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Settlement Fund: PSS, NMI government incorrectly interpreted high court ruling

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AS a matter of law, the Public School System is not entitled to a summary judgment, NMI Settlement Fund attorneys Joyce Tang and Nicole Torres-Ripple told the CNMI Superior Court.

They added that PSS and the CNMI government incorrectly interpreted the certified question ruling of the local Supreme Court.

The lawyers stated that the certified question ruling was limited to the application of the special fund doctrine in determining PSS’s 25% share of the CNMI government’s general revenue.

They said the high court did not consider the many other government funding mechanisms, such as the obligations imposed by law and lease obligations, and its decision is therefore inapplicable to the fundamentally different facts in this case.

“PSS continues to assert that the two special [Settlement Fund or] SF appropriations were unconstitutional and the money in those appropriations should be included in calculating PSS’s 25% share of the general fund. Although PSS says it is not, in effect, it argues it is entitled to the money in the SF appropriations,” the lawyers said.

“PSS and the CNMI incomprehensibly argue that the SF does not have a dog in this fight even though it is patently clear that the very same dollars PSS is trying to obtain by invalidating the SF appropriations and the budget law is money which has been appropriated for the payment of a judgment debt owed ultimately to the retirees.”

Torres-Ripple and Tang, who is also the SF trustee,  asked the trial court to find the SF appropriations valid and constitutional appropriations to pay for obligations imposed by the settlement agreement and the funding guaranteed by the CNMI Constitution.

In August, Superior Court Associate Judge Joseph N. Camacho allowed the SF to intervene in the lawsuit.

Represented by attorney Tiberius Mocanu, PSS has sued the CNMI government for not providing the school system the constitutionally required 25% of the general government revenues in fiscal year 2020.

But according to the CNMI government, PSS was allotted 25.3% of the total local revenue and resources available for appropriation in FY 2020.

Assistant Attorney General John P. Lowrey, who represents the CNMI government, stated that PSS has failed to establish that the revenue sources listed in its motion constitute general revenue as a matter of law.

Lowrey said the high court’s certified question ruling made clear that the application of its special revenue test was not a quick or cursory endeavor.

He said the CNMI Supreme Court stressed that it could not “definitely determine what revenues may qualify as special and what revenues may qualify as general,” adding that “this relationship must be evaluated on a case-by-case basis because the particulars of a revenue’s source and the purpose turn in the unique circumstances of each fund.”

Thus, determining whether a revenue is general or special is a fact-specific case by case inquiry that looks at both the revenue source and the articulated purpose of its use, Lowrey said.

The dispute stems from a lawsuit originally filed by PSS against the CNMI government in August 2019  to clarify what constituted general revenue in calculating the PSS budget.

But the lawsuit was withdrawn after Gov. Ralph DLG Torres agreed to work with PSS in submitting a certified question to the NMI Supreme Court.

In a 2 to 1 ruling, the high court held that that “general revenue” is a subset of the Commonwealth’s revenue, distinct from special revenue. “To qualify as special revenue, there must be a relationship between the revenue’s source and the revenue’s purpose. If there is no relationship, those revenues are general revenues, of which PSS is entitled to a percentage,” the ruling stated.

The high court also held that PSS is entitled to a portion of supplemental budgets passed when the CNMI experiences a revenue surplus. “That is, PSS’s guarantee is not restricted to a single annual appropriations bill. However, when there is a revenue shortfall, the Legislature may proportionately reduce PSS’s share, so long as PSS’s 25 percent share is preserved.”

On Wednesday, after hearing arguments from the parties, Judge Camacho ordered them to submit proposed orders for review on Nov. 9.

November 2020 pssnewsletter

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