PDP Reps Present Alternatives to Mitigate Retirement Crisis
SAN JUAN — A group of Popular Democratic Party (PDP) representatives on Wednesday expressed their opposition to a 10% reduction in pensions for beneficiaries of the central government and teachers’ retirement systems—as proposed by the Fiscal Oversight & Management Board—presenting alternatives to immediately raise an annual $462 million.
These proposals could help resolve the crisis in the retirement systems, which will require greater restructuring in the future to guarantee long-term benefits, explained PDP House Minority Leader Rafael “Tatito” Hernández during a press conference in his office. He was joined by Reps. Jesús Santa, Jesús Manuel Ortiz, José “Conny” Varela, José Aníbal Díaz and Javier Aponte Dalmau.
The first proposal is to “pledge 1% from Sales & Use Tax [IVU] collections, equivalent to $275 million, so it flows directly to the Retirement System, thus ensuring compliance with additional legislative contributions,” Santa said.
In response to questions by Caribbean Business, Santa clarified that the proposal does not aim to affect the general fund, but to ensure the retirement systems the money promised to them in various legislations, without interference from other offices. “I don’t want the government to have that $275 million and say: ‘I’ll either pay bondholders or allocate them to Retirement.’ It should be allocated directly to Retirement,” he said.
The second proposal is to restructure the retirement systems’ debt and transfer their responsibilities to the central government, as in other jurisdictions. “They borrowed $3 [billion], which is the POB [pension obligation bonds], which will then pass on to the government. This transfer involves a restructuring of the debt. That would save Retirement $167 million that they pay in interest every year,” the legislator said.
The third proposal aims to merge the management of the Teachers Retirement System with the central government, which would represent $20 million in savings.
“I don’t want them to say the general fund is being eroded, because what we are doing is providing certainty, guarantee and efficiency to approved legislation…. That has to go hand in hand with total debt restructuring,” Hernández declared. Pensions, he commented, could be deemed an “essential service” because they represent health for many of our senior citizens.
The representatives explained that these proposals would join others presented by Gov. Ricardo Rosselló, such as reducing “Cadillac” pensions by 10%, which would save $4 million, or create a trust of government properties to transfer earnings to Retirement.
They emphasized that the fiscal board’s 10% reduction in pensions must be avoided at all costs, because this income currently contributes $2.3 billion to Puerto Rico’s economy.
The legislators added that these proposals are easy to implement and contain real numbers, contrary to the governor’s, which include transferring money to Retirement from future public-private alliances or to reform pension systems, saying these aren’t accurate and don’t present estimates. They added that this doesn’t affect employer contributions, which they affirmed must remain effective.
The central government’s Retirement System currently has 119,975 contributing participants and 122,178 pensioners, which creates a $700 million operational deficit. Meanwhile, the Teachers Retirement System has 36,501 active contributors and 42,414 pensioners, representing an operational deficit of $400 million.