Fiscal board members, governor, legislative leaders meet on debt plan
By The Star Staff
Members of the Financial Oversight and Management Board for Puerto Rico met Tuesday with Gov. Pedro Pierluisi Urrutia, Senate President José Luis Dalmau Santiago, House Speaker Rafael Hernández Montañez, and other legislative leaders to discuss the central government’s debt adjustment plan, which would restructure some $35 billion in debt, according to a statement issued Tuesday.
The governor and the Legislature oppose the debt deal because, among other reasons, it proposes a cut of 8.5% to all pensions higher than $1,500 a month to retirees. Lawmakers have said they will not pass bills enabling the debt deal if it contains pension cuts. But the STAR learned that the oversight board has agreed to make concessions on certain budget appropriations in exchange for legislative support for the debt deal.
If the oversight board obtains support for the debt adjustment plan and the Legislature agrees to pass legislation enabling it, it would clear a path for the government to end its restructuring under Title III of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA).
The plan of adjustment, the oversight board said, lifts a weight off future generations by reducing $35 billion of existing claims by almost 80%, to $7.4 billion, and reduces the island government’s debt service payments (including on Puerto Rico Sales Tax Financing Corp., or COFINA, debt) to $1.15 billion per year, from an average annual debt service of $2.2 billion without the debt restructuring under PROMESA.
The plan includes a series of agreements with the diverse groups of stakeholders who negotiated and support the plan because they agree Puerto Rico needs to move forward together.
It includes significant reductions in payments to bondholders and unsecured creditors, and much smaller reductions for retirees. Most retirees do not suffer any reductions. Less than 30% of retirees incur reductions of up to 8.5% of their retirement benefits. This reduction in retirement benefits has been the center of concerns. The oversight board has acknowledged those concerns and invited the governor and the legislative leadership to discuss them directly and in more detail, the board said.
“The Oversight Board, the Governor, the Legislature, and indeed all Puerto Ricans share one goal: to close this painful chapter and allow Puerto Rico to recover and prosper,” Oversight Board Chairman David Skeel said. “The Oversight Board urges the Governor and the Legislative Leaders to help make this happen.”
“The proposed Plan of Adjustment is a milestone on Puerto Rico’s path towards a new era of growth,” Skeel added. “We, the Governor, and Legislature must all ensure that it is fiscally sustainable for Puerto Rico today and tomorrow, and that it continues to fulfill the requirements for confirmation by the court. Let us work together to pass the legislation that would implement this proposed Plan.”