Rebuttal to attack on Fund trustees: Jumping to erroneous conclusions

[B][I]First of three parts[/I][/B]

The political season being what it is, I do feel that the Fund’s board of trustees have been done an injustice as a result of comments which appeared in a recent Letter to the Editor published in this paper (Friday, April 17), titled: “The insolvency of the NMI Retirement Fund.”

The comments which follow are offered as a clarification and an independent assessment of several issues that appeared in the above letter as considered from the point of view of an economist and one who has not been asked to reply on behalf of, or in defense of, the Fund’s trustees.

Being a member I am interested in the long-term financial viability of the Fund and submit my opinion of the stewardship of Fund’s operation in contrast to that of the writer of the above letter. In the vein of Nehru’s observation, “it is right that we should encourage honest criticism and have as much public discussion of our problems as possible.”

The various published accusations leveled at the Fund’s trustees and my personal response to each follows—all of which are independent of Fund encouragement, endorsement or sanction. I alone bear the responsibility for the accuracy my comments and opinions.

[B][I]Accusation or Statement: “Trustees of the Retirement Fund are responsible for policy making issues of the organization. It makes decisions on the hiring of money managers—experts on investments—the annual budget of the fund, among others.”[/I][/B] [B]Response:[/B] This is true.

[B][I]Accusation or Statement: “It seems fair game for trustees to shift the financial debacle of the Fund to the administration and Legislature.”[/I][/B] [B]Response:[/B] I call attention to a statement made by Speaker Fitial during his legislative tenure as quoted in the June 8, 2004 edition of the Marianas Variety stating: “The Fund should be far more concerned about receiving the long overdue employer contributions from the central government which amounts to about $84 million. If the Retirement Fund should sue anybody it should be the government.”

Thus the above statement of the former Speaker of the Legislature and current Governor did—at that time—openly support the action of Fund trustees to seek redress from the government.

Constant and regular demands on the part of the trustees to the government to pay what is owed the Fund have been thoroughly documented in the lawsuit currently before the court.

Trustees and staff appearances before the Legislature together with meetings with the administration, Secretary of Finance, and delinquent agencies have been met only by empty promises time after time.

During the Retirement Month proclamation in September 2007 the Governor stated to those present that he would reinstate the 37 percent employer contribution. I’m told this has not happened.

During the deliberation on the defined contribution plan, the trustees presented the case on behalf of members, opposing any write-off of the millions of debt the government owes the Fund.

In summary, Fund objections and opposition to the decreased employer’s contribution rate have all been documented in letters transmitted to both the Legislature and Governor.

For the past several years the Executive Branch of the Commonwealth government has consistently and intentionally neglected to adhere to 1CMC, Div. 8, Chapter 4, Section 8342 and 1 CMC, Div. 8, Chapter 7, Section 8371 (a) thru (f) as related to its matching contribution to the Fund for subsequent and timely deposit to the Fund’s account for later use in the payment of pensions and possibly payroll taxes collected under the mirror image of the IRS code. Nor have funds earmarked for the retirement account been available for investment in interest earning instruments. This lamentable situation has continued uncorrected without adequate relief for so many years it is tantamount to theft by deception and may possibly involve the abridgment of federal law.

The long and the short of it is that the government “owes“ retirees their pension. Since it’s easier for the government to simply stop paying what it owes the Fund than to break its contact with the retirees, it has chosen to let the Fund go broke and die an unnatural death so it can be done with it—RIP. The result being that the government can take the money it would otherwise use to pay pensions and spend it for other purposes. What do you suppose they might be?

After years of not paying the Fund what it owes, is there a new power plant? Is there 24-hour, islandwide, potable water? Adequate educational and medical facilities? You tell me, what has the government done with the huge sums it has gained by not paying its financial obligation to the Fund?

[B][I]Accusation: “Trustees conveniently ignore that it is a part of this messy equation but want us to look the other way rather than taking a critical look at its ineptitude.”
[/I][/B] [B]Response:[/B] This is blatantly false: The trustees—and in particular the current chairman—have been very active in attempting to sound the alarm regarding the dire financial condition of an ever shrinking investment portfolio base which, if not immediately corrected and the financial hemorrhage arrested, will result in a bankrupt fund in from 3 to 5 years. This neglect cannot be blamed on the Fund’s trustees or its dedicated staff. The fault for the deteriorating condition of the Fund is not a result of the ineptitude of the trustees but rather is the fault of the central government and a recalcitrant Legislature—past and present—that created the so-called “messy equation.”

It seems to me that to criticize the competence of the Fund’s board of trustees is to criticize the judgment of the Governor who appointed them. I happen to think that the trustees are doing a good job under very trying circumstances.

[B][I]Accusation: “While it shifts the blame, the program sinks deeper into the red sea of insolvency.”[/I][/B] [B]Response:[/B] The trustees are not shifting blame; they are simply stating the true facts that the cause of the financial “meltdown” currently facing the 3,000 or so members’ retirement security is directly a result of the indifference of the central government and the “institutional ineptitude” of the Legislature. Actually, truth be known, it is the other way around, as the blame for the “messy equation” lies not with the Fund’s trustees but precisely and directly with those who wish to deflect blame away from themselves, particularly during this election year.

[B][I]To be continued.[/I][/B]

William H. Stewart
via e-mail

[I]P.S. Since 2004, I have published more than 50 “op-ed” pieces concerning the deteriorating condition of the member’s retirement security. These articles may be reviewed in the archives of this paper by entering my name in the archives search bar. For economic credentials Google: saipanstewart.com (open on “Home”).
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