May 8, 2012

From: Bill Stewart, Economist

The NMI Government — “Too broke to pay all these years?” Really !

As various people and organizations express concern over the dire condition of the Retirement Fund it is worthwhile to consider the Fund?s decline against  the backdrop of the local economy dating back and beyond the time before the NMI government started abandoning its contribution in making its legally obligated payments to the Fund. 

The first economic factor to acknowledge is the total U.S. financial contribution to the NMi since 1978 which, as of 2010, equaled $3.8 Billion ! 

Read on

 While the following does not directly relate to the present condition of the Retirement Fund it  does, however,  make inadequate the weak excuse that there was no locally generated revenue available for the NMI to meet its normal operating expenses and at the same time meet its legal, contractual and moral obligation to all retirees — past , present and future.

The Fund was not,  as some would like you to believe, a “Ponzi scheme.”

See Saipan Tribune archives of May 4, 2012 entitled: ”The NMI government made a Ponzi of the Fund — and not the other way around.”

As a result of much time and effort and from my contacts at the U.S. Bureau of Census, I have finally obtained a breakdown by fiscal year of the amount of financial and program assistance the  U.S. has provided the NMI over the past 34 years — a staggering total of  $3.8 billion.

Consider that that the above sum represents money for everything from school busses to the roads they operated on — and much more.

  The financial and program assistance made available from the U.S. Government  served to “free up” NMI revenue which would otherwise have to be dedicated entirely toward paying for much of the improvements now in evidence throughout the islands.

Yet– for some inexplicable, unfathomable reason –  (not really  as I am being facetious) — there is still a need, after more than 35 years for 24 hour island-wide potable water, Improvements are still  needed in education, adequate medical facilities, etc. 

I do not believe the total sum of $3.8 billion as allocated below has ever been publicly recorded for all interested parties to examine — and I doubt if anyone in the U.S. Congress or the Dept. of Interior has ever bothered to  assemble this record of astronomical financial contributions from the U.S. Government to the NMI and its rather small  U.S. citizen population. (I will omit from the discussion the contract workers and the transient visitors since I do not believe they were considered as being included as principal recipients in the provision of such largess within the Federal budget, allocation and appropriation process).  

 With the exception of the federal funds provided the NMI  under the Covenant, the amount of which is readily available to the public — one might ask why revealing the level of other federal assistance might come as a revelation to many and why was it not done as presented in the aggregate before?

For one thing it is time consuming to assemble records from more than three decades distant and also there must be an interest to do so — which, in my judgment may have long been absent from the oversight committees of Congress.

Below is a summary of U.S. Contributions to the NMI with financial totals presented at this stage by broad category.

Federal Loans, Program Grants & Covenant Contributions to NMI. 

Since becoming a Commonwealth in association with the United States the 

islands have benefited from the full range of hundreds of millions in federal 

loans and program grants made available from such federal agencies as: 

Agriculture (including food stamp assistance), Education, Health and Human 

Services, Medicare, Medicaid, EPA, Transportation (including road improvement),  Commerce, Housing and Urban Development, Labor as well as Department of Interior grants for construction, special programs, technical assistance, local  government operations and maintenance, typhoon relief, etc. 

- Estimated Federal Agency Program Grants (above) = $2.9 billion.

Total Covenant - $700.3 million consisting of Special Programs ('78 – '86) 

- $28.2 million; Operations ('78-'92) – $225.5 million; Capitol 

Improvement – ('78 – 2012) $ 446.6 million.- (Includes proposed $8.7 million for FY 2013).

Source: U.S. Department of Interior

- Direct Loans = $171.9 million.

. 

Total Estimated Federal payment (all sources): $3.8 billion 

Source: Consolidated Federal Funds Report , U.S. Bureau of Census

To gain some perspective on the above amounts consider the following– 

As a comparison, one dollar in one billion is the equivalent of one cent 

in ten million dollars or one second in 32 years. 

 A hypothetical allocation of the above when presented on the bases of an 

estimated "fixed" indigenous (only) population of 15,000 and presented for 

illustrative purposes only on a per person basis would equal $254,728 per 

person over 28 years or stated another way — $8,803 per year for every year 

for each person within the local population.

In addition to the above huge sums keep in mind that during the boom period The NMI?s internal generated revenue for the  “selected” years below  were as follows.

Total Annual NMI Internal Generated Revenue 

(Millions $ – All Sources)

1985 - $58.3; 1990 – $116.7; 1995 – $203.6; 2000 – $228.8; 2005 – $210.3;

- 2010 – $39.7 (2nd Qtr.)

2012 Est. $105. 

Source: CNMI Department of Finance

*  *  *  *  *  *  *  *  

Total Annual NMI Expenditures 

(Millions $ – By Year Indicated )

1985 - $59.3; 1990 – $108.6; 1995 – $191.4; 2000 – $221.6; 2005 -$224.1; 

2010 – $37.8 (2nd Qtr.)

Source: CNMI Department of Finance

The above will appear in detail in my paper entitled: "A Brief History of Several Forces Which Have Effected the Economy of the Northern Marianas"  when presented at the First Marianas History Conference – and subsequently placed on-line.