Latest plan of adjustment opposed for ‘clear infringement’ on gov’t powers
By The Star Staff
While the Financial Oversight and Management Board was meeting on Sunday with lawmakers to negotiate a single version of legislation to enable the central government debt restructuring, the Service Employees International Union (SEIU) voiced objections to the seventh amended plan of adjustment.
Prior to the meeting, House Speaker Rafael Hernández Montañez anticipated in a Facebook presentation that today there will be a conference committee to agree on the final details of the enabling legislation with the Senate and approve a single version of the bill. The legislation had been approved by the House, but the Senate introduced several amendments. On Tuesday, the Senate is slated to pass the final version of the bill, Hernández Montañez said.
“So far, there are no great qualms. Some style issues and technical language adjustments,” the House speaker said. “The expectation is that the meeting will be a positive one, with some kind of clarification of the processes.”
Hernández Montañez said nonetheless that the oversight board, as the representative of Puerto Rico in federal court, “has clear conditions as to what it can outline in court and how far it can go with a clear plan, conditioned under legislation.”
Title III Judge Laura Taylor Swain has the options of accepting the agreement, rejecting it, or allowing the parties to continue negotiations. She cannot change the plan.
The debt restructuring would reduce the $33 billion debt to about $8 billion.
The SEIU, an international labor union whose local chapters are collective bargaining representatives of some 20,000 government workers, objected to provisions in the Plan of Adjustment (POA) requiring the commonwealth to enact legislation called for by the POA that the oversight board has been seeking.
“Such a requirement would constitute a clear infringement on the powers of the Government of Puerto Rico and the rights of its people,” the union said.
The POA rests on the assumption that the commonwealth will enact legislation to issue about $7 billion in new general obligation bonds and $1 billion in the form of a contingent value instrument, or CVI.
A request for an order confirming the plan filed in July by the oversight board states that “pursuant to PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] Section 305, with the consent of the Oversight Board and consistent with the Plan, using all their political and governmental powers, the Governor and Legislature are directed to take all acts necessary to carry out and satisfy all obligations and distributions set forth in the Plan, including, without limitations, enacting enabling legislation required by, and solely to the extent set forth in, the Plan.”
The SEIU said the order would thus force the elected members of the Legislature to craft a bill that conforms to the dictates of the POA, and that contains no conditions or terms other than those allowed by the POA.
“Then, whatever the views held by the legislators or their constituents, the order would force Senators and Representatives to cast their votes in favor of the mandated bill,” the union said. “When the mandated bill reached the Governor’s desk, the order would force the Governor to sign it, whatever his beliefs about whether it was best for the Puerto Rican people.”
To date, Puerto Rico’s elected leaders have chosen not to enact the legislation that the oversight board seeks. Draft legislation conditions authorization for the new securities on, among other things, a prohibition on cuts to public employee pension benefits and to employer contributions to public employee health coverage. The conditions also include certain funding obligations for Puerto Rico municipalities and for the University of Puerto Rico (UPR).
On Thursday, the oversight board changed its position. In a letter to Gov. Pedro Pierluisi Urrutia and legislative leaders, the board stated that it would “not oppose” enabling legislation that, among other things, banned pension cuts and provided funding to municipalities and to UPR.
The oversight board said it would not oppose legislation that requires that the plan submitted for confirmation be amended to provide for no cuts to the accrued pensions of retired public employees and current employees of the commonwealth unless otherwise required by the U.S. District Court for the District of Puerto Rico.
“But to be clear, this requirement does not extend to the Plan’s freeze of the TRS and JRS pensions or the elimination of any remaining cost of living adjustments,” the oversight board said.
It also said it would not oppose a bill that would provide additional funding, within limits, to the municipalities for providing necessary government services; provides additional funding for UPR; provides funding of $1 million to conduct a study of the feasibility of extending medical coverage to currently uninsured residents; creates a mechanism to advance the terms of payment and debt cancellation following the termination of the oversight board; and establishes a joint working group with the oversight board, the Legislature, and the executive branch.
Still, the oversight board has not rescinded its request. “Nonetheless, as of today, the Board has not obtained from the Commonwealth the enabling legislation that it seeks, and the order, filed prior to October 14, still seeks to coerce the Commonwealth to enact such legislation,” the SEIU said.
The SEIU is a member of the unsecured creditors’ committee, which supports the debt deal.