Retirees’ 25% not included in FY ’24 budget

The CNMI government has not included in its fiscal year 2024 budget the 25% voluntary payment for retiree benefits that the CNMI government has been paying since the Inos administration, according to Settlement Fund trustee Joyce C.H. Tang.

In her report to the federal government, Tang said the CNMI’s budget for fiscal 2024 did not allocate any money for the 25% voluntary retiree benefit payment, which means Gov. Arnold I. Palacios and the Legislature will need to determine whether the government can find a funding source for the 25% benefit payments. Without it, the CNMI’s retirees will only be receiving the mandated 75% of their pensions.

“The government has voluntarily made the 25% benefit payments under the Settlement Agreement through Oct. 15, 2023. The current [fiscal] 2024 CNMI budget did not provide for 25% benefit payments. Without provision in the [fiscal] 2024 CNMI budget for the 25% benefit payments equal to $12.2 million, there does not appear to be funding available to cover the 25% benefit payment,” said Tang.

Also, Tang said the CNMI’s 2024 budget does not fully cover certain programs like the Group Health and Life Insurance Program for retirees.

Since 2014, pursuant a Settlement Agreement between the CNMI government and local retirees (which essentially established what is known today as the NMI Settlement Fund), the CNMI government has been making a 25% voluntary benefit payment to the Settlement Fund on top of its 75% minimum annual payments.

Together, the minimum annual payments and the voluntary benefit payment make up 100% of what is paid out to local retirees.

Retiree Betty Johnson sued the CNMI government in 2009 for its failure to pay the amounts it was required by law to pay to the Retirement Fund since 2005.

Johnson said the Fund would run out of money by June 2014 and would no longer be able to pay retirement benefits.

In September 2013, the parties agreed to settle the lawsuit and the federal court approved a $779-million consent judgment in case the CNMI government did not meet its obligations to the Settlement Fund.

The CNMI government committed to pay at least 75% of the retirees’ benefits.

To date, the CNMI government has been compliant with the settlement agreement.

Based on Tang’s report, the CNMI government has fulfilled its obligation by making it minimum annual payment or MAP of $36 million in fiscal 2023.

The settlement agreement also requires the CNMI government to pay an alternative payment of a greater amount or APGA equal to the difference of 17% of the government’s total annual revenue after deducting the amount of the MAP.

To date, APGAs were paid for 2014, 2015, 2016, and 2017 totalling $36.29 million.

The last APGA payment was made in 2017 during the peak of the casino industry on Saipan and APGA payments will not be due for 2020, 2021, 2022 or 2023 due to the CNMI financial struggles.