AAFAF has reservations about bill that would stop pension cuts

By The Star Staff

The head of the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) expressed reservations Tuesday on House Bill (HB) 120, which would create the Law for a Dignified Retirement that would prevent any cuts to government pensions.

The Senate Finance, Federal Affairs and Fiscal Oversight Board, chaired by Popular Democratic Party Sen. Juan Zaragoza, began the evaluation of the controversial bill.

“I want to make it clear that my position is that fighting tools are almost never perfect. In fact, if we were to find perfect tools to fight we would never do it,” Zaragoza said. “What is needed are tools that are sufficient to pay the way we want to travel. This bill is not perfect. But that cannot be an obstacle to your consideration or approval. This bill in essence presents an alternative as viable as others for debt restructuring, giving particular importance to safeguarding the right to pensions and the establishment of a trust to protect those funds.”

AAFAF Executive Director Omar Marrero said the government’s public policy at all times has been to reject cuts to public pensions.

“Public policy has been clear and has been expressed on multiple occasions by the governor and by this public servant, which is a public policy of zero additional cuts,” he said.

However, Marrero emphasized that “if the legislative process of this measure, as drafted, continues, the statute would face serious obstacles if it is challenged by the Financial Oversight and Management Board in the pertinent judicial forums.”

“It should be recalled that Judge Laura Taylor Swain has previously decided that, under PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act], the [oversight] board is empowered to request the invalidation of local legislation that is inconsistent with the certified fiscal plan,” Marrero said. “In this sense, we call attention to the communications received, in which the board let it be known that its formal position is that this measure should not be approved as it would be inconsistent with the Fiscal Plan. Therefore, if this measure is approved as drafted, it will most likely be the subject of litigation in federal court.”

During the discussion of the measure, Zaragoza asked whether the AAFAF’s work team has been able to see the numbers contained in the bill, the economic part and cash flows.

Marrero replied that “we have not seen an actuarial study that can support that this is feasible, from a fiscal point of view, in order to be able to obviously support it and talk and convince the board about the validity of this bill.”

To questions from New Progressive Party Sen. Migdalia Padilla Alvelo about the extent of the economic impact of HB 120 and if the measure is viable, Marrero responded: “Excellent question; we do not have that information.”

“That is why we have asked if there is an actuarial study that motivated the bill in order to be able to account for it,” the AAFAF chief said. “But that is information that we do not have.”

Puerto Rican Independence Party Sen. María de Lourdes Santiago stated that the position of the government regarding the bill “is very clear” and shows a “total absence of will that is needed to generate an authentic confrontation for a problem that is not only an accounting problem, it is basically a political problem.”

Zaragoza said the bill presents an expression of public policy of the current Legislature in relation to the path that should be taken in the restructuring of the public debt and should be seen as a pressure mechanism in the negotiation.

“Under that premise, we have accepted the task of evaluating it and holding public hearings and eventually taking it to a vote in the Senate of Puerto Rico,” he said.

The evaluation of the legislation will continue Friday with the testimony of the non-profit entity Let’s Build Another Agreement, the Puerto Rican Union of Workers (SPT) and administrators of the retirement systems for government and judicial employees.

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