Monday, August 15, 2022

Oversight Board Willing to Shield More Retirees from Pension Cuts

By on September 27, 2021

After Governor Pedro Pierluisi has repeatedly objected against pension cuts for government retirees, the Financial Oversight and Management Board for Puerto Rico (FOMB) issued a statement saying it “is willing to agree” to increase the threshold of beneficiaries exempt from any reduction from $1,500 to $2,000 per month.

The FOMB’s latest position on pension cuts could shield around 139,000 pension holders, about 84 percent, from any reduction. However, Pierluisi has said beneficiaries have made a series of concessions during the last years, and that other sources of funding can be used to prevent cuts.

“The Oversight Board 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,” reads the statement sent by the office.

Ironically, the FOMB’s executive director, Natalie Jaresko, had lobbied against Medicaid funding equality for Puerto Rico, although it finally aligned with the commonwealth’s efforts to achieve this goal after heavy criticism by local and federal officials.

The Oversight Board said it could also accept that municipalities share the benefits resulting from the reduction in debt service, “contingent on the commonwealth obtaining and maintaining adequate Medicaid funding.” The fiscal office said it would accept these proposals “if the Puerto Rico Legislature adopted 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.

According to the FOMB, the Plan of Adjustment would reduce the commonwealth’s outstanding debt by almost 80%, from $33 billion to $7 billion.

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