Retiree Committee: Puerto Rico fiscal board overstates pension cut similarities with Detroit
SAN JUAN – A committee appointed by the U.S. Justice Department’s Trustee Program to monitor parties involved in Puerto Rico’s bankruptcy proceedings said Wednesday that “attempts” by the chairman of the island’s fiscal oversight board “to justify” proposed pension cuts are “based on inaccurate data.”
The Official Committee of Retired Employees of Puerto Rico (COR by its Spanish acronym) was referring to remarks made by Chairman José Carrión in a Radio Isla interview, where he compared board-proposed measures for island pensions based on Detroit’s bankruptcy case, saying pensions were cut more than 20% during Detroit’s bankruptcy.
“Contrary to Carrión’s recent statements, Detroit did not cut its retirees’ pensions by 22% across the board. According to the Retiree Committee’s data, Detroit did not make any cuts to the pensions of retired police and fire personnel and made only 4.5% cuts to other retiree pensions,” COR said in a statement.
COR’s responsibilities include reviewing fiscal plans for the government and analyzing proposals made to “modify pensions and other benefits that retirees are entitled to receive,” according to the committee, which “intends to use every legal tool available” to “ensure that the collective interests of retirees are protected.”
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Although the committee said it “welcomes good-faith discussions of the circumstances surrounding Puerto Rico’s financial condition and its proposed Fiscal Plan,” COR’s chairman, retired Judge Miguel Fabre, says Carríon’s misstatements about what occurred in other bankruptcy cases, made in an “apparent attempt to justify the Board’s insistence on pension reductions” are “counter-productive to PROMESA’s goals.”
“We welcome an honest discussion about the proposed fiscal plan, but that discussion must be based on accurate information,” Fabre added.
According to the committee, the numbers demonstrate that the situations in Detroit and Puerto Rico “are simply not comparable. Any comparison to Detroit suggests that the Board’s proposed reduction to pensions is not justified.”
The committee elaborated, saying, “The public record demonstrates that retirees receiving their pensions through Detroit’s Police and Fire Retirement Systems experienced no cuts in their pension benefits; the only change in benefits that these retirees experienced was a reduction in the annual cost-of-living-adjustment (COLA) from 2.25% to 1%.
“In contrast, the last time retirees in Puerto Rico received a COLA adjustment to their pensions was more than ten years ago. Detroit retirees receiving their pensions through the General Retirement System experienced only a 4.5% cut in their pension benefits and the elimination of future annual COLA increases.”
Fabre said “the fact is that Detroit did not significantly reduce pension benefits from their pre-bankruptcy levels; it reduced or in some cases eliminated future increases in pension benefits, making reliance on a 22% reduction figure highly misleading.”
“Equally incorrect,” COR’s release reads, “is the suggestion that the economic circumstances facing pensioners in Puerto Rico is comparable to that facing Detroit’s retirees. The Retiree Committee’s data shows that while pensions in Detroit are relatively modest by U.S. mainland standards, they are still significantly higher on average than pensions in Puerto Rico, where the average pension is below the federal poverty level. The average pension benefit for general employees in Puerto Rico is about $12,000 per year, well below the average pension benefit for general employees in Detroit who saw an average pension of approximately $20,000 cut by $900.”
Fabre stressed that before Puerto Rico’s Title III cases, “its pensioners had already suffered significant reductions to their retirement benefits, which the Board has ignored in its insistence that pensions be cut even further.”
He concluded that “additional pension cuts will be devastating not only to retirees and their families, but as economists have warned also to Puerto Rico’s efforts to rebuild its economy.”
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