The bleeding Retirement Fund

As I write about the Legislature’s “chipping” away at the members’ retirement fund I’m reminded of the slow Chinese torture (Ling chi), “Death by a Thousand Cuts.” The cuts are small at first’but there are so many, death soon follows from the slow hemorrhaging. This is the bleak future of the Retirement Fund made even worse by the law just passed last Friday by the Legislature which permits borrowing from the Fund to purchase fuel for CUC. It’s not clear if the “loan” will earn interest. Let’s hope so.

The latest cut, done with the shard of a Legislative mirror reduces the government’s employer pension contribution from 18 percent to 11 percent for fiscal year 2008 and no doubt beyond. As is so often the case, it’s an old Legislative trick’make the law appear to be short lived in the beginning—then, when no one is looking extend the duration. You know how political mirrors work—”now you see it —now you don’t.” As far as the Fund is concerned—”now you have it—now you don’t.”

As done with their mirrors—the 7 percent left over from the original 18 percent of the employer’s contribution goes to CUC to purchase fuel. In the State of the Commonwealth address the governor was quoted in the Tribune as saying, “There are no funds available in the Commonwealth to subsidize CUC.”

But I would add—“meaning no funds other than those of the government’s employer contribution to the Retirement Fund.”

The Senate President was even quoted in the Tribune as saying, “Everybody should take blame for the (CUC’s) problems.”

I would say the retirees are providing more than their fair share of the Legislature’s “blame.”

But with the creative use of mirrors the central government and the lawmakers found money to do just that by tapping into the 18 percent which was originally earmarked as the government employer’s contribution to the Fund.

Now I don’t doubt for a minute that the power situation on Saipan is critical—and a solution is needed. But, in the opinion of this observer, this legislative solution is shortsighted to the extreme detriment of all the Fund’s members.

In a nutshell it’s—borrow money from the Fund—make it available to CUC as a dubious loan which no bank ever would touch—CUC then burns up both the fuel and the money—and voila—shortly thereafter—no Fund, no money, no power—back to square one still not having solved the basic problem.

Such action provides only a temporary reprieve—a useless band-aid which doesn’t stop the Fund’s hemorrhaging and doesn’t solve the power problem.

As I peer through the tall grass and the droppings within I’m astonished that the Legislature believes that retirees’ money should be used to provide power for the entire community when they themselves failed to take the necessary measures to do so by solving this “black and white” issue long ago. It seems to me that the recent action of the Legislature by passing the law is tantamount to “legislative larceny.”

If you are a retiree—what do you think?

We have been down that road before with the government’s cockamamie attempt in 2006 to borrow $40 million for use by CUC. See my piece hosted on the Tribune’s “search bar” entitled, “Power & Politics—What Does The Future Hold For Current & Future Retirees?”—Part #2 dated Aug. 10, 2006. That’s how long they have been trying to tap into the retiree’s money.

The last attempt by the administration to borrow from the Fund raised a furor among the retirees—some members in the Legislature must have forgotten.

The administration and the Legislature have already cut the financial legs out from under the Fund by “stiffing” it for millions of dollars and now have the audacity to borrow what should be routed into the members’ investment portfolio—not CUC smoke stacks. It’s the equivalent of “financial emasculation.”

If that’s not grounds for another lawsuit—I don’t know what is!

That stated, I’m not aware a public hearing was held on this retirement issue. Is the NMI a democracy or is it “GIPE” (Government Interest in Political Expediency” as in “gyp”).

For a solution other than taking the money from the Fund—why not consider selling off portions of government owned housing to fund CUC’s “black hole”?

Those houses are not generating any income and most are a drain on government maintenance funds as well while some have been allowed to deteriorate.

Considering the Article XII restriction, the property could still be heldwithin indigenous ownership.

Better still—secure the Fund’s loan to the government (not CUC) with Navy and Capitol Hill housing and other building assets. Or even the land lease on one of the golf courses or the government-owned land along the lagoon upon which several major hotels are situated and paying rent (hopefully).

Everyone knows the government’s reputation for nonpayment of its obligations—so what else is new.

