‘We will try to meet retirees 25%’

Gov. Arnold I. Palacios says the CNMI government will “try to appropriate” enough funds to pay the 25% voluntary payment for retiree benefits that the CNMI government has been paying since the Inos administration.

This comes soon after Settlement Fund trustee Joyce C.H. Tang reported to the federal court that the CNMI’s budget for fiscal 2024 did not allocate any money for the 25% voluntary retiree benefit payment. Without it, the CNMI’s retirees will only be receiving 75% of their pensions.

Technically, though, the 25% was never really supposed to reflect in the budget, said Palacios in an interview last Friday. Essentially, the CNMI government is not required to make these payments but chooses to do so when funding permits.

“It’s been discretionary since [former governor Eloy S.] Inos signed the agreement. The Settlement Fund is a 75% mandate and that’s our mandate, we need to meet that. As things progress, we continue to have the revenue to fund it, we will. But those are decisions that we have to make based on projections as we gain revenue. I remember [former governor Ralph DLG] Torres and even Gov. Eloy suspended it for a while because of the lack of funds to put in,” he said.

How it currently works is that an account is set up specifically for the 25% voluntary retiree benefit payment and excess funds are reprogrammed to that account for disbursement, Palacios explained.

“This way, we [can] put a little bit of funds in there…and we can reprogram money when other sources of revenue come in,” he said.

To date, Palacios said, the government has been fulfilling its obligations to the Settlement Fund and will inform the community if they are unable to make the discretionary 25% benefit payments.

“The Settlement Fund is being paid. As the trustee has reported, it’s being paid on time; sometimes even before it’s due. The 25% is there, we will try our best to make it but if we are not able to meet it, we will let the people know,” he said.

According to Saipan Tribune archives, Tang told the federal court that the government has voluntarily made the 25% benefit payments under the Settlement Agreement through Oct. 15, 2023. The current fiscal 2024 CNMI budget, however, 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.