wholly fund the following:

1) The current pension obligation of approximately $4.4 million every month
2) The reduction in the Unfunded Liability of the Program
3) The difference between the contributions received from the employee/member and the pensions paid out to these members during retirement.

Granting an exemption to one autonomous agency jeopardizes the ability of the Fund to pay the full benefits of retirees and survivors, opens the door to exemptions to other agencies, and aggravates the negative impact created by the government’s arrearage.

With respect to the government’s history of Unpaid Employer Contributions, the government ceased payments of the Employer Contribution from August 1999 until October 2001. By October 2001, Unpaid Employer Contributions had reached approximately $48,857,732. Partial and full payments of the Employer Contributions received thereafter helped reduce the adverse affect created by the Unpaid Employer Contributions. To the government’s credit, Employer Contributions paid from October 2001 to September 2005 amounts to $56,299,493.9. Passage of HB 14-369, as you can see from the worksheet enclosed, only compounds the government’s fiscal problems and reverses the progress in reducing the government’s arrearage made in recent years.

With all due respect, Mr. Chairman, we need your assistance and support in vetoing a potentially dangerous bill.
Thank you for giving us the opportunity to comment on House Bill 14-369.