State of the Territory: $100 Million in long term debt
In his State of the Territory Address, Gov. Lolo Matalasi Moliga revealed the American Samoa Government’s long-term debt is just over $100 million, which includes close to $50 million in unfunded liability for the ASG Employees Retirement Fund that must be addressed by the government.
Lolo reminded lawmakers that during his inaugural state of the territory address last January he provided information on the short-term liability, which the government worked on last year to resolve, but there remains the “long-term liability” still pending.
For example, there is $9 million which ASG is in arrears to the American Samoa Power Authority, he said, adding the government has paid around $6 million on all current utility debts with periodic payments to “reduce our utility arrears”.
According to the governor, the total liabilities are made up of accrued annual and sick leave and compensatory time, totaling $15.77 million. He didn’t provide other specific details of this debt, but did point out that strict policies have been put in place to prevent the repeat of unauthorized payouts to directors and government leaders at the end of an administration.
Lolo is currently awaiting the Attorney General’s Office opinion on the legality of these payouts, he termed ‘political’.
“If it is affirmed that the payments lacked legal sufficiency, steps will be taken to recover these funds from those who received payment,” he said.
Last year, Sen. Galeai Tu’ufuli, chairman of the Senate Government Operations Committee, recommended to the governor for the Executive Branch to look into the just over $1 million in payouts to cabinet directors as well as the governor and lieutenant governor of the previous administration.
Galeai said that following committee hearings, it's believed those who received payouts were not entitled to the money and for the government to do all possible to collect this money back, if it is found it was not in accordance with the law.
Last week Lolo issued a stern warning to directors about enforcing compensation and leave time statutes, saying a report from the Treasurer on accrued compensation liability attributed to the accumulation of annual leave, sick leave, and compensatory time has been very disconcerting.
Lolo says he is puzzled by the revelation that some employees have accumulated annual leave in excess of 1,000 hours along with compensatory time accumulation dating back to 1999.
As for long term liability for the Retirement Fund, the government current owes $11.87 million on the $20 million loan and $7.11 million on the $10 million loan, Lolo said.
(The $20 million loan was approved around 2007 followed by several amendments later for local capital improvement projects which are not funded by federal money; the $10 million loan was approved in 2006 as the first LBJ Medical Center loan.)
According to the governor, the Retirement Fund Unfunded Liability as of 2012 was $48.46 million, adding ASG “must address the Retirement Fund whose operations may have a significant impact on the financial position of the government if the unfunded liability is not addressed internationally by the Fund.”
(Samoa News notes the term “unfunded liabilities” in financial dictionaries is defined as “the amount, at any given time, by which future payment obligations exceed the present value of funds available to pay them. For example, a pension plan’s payment obligations, including all income, death and termination benefits owed, are compared to the plan's present investment experience, and if the total plan obligations exceed the projected plan’s assests at any point in time, the plan has an unfunded liability.)
The governor revealed the U.S. Department of Interior has now recommended that the Retirement Fund finances be included with the annual ASG financial audit report. To address the liability, he said it may become necessary to increase the current employer and employee contributions, which will take additional spending power out of “our people’s paychecks and our government’s coffer.”
He said the administration is working on a proposal for submission to the Fono to address the unfunded liability issue. Additionally, the administration will also be submitting nominees to the Retirement Fund board of trustees.
The governor also pointed out a comparative assessment of a random sample of similar retirement plans in the states and territories reveals the ASG’s pension plan “has the highest rate of administrative expenses of all funds reviewed.”
“Funds used for these expenses could have been invested to generate greater benefits for the Fund membership,” he said. “It is our shared responsibility to protect the financial integrity of the Fund.”
According to the governor, the other two long term liabilities are $8.46 million in Claims and Damages and $11.31 million in the “DOI Tobacco Loan” (which is the $18.6 million loan ASG received several year ago from the federal government in exchange for American Samoa’s share of the Master Tobacco Settlement Agreement, worked out by attorney generals of states and territories and U.S. major tobacco companies. DOI oversees this loan, including its repayment.)
In closing the governor said, “our outstanding financial obligations” total $102.98 million and measures are being explored to liquidate the long-term debts before the close of fiscal year 2014 (which ends Sept. 30, 2014.)
Samoa News will report later this week on other issues cited in the governor’s address. Additionally, this story contains the governor’s verbal address — which was in Samoan — and his official 63-page address, in English, distributed to lawmakers and others.