Northern Mariana Islands Retirement Fund BankruptcyOutdated Content Warning: This content refers to an older version of OpenSpending. See here for information about the next version of OpenSpending and ways to contribute.
Back on April 17 2012 the Northern Mariana Islands Retirement Fund attempted to file for bankruptcy under Chapter 11. There was some pretty interesting reading in their petition for bankruptcy including this section (para 10) which suggests some pretty bad public financial management (emphasis added):
“Debtor has had difficulty maintaining healthy funding levels due to a combination of factors, including: the failure of the Commonwealth’s central government and autonomous agencies to remit full employer contributions; a difficult investing climate over the most recent three to four years; and a benefit structure that has been continuously increased and made more generous by the Commonwealth government without a corresponding increase in funding to the Debtor to cover increased costs.”
The Government then made things even worse:
“These issues have combined to place the fund in a dire financial situation. Compounding this perfect storm, the Commonwealth Government has passed laws declaring payment holidays, diverting earmarked revenues from the Debtor and reducing contribution rates for the Commonwealth Government, its agencies and political subdivisions.”
And they are now very bankrupt:
“As a result, as of the date of Debtor’s last actuarial report as of October 1, 2009, Debtor’s actuary determined that Debtor’s obligation was approximately 38.8% funded. While the Debtor is currently engaged in compiling information necessary for an updated actuarial study, the Debtor estimates that it is currently 32% funded. Debtor’s financial condition continues to deteriorate, and, by management’s figures, the Debtor will deplete its assets by July, 2014 and thereafter be unable to provide any level of benefits to current and future Beneficiaries”
Remember what it means when a pension fund goes bankrupt: it means all those people who worked, often for many years, will suddenly receive nothing, often in a period of their life when they most need support.
Note that ultimately Marianas petition for bankdruptcy got refused - as a governmental unit they are not eligible for Chapter 11. More on this and its relation to Puerto Rico situation at http://www.distressed-debt-investing.com/2013/10/distressed-debt-investing-puerto-rico.html