Fitial placed the Fund on a state of emergency last April 7, resulting in the dissolution of its board and the transfer of the agency’s functions under the Department of Finance, with the full control of the Executive Branch.
Before it takes effect, the Legislature has to support it within 60 days. If the Legislature disagrees with the order, it may modify or reject it outright during the grace period.
Villagomez revealed that the executive order has given people a lot more to think about down to the very foundation of the system of government.
He said if the goal of the executive order were simply to reorganize the Fund, there is no need to declare a state of emergency because the reorganization can occur via Article 3 Section 15 alone of the Constitution.
Under the law, the governor may declare a state of emergency in the case of invasion, civil disturbance, natural disaster, or other calamity and may mobilize available resources to respond to that emergency. Clearly, Villagomez said, these events do not describe a financial difficulty of the government’s own making.
Three autonomous agencies are now under a state of emergency: the Commonwealth Utilities Corp., Commonwealth Health Center, and the Fund.
Because these agencies are desperately in need of cash, the executive order appears to be setting the stage to “reprogram” Fund assets for purposes other than paying of benefits to members, Villagomez said.
The Fund, compared to the two agencies under emergency, is the only one with cash.
Villagomez cited early reports where the governor asserted the “need for a unified” government approach to resolve the fiscal crises of the government and CUC.
He also cited earlier statements of the Office of the Attorney General where it was asserted that the balanced budget amendment gives the governor the authority to reduce pensions unilaterally. He said this is a strong indication that the government will not meet its obligations to retirees under the executive order.
“Though we’ve been advised by Lt. Gov. Inos that Fund assets will be protected and only be used for benefit payments, it is not unfathomable at this point that the intent of the E.O. is to facilitate this new ‘unified approach.’ We strenuously object to any reprogramming and use of Fund assets for other purposes,” said Villagomez in his letter dated Friday.
If the Legislature is not inclined to reject the governor’s executive order, Villagomez, listed some areas of concern that the Legislature needs to address in supporting or modifying the order: reconfirm that the Fund assets are held in trust for the benefit of members; ensure a mechanism for appointment of an independent fiduciary over trust assets with authority to enforce the Retirement Fund Act against the government; ensure that the assets of the trust can only be disbursed for benefits of members; clarify that trust assets will be kept separate from assets of the CNMI or its agencies; and ensure that operations will be shielded from outside influence or control.
Villagomez said the Legislature should also establish a mechanism for money to be deposited to the trust to ensure continued benefits and require that the professional expertise of an actuary be obtained to fully illustrate and plan around any major changes to the Fund.
Villagomez, whose contract is expiring in August, admitted that he is under no illusion that he will be retained. Whether he will be retained or the board functions, what matters now “is that some mechanism and independent structure is maintained and one or more independent fiduciaries remains responsible to maximize the value of the trust.”