Puerto Rico’s debt restructuring plan threatens public pensions
A federal control board created by Congress to settle Puerto Rico’s debt on Monday tabled a restructuring plan that threatens to cut public pensions by 10% without any agreement with retirees.
The board presented a 233-page plan that would reorganize at least $ 35 billion in public debt and over $ 50 billion in public pension liabilities, The Associated Press reported.
The proposal, which has been filed in a U.S. court, includes a reduction of up to 8.5 percent in monthly pensions of at least $ 1,500 to help the territory cope with the largest U.S. municipal bankruptcy filing in the ‘story. The board said it had received “substantial” support for the plan from creditors, especially those who hold more than $ 13 billion in bonds.
Board chairman David Skeel called the strategy “a milestone for Puerto Rico’s recovery, stability and prosperity,” according to the AP.
“This plan dramatically reduces the burden of debt payments on future generations, stabilizes and protects pensions that have been mismanaged for so long and upholds the collective agreements of government employees,” he said.
Governor of Puerto Rico. Pedro PierluisiPedro Rafael PierluisiPuerto Rico Limits Alcohol Sales, Gatherings As Coronavirus Cases Rise Puerto Rico Orders Businesses To Require Proof Of Vaccination Puerto Rico To Receive Nearly One Billion In Pandemic Relief Fund MORE, who has previously said he will reject any plan that includes large pension cuts, said the government will declare in court that it does not fully support the plan, but nonetheless called the proposal a step in the right direction .
“Puerto Rico must abandon this bankruptcy process in order to achieve the sustainable economic development we all aspire to and to eliminate the uncertainty inherent in this process, as well as the million dollar restructuring expenses that the government has had to incur. He said in a statement obtained by the PA.
“My administration has insisted that this reduction in pensions is not reasonable,” he added.
If approved by a judge, the proposal could reduce the island’s debt by 80% from $ 35 billion to $ 7.4 billion and could save the government nearly $ 60 billion in service payments debt.
Puerto Rico’s financial turmoil dates back to 2014, when it announced it could not pay its public debt, which reached $ 74 billion through bonds and $ 49 billion in unpaid pensions. The territory filed for bankruptcy in 2017 – the same year the island was hit by Hurricane Maria causing billions of dollars in damage and numerous deaths.
The Supreme Court ruled unanimously last June that the financial oversight board established by Congress to oversee Puerto Rico’s finances after bankruptcy was constitutional.