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  • Writer's pictureThe San Juan Daily Star

Economic cabinet seeks to amend budget to pay creditors, bondholders

Omar Marrero Díaz, executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority

By The Star Staff

Gov. Pedro Pierluisi Urrutia’s economic cabinet on Wednesday called for lawmakers to amend the current budget to allow the disbursement of $23.2 billion to pay creditors and bondholders as part of the debt adjustment plan for the central government.

House Resolution 278 was opposed by bankruptcy lawyer Rolando Emmanuelli, who urged the Legislature to put a stop to a debt adjustment plan that will hinder the rights of teachers and deny them fair salaries.

On Monday, the government presented to the Financial Oversight and Management Board (JCF by its Spanish initials) a proposal to amend the fiscal year 2021 budget to use $10.9 billion in surplus funds from previous years and an amendment to authorize an increase in expenditures to $12 billion.

In summary, the $10.9 billion surplus includes payments to satisfy various concepts such as court judgments and compensation, including: general obligation bond claims, bonds from the Public Buildings Authority, claims from “330 Centers,” an initial deposit for the Pension Trust, claims from beneficiaries of Law 1 and Law 447 on retirement systems, forced expropriations, and claims of a labor nature, among others, all of which are defined in the debt adjustment plan.

“The funds that are being recognized in this part of the budget amendment come mainly from surpluses accumulated over the past five years as a result of not having paid the debt service during this period. These funds were part of the annual government collections; however, they were not included in the certified budget in the corresponding fiscal year due to a stay during the bankruptcy process,” the economic cabinet comprising Treasury Secretary Francisco Parés Alicea, Puerto Rico Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero Díaz and Office of Management and Budget Director Juan Blanco said at a House and Senate joint Treasury Committee hearing. “Once the Debt Adjustment Plan is approved, these funds are recognized in the budget and are used to pay the obligations of the government of Puerto Rico as required by the plan.”

Regarding the hike in expenses, the agency heads said the amendment increases the total amount of the certified budget for this fiscal year and allocates money to the service of the debt related to the new bond issues agreed upon in the debt adjustment plan. Likewise, priorities defined in the recently certified Fiscal Plan are addressed; for example, the allocation to achieve the improvement of the retirement system of the members of the Police Bureau and to finance the operations of the Highway Authority. In addition, the amendment includes the funds for the contribution to the Pension Reserve Trust required by the debt adjustment plan and as established in the certified Fiscal Plan.

“The amendment to the budget also incorporates funds to ensure the solvency and retirement transactions of the beneficiaries of the Puerto Rico Electric Power Authority’s retirement plan,” the cabinet members said. “We also record appropriations under the custody of the Legislature to establish a budget office, modeled on the Congressional Budget Office as required by the Fiscal Plan, and an additional appropriation for unallocated expenses of the Legislature.”

The officials noted that the changes must be made by March 15, which is when the debt adjustment plan goes into effect.

“The purpose of the amendments to the current certified budget is to make the budget compatible with the debt adjustment plan and the Fiscal Plan and, what is even more important, to maintain a fully balanced current budget, including debt payments, to comply with one of the conditions for the expiration of the mandate of the [JCF],” the officials said.

Emmanuelli, meanwhile, urged lawmakers as to the importance of stopping the implementation of the debt adjustment plan because once it is implemented, judges will rule against any claims, citing that they are moot. Emmanuelli has already asked the U.S. First Circuit Court of Appeals to review the debt adjustment plan.

“Through this House Resolution 278, it is intended to execute the plan of debt adjustment immediately, which would violate FADEP’s [the Public Education Defense Coalition] rights to access to justice and to have a fair appeal procedure,” Emmanuelli said. “In that sense, the Legislature would be collaborating with the [JCF] to deprive the teachers of Puerto Rico of their claim within the due time process of law in the American courts.”

“This Legislature should not be an accomplice of the [JCF] in deliberately depriving the teachers of their right to defend their claims in the federal appeal,” the attorney added. “The problem here is who gets there first. … This resolution prepared by the JCF tipped the scales to deprive teachers of the right to appeal. This Legislature should not allow this additional outrage against the teachers of Puerto Rico.”

The resolution also has a fatal vice, Emmanuelli said, since it allows the disbursement of more than $10 billion without there being a final and firm obligation to oblige payment. The sentence handed down by U.S. District Court Judge Laura Taylor Swain that confirms the debt adjustment plan is not final or firm, he said.

“Until the federal courts resolve the appeals, this ruling may be subject to change and reversal,” Emmanuelli said. “It is irresponsible to authorize a payment without a final and binding obligation.”

Finally, he said he did not understand the rush to pass the bill.

“Passing this resolution will not make the oversight board [JCF] leave tomorrow,” the attorney said. “It is uncertain when the [JCF] is going to leave Puerto Rico, but if the text of the law says something, it will be at least 10 more years.”

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