The Puerto Rico Oversight Board ordered the local government to stop implementing new laws that improve pension payments.
Board Executive Director Natalie Jaresko sent the letter to Omar Marrero, executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority, on Oct. 21. The board released the letter and press statement Monday.
The board stated that implementation of three laws passed in August would increase the Puerto Rico government’s expenses by as much as $8.3 billion over the next 30 years. By comparison the current fiscal year’s approved General Fund budget is $10.04 billion.
Acts 80-2020 and 81-2020 affect the Employees Retirement System. Act 82-2020 affects the Teacher’s Retirement System.
“As we have seen no realistic plan by which these acts may be implemented within the bounds of the fiscal plan of [Puerto Rico Oversight, Management, and Economic Stability Act], the government should reverse its decision and immediately cease any implementation of the acts,” Jaresko told Marrero.
The board has the power to halt the laws because PROMESA gives them power over spending. It also gives them the power to approve budgets and the board suggested the laws are inconsistent with the budget as well as the fiscal plan.
If the government wants to implement the acts it “must provide a realistic plan for offsetting the substantial costs of each of the three laws without impairing essential services,” the board said in a statement. The local government would have to cut substantial personnel to find the savings, the board said.
The board asked Gov. Wanda Vázquez Garced to cease implementing the laws until the board consented to the government’s proposed plan. It asked the local government to provide a plan of how the acts’ costs would be covered by Wednesday.
“Should the government continue to implement measures under these laws inconsistent with the certified fiscal plan and PROMEA, the Oversight Board may have to take such actions as it considers necessary, consistent with its powers under PROMESA, to prevent further harm to Puerto Rico’s future,” the board stated.
Since the board's founding there have been a number of suits between the board and the local government. The court system has overwhelmingly sided with the board.
Currently, the board’s Plan Support Agreement for the pensions includes 8.5% cuts to pensions over $1,200 per month. However, until the U.S. District Court for Puerto Rico approves the Plan of Adjustment that includes the PSA and the approved plan survives any appeals, the cuts won’t be finalized.
The Puerto Rico legislature has voted its opposition to any pension cuts. If the cuts are included in the approved Plan of Adjustment and after the board disappears from Puerto Rico, it is possible the legislature could try to restore the benefits.
Spokespeople for FAFAA and Vázquez Garced didn’t immediately respond to a request for a comment. The Puerto Rico Retirees Committee also didn’t immediately respond.
