Accord between fiscal board, gov’t invalidates retirement laws
By The Star Staff
The Financial Oversight and Management Board says it is pleased to have reached an agreement with the administration of Gov. Pedro Pierluisi Urrutia that creates an opportunity to provide additional retirement benefits for certain government employees in a fiscally responsible way.
The oversight board said the government had agreed to repeal laws that broaden government retirement benefits. The board earlier this month sued Pierluisi and government agencies in the U.S. District Court for the District of Puerto Rico to stop the government from implementing and enforcing Joint Resolution 33-2021, Act 80-2020, Act 81-2020 and Act 82-2020 because they would add significant and unaffordable retirement benefits for government employees.
“The acts will reinstate the fiscal mismanagement that existed before PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] and caused Puerto Rico to incur over $120 billion in unaffordable debt, including $55 billion of unfunded pension obligations,” the suit read. “Repeating history, the Acts would create billions of dollars in new unfunded defined-benefit pension obligations for the Commonwealth with no viable plan or method to cover the increased costs,” the suit read.
The government enacted Act 80, Act 81, and Act 82 in August 2020 without sufficient analysis of how much the new retirement benefits would cost and how to pay for the additional costs, the oversight board said.
For over a year, the oversight board said, it engaged with the government to explore ways to make the laws affordable.
“The Oversight Board proposed an approach in June 2021 that could work with respect to a partial implementation of Act 80. The Government never made any proposal for implementing Acts 81 and 82,” the board said. “Ultimately, no agreement was ever reached on the implementation of any of these laws.”
However, on Monday the oversight board said it welcomes the administration’s “willingness to agree on invalidating Joint Resolution 33 and Act 80-2020, along with Act 81-2020 and Act 82-2020, and work together on solutions that Puerto Rico can afford and that comply with the Certified Fiscal Plan.”
The oversight board and the administration will endeavor to reach an agreement on enhancing benefits for certain employees while creating the necessary savings for the government, the board said.
The oversight board said it will endeavor to reach an agreement with the government within 60 days to provide enhanced retirement benefits to police officers consistent with the Fiscal Plan and the proposed Plan of Adjustment, and to reach an agreement within 120 days on possible alternatives for providing an enhanced compensation package for teachers consistent with the Fiscal Plan and proposed Plan of Adjustment, and with the overarching goal of improving public education.
The agreement reached this week will avoid costly and time-consuming litigation and a potential delay in confirmation of the Plan of Adjustment to reduce Puerto Rico’s debt and end bankruptcy. The oversight board said it remains committed to continue to work together to find affordable solutions that will move Puerto Rico forward without the risk of falling back into old practices of overspending.