Fiscal board likely to reject House bill that would fund PREPA retirement system
By The Star Staff
If the Legislature approves a House bill that would take away $272.5 million that had been set aside for the Genera PR contract to capitalize the Puerto Rico Electric Power Authority Retirement System (SREAEE by its Spanish initials), the Financial Oversight and Management Board will reject it, sources familiar with the federal entity said.
The legislation, House Joint Resolution (HJR) 485, goes against the oversight board’s fiscal plan. It also goes against a request from the board to set aside over $500 million to pay for the Genera contract.
For pensions, the fiscal plan approved on April 3 says the debt adjustment plan calls for PREPA’s pension system to be given a treatment substantially similar to the treatment of commonwealth pensions. The PREPA plan closes the pension system to new entrants, preserves the benefits of current retirees, eliminates any future cost of living adjustments (COLAs), and ensures all benefits accrued to date by active participants are protected.
“Pension costs on a pay as you go (PayGo) basis will be paid through reimbursements of pension costs paid by the PREPA ERS, to be funded by PREPA through a new separate trust and paid as an operating expense of PREPA that will require sufficient rates to ensure pensions are covered and paid,” the fiscal plan reads.
HJR 485 seeks to save the retirement system from imminent insolvency. José R. Rivera Rivera, chairman of the SREAEE board of trustees, said in February that the retirement system’s actuarial deficit as of June 2021 was over $3 billion. While PREPA in 2022 was supposed to contribute 166.38% of the total payroll, or $23.8 million per month, it has yet to make any payments to the pension system.
As of December 2022, PREPA owed the SREAEE $895 million in delinquent pension payments. In addition, agencies that took former PREPA employees following the LUMA Energy takeover of the transmission and distribution system owed the SREAEE over $8 million.
“The privatization of the Authority has resulted in the displacement of hundreds of PREPA workers and a wave of retirements, the withdrawal of contributions from members who resigned, and the subsequent reduction of SREAEE revenues, all of which have taken the system to the verge of imminent insolvency,” Rivera said in February.
The SREAEE’s advisors, Asset Consulting Group LLC, reported that the pension system will be depleted in May, including money from active members who are contributing to the pension system, he said.
Even if the oversight board approves the joint resolution, something it appears unlikely to do, it still will not cover the deficit at the SREAEE.
Gov. Pedro Pierluisi Urrutia recommended on Wednesday to the Legislative Assembly that before proposing to remove funds from Genera PR for the payment of pensions for PREPA employees, they should discuss it with the Financial Oversight and Management Board.
“I do not have all the details, but I would urge the Senate to establish communication with the fiscal board, to pay attention to what the director of the Office of Management and Budget [OMB, Juan Carlos Blanco] is saying,” the governor said in response to questions from the press. “Because what the board submitted is a proposal that was already deliberated upon; it is well thought out, and disrupting it, what it is going to cause is an unnecessary controversy.”
“Whether we like it or not, the board has the last word in everything related to the budget of the Government of Puerto Rico,” Pierluisi added. “If you want to make changes to that resolution that the board submitted, you have to discuss it with the board and justify it to the board, because otherwise I already know how it will end. What I want is that we don’t waste time, that we focus on having an excellent budget for next year.”
Meanwhile, the House also gave the green light to House Resolution 976, which would require the governor and Fiscal Agency and Financial Advisory Authority Executive Director Omar Marrero Díaz, to urge the oversight board to ensure there is sufficient money to pay pensions as part of PREPA’s bankruptcy process.
“With the approval of these measures, we reaffirm the unequivocal commitment of the House of Representatives, from day one, to PREPA retirees,” House Speaker Rafael Hernández Montañez said in a written statement. “By allocating these funds, we are capitalizing the Retirement System, which would be insolvent in just weeks.”
Rep. Carlos “Johnny” Méndez Núñez, the New Progressive Party minority leader in the House, insisted that “we are going to defend the pensions of our men and women who worked for the people of Puerto Rico.”
“This surplus, thanks to sound public administration, the measures taken to control expenses and the oversight policy, will make it possible to save the PREPA retirement system, because every public employee deserves a stable and dignified retirement,” he said.
Likewise, House Treasury Committee Chairman Jesús Santa Rodríguez stated that “this amendment to the budget only seeks to address a problem that the central government itself has admitted, which is the insolvency of the retirement system and the possibility of a halt in the payment of pensions to PREPA retirees.”