‘Initiatives will mortgage our children’s futures’

The Saipan Chamber of Commerce has urged the Legislature to reject two legislative initiatives that seek to permit the issuance of pension obligation bonds and authorize the Commonwealth to issue such bonds.

Chamber president James T. Arenovski said if these initiatives are passed, they fear the community will stop searching for the right solutions to problems and instead rely on easy solutions.

“An overall concern of the Chamber is that the authorization of public indebtedness of this sort will open a Pandora’s box: We are facing a utilities crisis—couldn’t the issuance of additional bonds help solve that problem as well?” asked Arenovski in the Chamber’s comment to House Legislative Initiatives 16-12 and 16-14.

Rep. Heinz S. Hofschneider introduced the two initiatives. H.L.I. 16-12 seeks to amend Article X of the NMI Constitution to permit the issuance of pension obligation bonds. H.L.I. 16-14 on the other hand, seeks to add a new provision to Article X of the NMI Constitution to authorize the Commonwealth to issue such pension obligation bonds.

In a letter to House Standing Committee on Ways and Means chair Rep. Ray N. Yumul and vice chair Rep. Victor B. Hocog, Arenovski said the Chamber’s government relations committee—chaired by Alex Sablan and Mike Johnson—has reviewed and discussed the initiatives.

Arenovski said the Chamber disagrees with the specific intentions of the initiatives to authorize public indebtedness in excess of the amount currently authorized by the NMI Constitution and authorize public indebtedness for operating expenses.

The Chamber president said their opposition to these initiatives is not an objection to the goal of repairing the Retirement Fund, which they believe must occur.

“It is the specific means, contained in these initiatives, to that end which we cannot endorse,” Arenovski stressed.

He cited the outline in the findings of H.L.I. 16-12 that stated the Fund’s current financial crisis has been brought about primarily through the Legislature’s approval of many—and significant—increases in benefits and the corresponding approval of decrease in sources and amounts of revenue.

“While these initiatives seem to promise an easy solution to a long-standing and serious problem, we do not believe that the correct solution should necessarily be easy,” he said.

Inasmuch as the vast majority of dollars needed in any solution—including for the repayment of bond debt—will come from the private sector, Arenovski said the Chamber thinks the Legislature and past and future retirees should bear some of the burden.

The Chamber chief said that, while they believe recent Fund board members have been working diligently to address the issues facing the Fund, it is not clear that recent Legislatures have accepted their responsibilities in this regard.

He said there are options that the group thinks would significantly improve the long-term outlook for the Fund without necessitating the kind of drastic measures proposed by these initiatives.

One option, Arenovski said, is that, while the Constitution mandates that “accrued benefits of this [retirement] system shall be neither diminished nor impaired,” it does seem to allow a prospective reduction in benefits.

“While this might be wildly unpopular among your constituencies, it also might allow the Fund to survive without saddling the government with enormous long-term debt. This sort of action would only require legislative fortitude—it wouldn’t require voter approval,” he said.

Going one step further, Arenovski added, since the initiatives will be asking all residents to mortgage their children’s futures, perhaps the public should first be asked whether the accrued benefits language of the Constitution should be considered.

This is to be done, he said, so that some of the excessively generous and expensive benefits conferred by the Legislature in the past might be reduced to a level commensurate with the Commonwealth’s fiscal abilities.

“While this will certainly meet with disfavor among those who are currently benefit=ing from the largesse of previous legislatures, if it is framed as a choice between reduced benefits or no benefits (as would be the case if the Fund is bankrupt), reduced benefits might be the palatable alternative,” the Chamber president said.

He said there are a number of options to incurring an enormous public liability that will outlast many of the individuals who are debating it.

“These other options must be attempted before the Chamber can support an amendment to the Commonwealth Constitution’s restrictions on public debt, which restrictions are likely the only remaining protection from the effective bankruptcy of our government,” Arenovski said.