Oversight board agrees to raise threshold for pension cut
By The Star Staff
The Financial Oversight and Management Board for Puerto Rico agreed on Monday to increase to $2,000 a month the threshold for retirees to be exempt from the proposed 8.5% cut contained in the plan support agreement that would restructure some $35 billion in debt.
The oversight board and the elected leaders of Puerto Rico, Senate President José Luis Dalmau Santiago, House Speaker Rafael Hernández Montañez, and Gov. Pedro Pierluisi Urrutia, have been working toward confirmation of the Plan of Adjustment by the U.S. District Court for the District of Puerto Rico to restructure the commonwealth’s debt to sustainable levels, the oversight board said.
“Following extensive discussions with the elected leaders, the Oversight Board is willing to agree to increase the threshold for retirees exempt from any reduction in benefits from $1,500 per month to $2,000 per month,” the board said. “This new threshold will exempt approximately 139,000 of government retirees, or 84% of government retirees, from any reduction in benefits,” the board said.
The information came out after Dalmau Santiago as well as House Treasury Committee Chairman Jesús Santa Rodríguez, as reported by the STAR, spoke about conditions for the Legislature to approve enabling legislation for the debt deal.
The oversight board said it is also willing to support restoring any reduction in pension benefits should Puerto Rico receive federal Medicaid funds in excess of amounts projected in the 2021 Certified Fiscal Plan for Puerto Rico and should such funds generate enough savings in the government’s general fund budget to permit a restoration of the benefit reduction.
Further, the oversight board is willing to agree that municipalities share the benefits resulting from the reduction in debt service, contingent on the commonwealth obtaining and maintaining adequate Medicaid funding. The board proposes to include additional funding to the existing municipal equalization fund, to be distributed in accordance with the existing parameters at CRIM, the Municipal Revenue Collections Center.
The oversight board would agree to those proposals if the Puerto Rico Legislature adopts the necessary legislation for the Plan of Adjustment and the governor signs that legislation into law.
“After years of tough negotiations, a diverse group of creditors that includes retirees, unions, bondholders and bond insurers, and other creditors of the Commonwealth of Puerto Rico agreed to a Plan of Adjustment that is fair and provides a path out of bankruptcy,” said the oversight board’s chairman, David Skeel. “We are almost there. Let’s get to the finish line with the legislation necessary to restructure the debt so we can go into confirmation hearings in November with all of the necessary pieces in place to lift the burden of bankruptcy from the people of Puerto Rico.”
Before the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), the commonwealth had to pay up to 25 cents of every dollar it collected in taxes and fees to creditors; the Plan of Adjustment would reduce that amount to just over 7 cents of every dollar. The Plan of Adjustment would reduce the commonwealth’s outstanding debt by almost 80%, from $33 billion to $7 billion. The oversight board said it will continue the constructive dialogue with the Legislative Assembly and the executive branch of the island government to find a solution that will result in the enactment of legislation to complete the Title III debt restructuring process under PROMESA, which is an essential step for the oversight board to complete its mandate under the law.