Torres officials allow thousands to skip the PUA line using process struck down by Ninth Circuit in 2015

The CNMI government is allowing thousands of federal unemployment claimants to jump the line, utilizing a ‘hardship’ process struck down by the Ninth Circuit Court of Appeals in 2013 as being illegal and unconstitutional.

According to August 13, 2021 testimony by CNMI Secretary of Labor Vicky Benavente, her agency has processed and paid out thousands of PUA claims under an expedited claims process. The process starts, when a beneficiary waiting for a PUA payment writes a letter to Ms. Benavente explaining a personal and financial hardship. According to the secretary, who was under question by Rep. Tina Sablan, her team of supervisors would then make recommendations as to whether the hardship warranted an expedited payment, then the claimant would be paid ahead of others who filed their claims first. The process came to be because the CNMI Department of Labor had, for months, been unable to process claims on schedule, creating a significant backlog.

A similar problem occurred in Guam between the late 1990s and until 2011, when the government’s payment of tax refunds fell years behind. The governor’s office and the Guam Department of Revenue and Taxation created a hardship request program, where taxpayers owed a refund wrote a letter explaining their personal and financial hardship to the governor, his liaison, or the director of the DRT requesting for an expedited refund. GovGuam officials would review the letters and process requests, allowing thousands to skip the proverbial line. While the process did provide financial relief (it was their money anyway) to many, the program often was hijacked to repay political favors, or to create ones.

In 2011, taxpayers Rea and Jeff Paeste, and Sharon and Glenn Zapanta began a class action lawsuit in the U.S. District Court of Guam against the government of Guam, “challenging systematic delay and unfairness in Guam’s handling of income tax refunds. The Taxpayers asserted one claim, against all the defendants, under the Organic Act of Guam, 48 U.S.C. § 1421i; and another, against all but Guam itself, under 42 U.S.C. § 1983, alleging a violation of the Equal Protection Clause of the Fourteenth Amendment.” [Source: 798 F.3d 1228 (9th Cir. 2015)]

Not only did District Court judge Consuelo Marshall in 2013 rule the hardship process was illegal, she also issued a permanent injunction, requiring GovGuam to pay tax refunds within six months of claims filing. Then-Gov. Eddie Calvo appealed the decision, and in 2015 the U.S. Ninth Circuit Court of Appeals affirmed Ms. Marshall’s decision.

Writing for the court, en banc, Circuit Judge Marsha Berzon wrote, in part:

“The district court’s findings of fact, which Guam does not challenge on appeal, paint a troubling picture of Guam’s tax-refund practices. Guam has, ‘[s]ince the early 1990s, … financed chronic budget deficits by regularly delaying the payment of [Guam income tax] refunds to its taxpayers’ such that ‘many … refunds [were] not paid in a timely manner’ and ‘during [some] periods, no refunds were paid to any one.’ Guam failed timely to pay refunds even after Guam’s Legislature enacted two separate statutes requiring that money be set aside for that purpose.

“‘Traditionally, the Government of Guam has paid [income tax] refunds in a first-in, first-out order, the same way the Internal Revenue Service ordinarily pays federal income tax refunds.’ But, in light of the chronic delays, for years Guam paid some refunds on an ‘expedited’ basis, out of the chronological order otherwise applicable. The expedited refund process was not governed by any “formal rule-making process or any regulations,”—nor, it appears, any consistently followed set of standards. The result was starkly unequal treatment of refund requests.”

The CNMI also falls under the jurisdiction of the Ninth Circuit.

The PUA hardship program – administered by CNMI DOL utilizing federal pandemic funds – appears nearly identical to its Guam tax refunds hardship program counterpart now found in the political graveyard. According to Ms. Benavente, hardships considered include medical emergencies and deaths in the family; the two top qualifiers in the deceased Guam program.

Here is the transcript o the August question and answer on the hardship program between Ms. Sablan and Ms. Benavente:

SABLAN: Under what circumstances would PUA beneficiaries be advised to write letters to the Secretary (of Labor) personally to request action on their claim?

BENAVENTE: All claimants, all applications are reviewed. I have been receiving hundreds of letters from claimants who are requesting for an expedited, um, application so that they can tend to personal and emergency matters. Does that answer your question?

SABLAN: If there is some kind of emergency, or um, some sort of urgent situation, is there some process in your protocols in which people are able to write to you personally, and that there would be expedited action in that?

BENAVENTE: Yes, and provided that everything is complete with PUA applicants’s claims, we try to assist anyone who asks for an expedited, um, claims to be processed. 

SABLAN: And you’re seeing hundreds of these requests for expedited action?

BENAVENTE: My department has, yes. 

SABLAN: Are you the only person reviewing that, or are there also, um…

BENAVENTE: The team that you see here are all reviewing it; from the supervisor to the call center. The team that is in this room now are reviewing it. The supervisors and the directors receive these expedited  letters and we try to review them and expedite.

SABLAN: And then the process is they review these applications and they make recommendations to you, and then you decide? Is that how that works? 

BENAVENTE: No, the recommendation comes from the team, and the team will process as quickly as possible. They’ve already been aware of why we expedite claims, and many of these reasons include a medical emergency, or a death in the family.

SABLAN: Do you have any data on how many applications have been expedited under this process?

BENAVENTE: No I don’t. We can look back, but that would mean having to look back at each individual file. I’d really have to say, probably, in the thousands. 

According to the 2015 opinion of the Ninth Circuit in Guam’s case:

“The equal protection claim brought under § 1983 is that Guam officials established an expedited refund process that was so standardless and arbitrary that it violated principles of equal protection. That process was not established by Congress and signed by the President; it is not mentioned in the Organic Act or the Internal Revenue Code. It was created and administered entirely by Guam officials. Those officials used the power vested in them by virtue of their position as territorial officers to authorize or refuse refunds of tax overpayments collected by Guam, held by Guam, and obliged to be refunded by Guam. No officer or agency of the federal government was involved at any point.”