• The San Juan Daily Star

With fiscal board about to file 8th POA, lawmaker seeks repeal of enabling law

Puerto Rican Independence Party Sen. María de Lourdes Santiago

By The Star Staff

The Financial Oversight and Management Board will file the eighth amended plan of adjustment on Thursday to, among other things, incorporate the effects of Act 53, the legislation enabling the debt deal.

Meanwhile, a minority lawmaker wants to repeal the law.

The information was provided during a Title III Bankruptcy Court hearing Monday regarding requests to exclude evidence put forward by the oversight board and by creditors. Judge Laura Taylor Swain reserved the rulings for a later time on most of the requests, but rejected a request by creditors to exclude the testimony of Marti Murray to the effect that the debt adjustment plan that would restructure some $33 billion in debt is sustainable and is consistent with the fiscal plan.

While the oversight board has accepted Act 53 of 2021, which would ban cuts to pensions for retirees, it has requested preemption of some 100 laws, including those that may prevent it from implementing the plan. In a letter to the government published Friday, the board said Act 53-2021 neither implements a freeze nor prevents a freezing of future pension benefits for public employees.

“The Oversight Board agrees with your assessment of the Act,” the board wrote to the governor. “As you note, the freeze ‘is an issue separate from Act 53-2021’ as the Act “does not implement the freeze or prevent a freeze from occurring.”

On Monday, nonetheless, Puerto Rican Independence Party Sen. María de Lourdes Santiago introduced legislation to repeal Act 53 because, she said, it is merely an attempt to fool people.

“The fiscal control board admits and specifies that the alleged protections listed, or the aspirations that emerge in the “Declaration of Public Policy Intent,” do not bind them because they are ineffective and inoperative,” Santiago said.

The debt adjustment plan contemplates the issuance of new general obligation bonds in the approximate principal amount of $7.4 billion, consisting of $6.7 billion in current interest bonds (CIBs) and $731 million in capital appreciation bonds (CABs). CIBs are bonds whose interest is payable on a semi-annual basis, with principal due at maturity. In the case of CABs, interest accrues and compounds throughout the bond period, and is payable along with the principal at the bond’s maturity. The CIBs and CABs issued under the plan amortize beginning in fiscal year 2022.

In addition to the bonds, the debt plan also proposes to issue contingent value instruments, or CVIs, that give a holder the right to receive payments if the commonwealth’s sales and use tax collections exceed certain thresholds. In addition to some $21.9 billion in funded debt claims and $2.75 billion in estimated general unsecured claims, the government has claims relating to legacy pension plans that, as of June 30, 2016, represented an actuarial liability of more than $50 billion.

There are virtually no assets held in reserve to satisfy those liabilities, and as a result, the commonwealth’s pension systems are virtually 100% underfunded and insolvent, and have been for some time. The plan calls for a freeze of benefits in defined benefit plans for the Teachers Retirement System and judiciary beneficiaries. Second, it includes an 8.5% reduction in pension benefits for those beneficiaries receiving in excess of $1,500 per month, which was recently raised to $2,000 per month.

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