WASHINGTON - Trustees of the $3.3 billion District of Columbia
Retirement Board are once again prepared to duke it out with the local government to get the money it owes the fund - plus interest.
"Until we actually receive the money, we're going to have difficulty moving forward," said board Chairman Martin L. Pfeifer.
At issue for the retirement board is the first-quarter payment, which was never made for fiscal year 1996 and the late interest penalty owed on both first- and second-quarter payments.
When it's all tallied up, the board estimates the district owes the first-quarter payment of $74 million, plus 8% an interest penalty on this amount that's compounded daily, plus an 8% interest penalty on the second-quarter payment that came in about two weeks late. By law, the retirement board must charge interest on the late payments; while it knows it has to pay the interest on the second quarter payment, the district is hinting it wants the board to waive the late fee from the first quarter.
The district government isn't totally at blame.
The retirement board sits at the end of a monetary chain that starts with the federal government. When the federal government shut down last year, it also stopped the $660 million it owed the district for fiscal year 1996. Since the federal government never really approved and appropriated a budget for this year, the district has to abide by it's fiscal 1995 numbers, which earmarked $296.7 million for the retirement board.
The retirement board expected to get about $336 million for fiscal 1996; the board's Executive Director, Jeanna Cullins, said she isn't worried about the estimated $40 million difference, because the board will probably get it back through future fiscal payments.
Meanwhile, neither retirement board nor district government officials are concerned about making the payments; the concern centers on the delay and whether interest due on the delayed payments will be paid.
"It's hard to manage our cash not knowing when the payment of the federal government is coming in," said District of Columbia Treasurer Maria Day-Marshall. "It's been very difficult on all of us."
The retirement board is worried that any exceptions for waiving the interest payments will set a precedent in letting the district off the hook.
Although Congress has paid about $440 million so far and passed a continuing resolution in January giving the district spending authority at fiscal year 1995 levels, it hasn't solved all of the problems of the retirement board or the district government.
Because the retirement board isn't getting paid in full, it has exhausted its $80 million reserve fund to pay benefits since October. The board uses its reserve fund in emergency situations like this when the district doesn't make payments to the fund.
"We will be able to replenish the reserve once we have received the first-quarter payment," Ms. Cullins said in a letter Anthony Williams, the district's chief financial officer.
"Without the reserve, if future payments are delayed, it will be necessary to liquidate assets from the permanent funds," she said.
So far, the board has not had to liquidate assets, as it had to in 1994 when Mayor Sharon Pratt Kelly delayed payment to the board to alleviate budget problems. But the board is working on a pay-as-you-go basis: the district government's second-quarter payment of $74.2 million, which was made Jan. 17, went straight into a short-term account to pay benefits.
"This has made it difficult to work with our asset allocation," Mr. Pfeifer said.
The federal government's shutdown has caused a flurry of questions and problems as to how much and when the district government needs to pay the retirement board.
"This is new ground and we're trying to figure out what needs to be done," Mr. Pfeifer said.
The district government is questioning when it needs to make the first-quarter payment to the retirement board. The payment usually is triggered by the president signing an appropriations bill that would eventually pay the district government. The problem is, President Clinton has not signed the appropriations bill for the district.
Now, district officials are questioning whether the continuing resolution - signed Jan. 6 - should be considered an appropriations bill.
Mr. Williams said in a letter to Ms. Cullins that he intends to ask the General Accounting Office to research the district's "obligation to make the first-quarter payment and its timing."
But a GAO official said no request had been made as of Feb. 12.
Mr. Pfeifer said trustees will not budge on their obligation to make sure the board receives interest on the late payments, no matter what the circumstances.
"We will not make deals" with the district government, Mr. Pfeifer said. "We may not agree with the district on certain issues, but we are going to press them to do what's fair."
Ms. Cullins said in her letter to Mr. Williams that she would ask the board about the waiver request at the next meeting, Feb. 22. She said it seemed doubtful the board would approve it because it would establish an imprudent precedent.
"Trustees on the board are quite aware of their fiduciary obligations," Mr. Pfeifer said. "What's good for the participants may not always be in the interest of the district."
