How do you solve a problem like the Fund?

The debate on how to address the Retirement Fund problem reminds me of the lesson about the two men on a sinking boat. With my own twist, here is my view.

There are two men on a boat. The boat is leaking and there is water up to their knees. One is telling the other that the boat will sink unless they use the cut plastic container to drain the water out of the boat. The other on the other hand is proposing that they first plug the leak and then drain the water.

The government’s failure to remit some $128 million to Retirement as of Sept. 30, 2004—or for the a decade beginning in 1994—has caused the retirement program and its members to be concerned with how the Fund and the government will fix the problem. They are concerned that the boat will sink if nothing long-term and viable is done to fix the problem.

It is estimated that the $128 million owed will increase to about $155 million by Sept. 30, 2005. By Oct. 1, 2007, that is expected to increase to an amount equal to or more than the entire government’s annual budget.

Just imagine this: the entire annual government operation fund will be owed the Retirement Fund. Beginning on Oct. 1, 2007, there will be no money for schools, police, public health, public works, utilities, and so forth. There will be no Visitors’ Authority, no Customs and no Immigration, so there will be no tourists. No one at the Labor Department could process nonresident workers’ papers. Since there is no money to run the office, Finance employees will not be there to accept payments or to accept tax reporting. Just look at Puerto Rico.

Is this what we want? Obviously, the Fund will have money but they will only have money for the existing pensioners. Mr. Reyes will continue to receive his hefty salary but what about those who continue to pay but are not yet retired? Do these members matter to Mr. Reyes? At present, it is these members’ contributions that provide the funds to pay most of the retirees’ pensions. So, there remains a major leak in the system since the Fund is using present contributions to finance the cost of pensioners.

The government’s contractual obligation to the Fund is intended to protect both the pensioners and those who have yet to retire. Any court will look into the inequity of the present scheme that the Fund is using and will have to put a stop to this. No court will decide to bankrupt the Fund and the government both and will also find that Mr. Reyes has as much a responsibility to the pensioners as he does to the non-retired members of the Fund.

I do not know if what this administration is proposing is the entire solution to this huge problem. But, they at least have offered some solution. What does Mr. Reyes offer in return? He offers a lawsuit that he does not know how it will end or to declare bankruptcy. Just imagine what bankruptcy means to both the retirees and those still contributing to the Fund. Does Mr. Reyes really think that a court will allow him to do that? Any court?

I suggest that the Fund’s trustees and administrator sit down with the administration and provide a solution to the problem. They could disagree with the administration but if they have no solution—as is very obvious that no solution to the problem has been offered in the past 10 years—then they should not callously block the proposal just because they have nothing better to offer themselves.

I see the two men in the sinking boat as: Karl is proposing that the water be drained from the boat and Governor Fitial is proposing that they first plug and close the leak and then drain the water. So, who makes more sense to you?

Gregorio C. Sablan
Garapan, Saipan