Gov’t/NIS activities (2001-2010) — call them by the numbers

By Observer

The National Insurance Services (NIS) made headlines again recently when Minister of Finance, Camillo Gonsalves, announced measures to reform the scheme. Subsequently, we were reminded of the numerous attempts of then Leader of the Opposition, Arnhim Eustace, at cautioning and pleading with his parliamentary colleagues to be extra cautious of their fiduciary responsibilities regarding the NIS. We’ve also heard the public chatter and concerns surrounding the activities of the NIS over the years.

In this piece, our intention is to take you back through the years (2001-2010), reliving the government’s activities — by the numbers — that involved the NIS. The years after 2010 will follow in a subsequent piece.

The following details, including excerpts, are directly related to the NIS and taken from the records of the parliament. We focus here specifically on the concerns raised by the public, in response to the announcement by the finance minister.

2001 Budget Debate – 100% mortgages, and more…

• 100% mortgages with no down payment, to public servants: funded by $5 million initially from the NIS
• Poverty eradication: “supplementary resources and programmes will also flow from State enterprises such as the National Insurance Scheme”
• Construction of a Day Care/Recreational Centre for the Aged: $500,000 grant from the NIS
• Student Loan Programme: “In 2001, an additional $2.8 million was injected into the Student Loan Programme. This allowed the students’ loan committee to approve new loans in excess of $8 million during this year.”
• Non-Contributory Assistance Aged Pension (NAAP): increase from $20 to $25 per week; “add some three hundred elderly and poor banana farmers to the list of persons who are entitled to such a pension.”
• “In the upcoming year the NIS will also focus on other issues of national concerns, these include AIDS, occupational health and safety, social outreach, student loans and public health.”
• NIS buys arrowroot industry assets for $11.4 million

Eustace responds (summarised excerpt) to 2001 budget:” …Well, the Prime Minister did not say he got a bad hand for this, he said the actuary report shows it is in strong financial and actuarial condition, and he indicated Mr. Speaker, a number of increase benefits which have been recommended by the actuary…But there something I want a clarification on and that is, is the 100% mortgage programme financed by the NIS or by the NCB?”
Prime minister Gonsalves answers: “It is a NCB, National Commercial Bank Financed operation, but a portion of NIS’s deposits were transferred to the National Commercial Bank[from another bank], $5 million specifically for that purpose.”

Eustace responds: “…let me express my concern on this matter. Mr. Speaker, the NCB is the main depository of NIS funds, all of us know Mr. Speaker, that the NIS has to meet long-term payments to pensioners over the years, mortgages are long-term instruments. At the same time Mr. Speaker, we have to ensure that (1) that the NCB gets an adequate spread on its monitor to cover its administrative costs and to make something for itself and at the same time Mr. Speaker, the NIS has to get a good return on its investment. Mr. Speaker, at 7¾% for these loans I wonder if both are going to happen…I am not opposed to it, I am just asking about the mechanism. I know you like to make a little political thing out of this to say, I do not want public servants to get hundred percent mortgages. But I do not want mortgages which would come and cause the NCB or the NIS to lose money, that is what I do not want to happen. That is the fundamental point, and whatever politics you want to play with it I will still say it. I do not want the NIS or the NCB to lose money. Because if the NCB as an institution fails we are in serious trouble in this country because of what NIS deposit. That is my concern. It has nothing to do with whether civil servants get a hundred percent mortgage. All I want to ensure Mr. Speaker, is that there is no loss to the NIS and no lost to the NCB. That is essential…”

Gonsalves: “The NDP was not bold and creative enough to device such a programme. That is why you are over there and I am over here.”

Eustace: “Mr. Speaker, we could talk whatever politics we want, we cannot find ourselves in a position, Mr. Speaker, where the profitability of either the NIS or the NCB is compromised…We are making jokes with people’s money… Mr. Speaker, I do not think, sometimes we understand the gravity of the situation in relation to these institutions.”

2002 – New NIS building

• NIS to construct new building at old arrowroot headquarters, “at about $8 million”.

2005 Budget, presented in December 2004

• Student loan programme: additional $5 Million “contribution” from the NIS to cover academic years 2004-2006; 20% will go towards economically disadvantaged loans.
• Two “Golden Years Activity Centres” at Cane Grove and Black Point: $750,000 total funded by the NIS; plus, additional funds budgeted to staff and operate.

2006 Budget, presented in January 2006

• NIS headquarters: work continues; “The revised construction cost is now $13.0 million, slightly higher than the original estimates of $12.5 million.”
• IADC Airport Development loan: $20 million “to go towards the purchase of the properties at the Argyle site.”

