Pension measures could delay debt adjustment plan confirmation
By The Star Staff
Gov. Pedro Pierluisi Urrutia on Thursday filed two bills to the Legislature as an alternative to Act 7-2021, the Dignified Retirement Act, which bans cuts to public sector pensions and which the Financial Oversight and Management Board wants to annul.
However, the process of making the new measures a reality could result in a delay of the confirmation of the commonwealth debt adjustment plan because Pierlusi asked the Legislature to evaluate the measures during the second regular legislative session, which starts in August.
The Title III bankruptcy court has hearings slated for next Tuesday and Wednesday to discuss the adequacy of the disclosure statement, the document that explains the terms of the commonwealth debt adjustment plan to restructure some $35 billion in central government debt.
“I present these measures as a solution to the current impasse. The [oversight] board insists on its part in the cuts to pensions and in not providing a fair retirement, [and] the only thing it will lead to is a stalemate in the restructuring,” the governor said. “On the other hand, my appeal to the entire community of public servants in Puerto Rico is that these alternatives that I present today are much better than what the board proposes and are a realistic solution to the bankruptcy of the government.”
Pierluisi and the Legislature oppose cutting public pensions as part of the commonwealth restructuring. Under the debt adjustment plan, pensions that are higher than $1,500 will receive an 8% cut. The proposed cut is supported by the Official Committee of Retirees in the bankruptcy process, which the governor has said does not represent the views of the majority of government retirees.
“My commitment from day one has been to avoid cuts to pensions, since government retirees have already suffered significant reductions in their benefits,” the governor said. “This is what I have made known to the board and I have consigned it to the Title III District Court. I will continue promoting viable alternatives like these to protect our pensioners.”
One of the bills, called the “Zero Cut to Pensions Law,” establishes as public policy of the government of Puerto Rico that pensions will not be reduced through the debt adjustment plan proposed by the oversight board before the Title III Court.
It calls for the board to deal with the pension obligations within the budget process and the fiscal plan established by Title II of the Puerto Rico Oversight and Management Board. The law calls for public pensions to have a priority over other disbursements of funds, except the debt.
“Basically we are telling the board that we respect the priority of payment that the restructured debt will have in the bankruptcy process, and that pensions would come above the other priorities, raising the priority of payment to pensions as a public policy,” Pierluisi said.
Likewise, the governor unveiled a second bill that would protect the pensions of those public employees who have been working in the government of Puerto Rico for more than 30 years, and who entered public service 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 pension system under Act 447 of 1951 and 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 these 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.
“The estimated cost is just over $2 billion over the next 20 years, about $100 million annually,” Pierluisi said of the second measure. “This is a sustainable amount based on the collection projections expected by the government, so it can be paid.”