Since when are loans granted without adequate collateral? If the Legislature expects the Fund to serve as a bank then by all that’s right, just and proper the Fund should demand that the borrowed funds be adequately secured for the members’ protection. Something the Legislature with its “cracked” mirror failed to consider.

The Legislature’s knee-jerk reaction in passing the above bill without adequate and through professional study of the ramifications concerning the Fund is nothing more than a temporary blood transfusion for CUC—which is a dying patient and now the law making body wants to take what’s left of the members’ retirement to the grave with it. It’s simply outrageous disregard for the retirees, their surviving dependents and widows.

I don’t find in the legislation where the drafters of the bill allowed for repayment to the Fund by factoring in the interest that could have been earned for the retirees if the money had been invested in the money market rather that burned up by dilapidated, antiquated, oil guzzling inefficient generators. Maybe they don’t understand finance. Did any of the lawmakers anticipate that without the payment of interest the money paid back to the Fund (if indeed it is ever paid) will, as a result of inflation, have less purchasing power than when it was first burnt up by CUC?

It should be obvious that continued reliance on oil is not—and never will be—the answer particularly as several energy experts have stated it could go as high as $200 a barrel. Actually it’s not that oil is so expensive—it’s that the value of the dollar is becoming increasingly worthless relative to foreign purchases. This is a result of U.S. government policy which is too involved for me to discuss here-in —but it’s one more reason to purchase American produced items.

A coal-fired generator is one possible solution which may well be reasonable and viable if the strangle hold of “environmental purists” can be broken and “trade-offs” accepted.

I find it surprising that Interior’s Office of Insular Affairs, an agency that professes to want to assist the NMI, hasn’t indicated an interest in supporting an examination of the feasibility for such a power generating conversion. Equally surprising is the apparent lack of interest on the part of the central government and the Legislature in even considering such a request considering some of the most powerful men in the U.S.Senate are from coal-producing States. I have in mind Robert C. Byrd (D W.Va.). Coal for their constituency is like tourism is for the NMI—it keeps them in office. Coal is mined in 27 states.

As a side note—when I called the office of Senator Byrd to obtain some of the above information and mentioned Saipan—the first remark made by staff was, “Is that the island once associated with Jack Abramoff ?”

How’s that for name recognition and knowledge of the NMI!

A U.S. Senator from Montana has stated that the United States has enough coal to last the country for the next 200 years. Almost 50 percent of all electric power generated in the country is produced from coal followed by 19.3 percent by nuclear and 18.7 percent from natural gas. All power generated in the U.S. from coal now meets EPA’s environmental emission regulations of the Clean Air Act.

As near as I can figure the equivalent of steam generated electricity sent out from one ton of coal is 2.65 MWh. I don’t know the Saipan CIF cost per ton of coal since it depends upon such things as the quality, i.e., BTU content, the quantity purchased at any particular time, port of export and other factors to numerous to list here-in. The concept for the conversion of oil to coal fired steam turbine generators is not a simple solution as the port would need modification for unloading and a storage area would be required to bunker the coal. This is the reason that a detailed financial feasibility analysis to evaluate the cost and benefit characteristics of such a proposed project is first required.

The NMI will never be able to purchase a Middle East oil well —but it can arrange, or even own, a source of supply for coal for its power generation. If the Legislature doesn’t encourage such an analysis —it could be the death of the NMI as we have come to know it and the return to the days of the Trust Territory—which some feel is already rapidly taking place.

The condition of the Fund is an appropriate metaphor for the entire economy—”going broke in a hand basket.”

As a result of my frequent “op-ed” pieces which appear in the media—I wish I could share the scores of mail comments I receive from retirees and employees not yet retired reflecting their utter disgust with many of their elected officials. However, the confidentially of their statements and opinions will not allow me to do so.

But I will say on the basis of what they tell me—the people are truly fed up with the Legislature’s and government’s abuse of the Retirement Fund.

Their day for “sweet revenge” is coming—so they indicate to me.

Perhaps the Fund should be renamed as “CUC’s Savings & Trust Bank.” But then at the rate it’s resources are being dissipated—It will soon have no savings and I leave it the retirees to consider if CUC can be trusted. Another name might be “The Legislature’s Piggy Bank of the Commonwealth.”