Fiscal board opposes governor’s alternative pension proposals

By The Star Staff

The Financial Oversight and Management Board has come out against two bills introduced by Gov. Pedro Pierluisi Urrutia in July to settle differences over the proposed pension cuts in the debt adjustment plan that would restructure $35 billion in Puerto Rico central government debt.

In a letter dated Aug. 2, the oversight board said that while the governor introduced the bills to the island Legislature to settle objections to Act 7 of 2021, the Dignified Retirement Act, which bans cuts to pensions and is the subject of litigation, it opposes the measures.

The oversight board filed a complaint against the government recently in court seeking to nullify Act 7, arguing that it interferes with the board’s powers under the federal Puerto Rico Oversight, Management and Economic Stability Act.

“Based on the Oversight Board’s preliminary review, many of the concerns set forth in the complaint seem equally applicable to the bills,” the board wrote. “Nevertheless, the Oversight Board is continuing its thorough review of the bills, their potential fiscal impact, and their consistency with the certified 2021 Commonwealth Fiscal Plan.”

The oversight board said it is still open to a viable path forward for any pension reform measures. However, last week Judge Laura Taylor Swain, who oversees the Title III bankruptcy court process for Puerto Rico, already approved the disclosure statement that explains the debt adjustment plan. Hearings to confirm the plan are slated for November. Judge Swain has also established a voting schedule for the plan.

The oversight board in the letter was talking about two pension-related measures the governor is proposing to avoid a proposed 8.5% cut to pensions higher than $1,500 a month that is contained in the debt adjustment plan.

One of the bills, the “Zero Cut to Pensions Law,” would declare as public policy that pensions will not be reduced through the debt adjustment plan proposed by the oversight board. The law also calls for public pensions to have priority over other disbursements of funds, except the debt payments.

Pierluisi is proposing a second measure that would protect the pensions of those public employees who began working for the government of Puerto Rico before the year 2000 with the expectation of a defined pension.

The proposed “Law to Guarantee the Right to a Fair Pension” reiterates the public policy of no more cuts to the pensions of public employees, and states that those employees who have entered the Employees Retirement System under Act 447 of 1951 and the Act No. 1 of 1990 have the right to a pension equivalent to 50% of their salary when they retire from public service. The measure establishes that those pensions would continue to be paid through the pay-as-you-go mechanism established in Act 106-2017. Some 38,000 public servants would benefit from the measure.

“This measure serves all those public servants who entered before 2000 with the expectations of a fair and reasonable pension, since it provides them with compensation of 50% of their salary,” Pierluisi said.

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