PSS: Rate increase is the wrong solution

Education Commissioner Rita Hocog Inos agrees that other agencies would also probably request an exemption from the rate increase imposed by the Retirement Fund if it grants the Public School System’s request for such an exemption. However, she stressed that the exemption to PSS highlights a basic issue of fairness.

“Exempting PSS from the…12-percent increase [in employer contribution] makes sense because PSS is current in all its payments, whereas the CNMI government owes $80 million that was appropriated by law but never remitted to the Retirement Fund,” she said in a statement issued yesterday.

Rep. Ray Tebuteb had earlier said that other independent agencies would probably request an exemption from the increased contribution rate to the Retirement Fund if it allows the exemption for PSS.

Inos explained that PSS has always paid its share of the retirement contribution—“as we do every pay period”—and requiring the PSS and other autonomous agencies to pay a higher rate because the government owes the Retirement Fund over $80 million simply does not make sense.

“Charging the PSS and other autonomous agencies that paid their employer’s share a higher rate is not fair. It penalizes the PSS and other autonomous agencies that made the hard choices that those good managers make to balance their budgets. We do the same thing that every responsible family does – we lived within our means and paid our bills,” she said.

Inos noted that PSS has not had a budget increase in over seven years. Further, the PSS budget is $5 million dollars lower than it was in 1997 and 1998. Yet, PSS has opened six new schools and added over 2,500 more students since 1997 and now has a student enrollment of over 12,000 students. It is for this reason and because of the fidelity that PSS has demonstrated in paying its retirement contribution that the Legislature decided to exempt PSS from the rate increase.

In addition, Inos explained, the Retirement Fund administrators testified before the Senate that if the government had paid the $80 million it owed, then the rate increase would not have been necessary.

Inos elaborated by posing a simple question, “Since the Department of Finance has a track record of failing to pay its Retirement Fund obligations at the 24 percent rate, is there any good reason to expect that come Oct. 1, 2005 that they will pay at the 36 percent rate?”

On the other hand, the autonomous agencies have always paid their share. It is for all these reasons, the commissioner stated, that PSS should be exempted from the rate increase. (PR)