PSS sees $8M shortfall due to higher employer contribution rate

The Public School System expects to incur a shortfall of $8 million this fiscal year because of the rate increase in employer contributions being enforced by the NMI Retirement Fund.

At the same time, PSS finance director Richard Waldo said there’s no way PSS can pay the mandated 60 percent employer contribution rate, which became effective on Oct. 1.

The employer contribution rate used to be just 37 percent.

Waldo pointed out that since PSS is a non-revenue generating agency that is heavily dependent on limited local appropriation, PSS cannot afford to make this payment. In fact, he said, PSS has not been paying the new rate since the start of the new fiscal year.

Even if PSS does not pay this new rate, Waldo said the shortfall will still be reflected in the books of public schools as an outstanding $8 million debt owed the Fund.

“This new rate will impact PSS by $8 million this fiscal year and there’s no way we can afford to pay that because we heavily rely on local budget. They have to remember that PSS is the largest single employer in the CNMI and is not generating any revenue for its operations,” he said, adding that only small agencies can afford the new higher rate.

Waldo, however, refused to say if PSS is officially disputing the Fund’s policy. He simply said, “We’re not going to pay that rate.”

PSS has over a thousand employees, of which a little over 500 are classroom teachers. Each payroll, their salaries amount to $1.1 million.

Waldo said the central government has to absorb the new employer contribution for PSS, which has over $7 million in “rollover” funds from previous years. These rollover funds represent budget allotments for PSS that were not remitted in fiscal years 2010 and 2011. In these years, PSS supplemented this shortfall with federal funds.

While the administration acknowledges that it owes PSS these rollover funds, Waldo said it has given no concrete time frame as to when it plans to pay these unremitted funds in full.

Waldo also said that the employer contribution that PSS has not paid for many years will also be absorbed by the central government. PSS has incurred about $30 million in unpaid employer contributions, he added.

Besides the employer contributions, the administration also “acknowledges” that PSS owes $1.7 million to the Commonwealth Utilities Corp.

PSS has been allocated just $30 million for fiscal year 2012, of which $28 million will pay for the salaries of personnel while $2 million will go to operations and all other expenses of schools.