If the retirees of the local government reject the terms of the adjustment plan, the Fiscal Control Board (JCF) could make a larger reduction than that proposed in said document, which amounts to 10%
This was recognized today by the executive director of the fiscal unity, Natalie Jaresko, at a meeting with the media after the presentation of the Adjustment plan of the debt changed in federal court. In summary, the proposed adjustment plan indicates that it is part of it 8.5% Bee pensions that the $ 1,500 per month
“If the retirees reject the proposal in the plan, we will return to the previous proposal – from three years ago – of a 10% reduction in pensions,” Jaresko told press inquiries. However, Jaresko stated that the cuts envisaged in the adjustment plan will only affect less than 30% of those withdrawn from the government. He added that the plan provides for the establishment of pension funds so that the government can continue to fund these programs in the event of potential budget deficits.
“This plan is reliable because it protects pensions and ensures that the Puerto Rico government will never run out of money to pay for pensions,” said Jaresko.
The new debt adjustment plan, presented to federal judge Laura Taylor Swain yesterday, proposes restructuring some of the $ 35 billion national debt. If the plan is approved, the debt would be restructured to approximately $ 7.4 billion. In addition, the agreement covers 66 categories of creditors, including agreements with general bondholders (GOs); with bondholders from the Public Buildings Authority, an agreement with the Official Retirement Committee (COR) and with United Public Servants. It also handles other claims, such as disputes with the country’s dairy industry.
Jaresko also noted during the press conference that the plan considers that, in the event that the government exceeds the projections of collections in the budget plan, a 10% of this profit is earmarked for the payment of pensions. Thus, according to the Executive Director, this scenario could in some cases mitigate the impact of pension cuts.
The Executive Director, for her part, insisted that the adjustment plan will lead to greater economic flexibility for the government in the coming years. “This plan is sustainable because it significantly reduces the government’s responsibility to pay off the debt so that they can pay it back in the years to come,” said Jaresko. According to the official, the agreement will reduce the debt payment from $ 1,475 million – proposed in the 2020 adjustment plan – to $ 1,150 million in the new proposal submitted by the tax entity yesterday.
While Jaresko rejected that they needed the approval of the country’s legislature to implement the adjustment plan agreements. “Typically, legislation is needed to be able to issue new bonds and for the Contingent Value Instrument [que incluye el Plan de ajuste], but not to approve the Adjustment Plan as such. But in the end we will see what exactly needs to be approved by the legislature once the federal court confirms the adjustment plan, ”Jaresko said to questions from Subway
The official, for its part, rejected that the Promise Act would allow them to compel the legislature to pass a measure that would make the issuance of new bonds viable, should the said branch refuse. Jaresko noted that despite the government’s opposition to pension cuts, he hopes they will support the plan and see it as the only proposal that will protect the country’s pension system.
Likewise, he justified the sustainability of the adjustment plan, despite the fact that, according to the tax entity’s own estimates, the island could face a budget deficit between 2029 and 2032. According to Jaresko, the tax entity proposes the creation of a pension fund that will enable the government to continue its payments to the pension system despite economic downturn scenarios.
Likewise, Jaresko urged the government to implement more structural reforms that can promote job creation and economic development.