If local government retirees reject the terms proposed in the Adjustment Plan, the Fiscal Control Board (JCF) could implement a major cut to the one proposed in this document which would amount to 10%.
This was acknowledged today by the executive director of the tax entity, Natalie Jaresko, during a meeting with the media after the presentation of the Adjustment Plan of the amended debt before the Federal Court. In summary, the proposed adjustment plan details that a cut of 8.5% at pensions that exceed the $ 1,500 monthly.
“If retirees reject the proposal in the Plan, then we go back to the previous proposal – three years ago – of a 10% reduction in pensions,” Jaresko said to questions from the press. Jaresko, however, argued that the cuts envisaged in the adjustment plan will only impact less than 30% of government retirees. He added that the Plan envisages the creation of pension funds so that the government can continue to fund these programs in the face of possible budget deficits.
“This Plan is reliable because it will protect pensions and ensure that the Puerto Rican government never runs out of money to pay pensions,” Jaresko said.
The new Debt Adjustment Plan, presented yesterday to Federal Judge Laura Taylor Swain, proposes to restructure a portion of central government debt amounting to $ 35 billion. If the plan is approved, the debt would be restructured to about $ 7.4 billion. In addition, the agreement includes 66 classes of creditors, which includes agreements with General Obligation Bonds (GO s); with bonuses from the Public Buildings Authority, an agreement with the Official Retirement Committee (COR) and with United Public Servants. It also deals with other claims, such as disputes with the country’s dairy industry.
Jaresko, during the press conference, also commented that the Plan provides that, in case the government exceeds the precautionary projections in the Fiscal Plan, 01:00 10% of this gain will be allocated to the payment of pensions. Thus, according to the executive director, in some cases this scenario could mitigate the impact of cuts in pensions.
For her part, the executive director insisted that the adjustment plan will result in greater economic flexibility for the government over the coming years. “This plan is sustainable because it reduces government responsibility in paying off debt substantially so that they can pay in the coming years,” Jaresko commented. According to the official, the agreement will reduce the debt payment from $ 1,475,000 – proposed in the 2020 adjustment plan – to $ 1.15 billion in the new proposal submitted yesterday by the tax authority.
While Jaresko rejected that they need the endorsement of the country’s Legislature to execute the agreements outlined in the adjustment plan. “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’ll see what exactly needs to be approved by the Legislature once the Federal Court confirms the adjustment plan, ”Jaresko pointed out to questions Subway.
For her part, the official rejected that the Promise Act would allow them to force the Legislature to approve a measure that would make it possible to issue new bonds, in the event that this Branch refuses. Jaresko commented that, despite opposition from the government to cuts pensions, he hopes that they will support the plan and see it as the only proposal that will protect the country’s pension system.
He also justified the sustainability of the adjustment plan despite the fact that, according to the tax authorities’ own estimates, the island could face a budget deficit between 2029 and 2032. According to Jaresko, in the face of this, the tax authority proposes the creation of a pension fund that will allow the government to continue its payments to the pension system despite scenarios of economic contraction.
Jaresko also urged the government to implement more structural reforms that can promote job creation and economic development.