4.2.18 - local
Governor Drops Labor Reform as Oversight
Board Pushes Pension Cuts, Labor Austerity
Puerto Rico’s federally appointed fi nancial oversight
board insisted last week on pension cuts and
other austerity measures as conditions for approving
a turnaround plan for the bankrupt island still reeling
after Hurricane Maria.
In a seven-page letter to Governor Ricardo Rosselló
Nevares, the board last Wednesday called for a revised
plan with an average of 10 percent cuts to public employee
pensions, provided that no one is pushed into
poverty by the cuts.
All changes requested by the oversight board must
be submitted on or before Thursday at 5 p.m.
The demand is part of a bankruptcy process under
which Puerto Rico must submit a blueprint for regaining
its fi nancial footing. The plan must be approved by
the oversight board, which may impose its own plan if
both sides cannot agree.
The fi scal reform measures will determine how
much money the U.S. commonwealth has left over to
pay holders of $71.5 billion in bonds, who are expected
to take huge cuts as part of a massive debt restructuring.
Puerto Rico’s benchmark general obligation bond,
maturing in 2035, traded around 42.6 cents on the dollar
on Wednesday 74514LE86=MSRB.
Pension cuts have been a major sticking point as the
board and Rosselló try to reach a consensual plan. Rosselló’s
latest draft, published on March 23, includes labor
reform and other austerity, but no pension cuts.
In a brief televised response on Wednesday afternoon,
the governor said he would nullify the labor reform
proposal he had presented just a week previous.
In a message that lasted about fi ve minutes, Rosselló
said the conditions presented by the federal oversight
board would make the proposed salary increase, which
“is the basis of our reform,” impossible.
“The Board has sent us a communication proposing
measures that would have the eff ect of increasing
the conditions of poverty in Puerto Rico,” the governor
said according to local press reports. “The basis of
our proposal was the [minimum wage] increase for our
workers and the creation of training opportunities; with
these elements rendered impossible, the [labor reform]
proposal is not viable.”
Rosselló added that he can not allow the federal fi scal
agency to exercise powers it does not have.
“The Board intends to dictate the public policy of
the government, and that, as well as being illegal, is unacceptable,”
the governor said.
Puerto Rico’s public employee retirement systems
are $50 billion underfunded and have no assets, with
payments coming out of the island’s general budget. It is
one of only a few times in U.S. history that a large-scale
public pension has gone to a “pay-as-you-go” system.
Last September, Hurricane Maria compounded what
was already the biggest-ever U.S. government insolvency,
decimating infrastructure and sending hundreds of
thousands of Puerto Rico’s 3.4 million residents, who
are American citizens, fl eeing to the U.S. mainland.
“Without change we face a future of poverty and
outmigration as Puerto Rico residents move to the mainland,”
the board’s letter said. “These are the changes we
need to make to honor our pensioners.”
The board also called for paring a recovery fund for
the island’s municipalities, instructing Rosselló to budget
for $78 million for just one year. Small, rural towns
were hit hardest by Maria, with thousands of residents
still without power six months later.
The board demanded more specifi city on Rosselló’s
controversial plan to privatize prisons, saying the current
plan “does not demonstrate a viable path for achieving
its claimed savings.”
It also wants Rosselló to remove hiring incentives
for employers, but the governor said he planned to forge
ahead with the new tax model and incentive code.
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|Mon, 02 Apr 2018 16:57:12 +0100