Interestingly, in the same budget address, we were told this, regarding the NIS 6^th actuarial review: “The Actuary however cautioned that whilst the scheme has a significant amount of money in reserves, $244 million at the end of 2004, the number of pensioners is rapidly increasing. Therefore, the NIS needs to be ever more cognizant of its investment strategy and cash flow needs.”

2007 Budget, presented in December 2006

• Private sector development: $6 million loan funds from the NIS. “… fisherfolk, small hoteliers and the providers of tourism services will be facilitated through loan monies from the Development Bank and Credit Unions with monies specifically negotiated from the NIS.”

Here, doing the same thing that Eustace was concerned about in 2001. That is, taking the NIS funds and depositing them in other institutions to serve as loans. These institutions have their own overhead costs. At an interest rate of 8%, perhaps it wasn’t enough for both institutions (NIS and Credit Union/Dev Bank) to benefit.

2008 Budget

• Loans available to fisherfolks: $6 million loan fund; “Ministry of Agriculture and the National Insurance Services have established memoranda of understanding. Loans of up to $400,000 and in special circumstances over $400,000 are now available at an interest rate of 8 percent.”

2009 (Referendum Year) Budget Presentation and Other sessions; CLICO collapse and more…

• Private sector development funding: $25 million from the NIS “for on-lending to businesses and entrepreneurs in tourism and tourism-related services”
• NIS new building: “the NIS moved to its modern headquarters built at a cost of approximately $18 million.”

• Public Debt Increase causes:” An additional loan of $40 million to the state-owned National Properties Limited from the National Insurance Services for the International Airport Development Company (IADC)”.

• Feb 3:“NIS holds $38.6 million Eastern Caribbean or 11.36% of its total investments in CLICO group in Trinidad mainly in annuities. Another 6.8% of the NIS’s total investment of EC$23 million is in CLICO Barbados.”

• Feb 24: New Elderly Support Benefit (EAB) Programme – “$75.00 every two weeks [per person]. And we are having 300 persons, this will cost the NIS $585,000.00 a year and the leadership of the NIS in discussions with the actuary, had given the life expectancy and the criteria, this would amount to a payment over ten years, an assumed ten-year period of $5.8 million.”

• Responding to a question asked by Arnhim Eustace on the exposure of NIS to CLICO, PM Gonsalves said this as part of the answer: “if the NIS was not making money the programme which I just announced, if they were not in a good condition, I could not have mounted another programme, another non-contributory programme for over half a million dollars this year; to take care of 300 additional old persons. Mr. Speaker, as the 31st of January, 2009, the exposure to CL Financial Holdings that is to say all of the CLICO Group of Companies, that is to say Trinidad, Barbados, St. Vincent, under what name, British American, whatever the names stood at EC $61.8 million”

• Oct. 23:” Mr. Speaker, I would like first of all to announce that today at the moment that I speak the National Insurance Services will be paying out to nearly 5,000 persons NIS pensioners who contributed, the Non-contributory Assistance Age Pensioners, and those who are in receipt of the recently constructed Elderly Assistance Benefit that each of them today will be receiving an additional $200 as an Independence gift to them from the NIS and the people of this country to say thanks to them for the work they have done to have brought us the foundation upon which we now stand and we say thanks to them from the bottom of our heart .This $1 million or so approximately is part of a package of $30 million: $1 million for each year of independence which the Government will announce in my speech on the morning of independence.”

2010 – CT Scan Machine and more

• CT Scan machine: $1.4 million; NCB/NIS partnership
• IADC $40 million loan summary:” In the case of the $40 million borrowed from the NIS, these funds were made available to the IADC indirectly through the National Properties Limited a state owned company. National Properties purchased from the IADC, 600 acres of land at Park Industry Bequia for $125 million. As part payment to IADC for this land, National Properties borrowed $40 million from the NIS and paid this over to the IADC, part of this land bought by National Properties at Park Industry was used to secure the loan from the NIS. The NIS loan to National Properties is also secured by a government guarantee. In terms of the cost of servicing the $40 million from the NIS this loan is on the books of National Properties as I have indicated. The loan is to be repaid in thirty semi-annual installments, the 30th June and 30th July each year at an interest of 7.6% per year. This monthly loan servicing cost interest and principal is $433,350 for National Properties.”
• Response to hurricane Tomas: $1 million grant from NIS

What we presented here is more than likely not an exhaustive list of activities between the government and the NIS. You may recall, for example, that in one of our previous pieces, we provided some details from the estimates. In that we showed you the loans owing to the NIS by the national lotteries and the student loan company and so on. Some or all of those were not included here in the details of this piece. We also did not cover all of increased payments and bonuses paid out to pensioners, including non-contributory ones, throughout the years. Our intention here, again, was an attempt at reliving the years 2001-2010, as recorded by the records of the parliament. No information was available for 2003. As time and information allows, we will attempt to do likewise for the years 2011 onwards.

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