By Nydia Velázquez who represents the 7th District of New York and is chairwoman of the Small Business Committee. Jesús “Chuy” García represents my 4th District of Illinois and a member of the House Financial Services Committee.
Imagine after years of devoted public service work, your hard-earned pension benefits are now on the brink of being slashed, even when your elected representatives are trying to protect them through law. That is exactly what’s at stake for Puerto Rico’s public sector pensioners.
Earlier this summer, the Puerto Rico Financial Oversight and Management Board, otherwise known as “the Board” sued members of the government of Puerto Rico. The lawsuit attempts to invalidate a new local law — the Dignified Retirement Act — designed to protect pension-holders and essential services in the debt restructuring deal being considered in court. The Board, in taking this action, is violating the spirit of the power-sharing arrangement we established through federal law.
When Congress created the Board through the 2016 law known as PROMESA, it did not give it a carte blanche. Specifically, Congress recognized that provisions of the bankruptcy code incorporated into PROMESA cannot be used to infringe upon the exclusive powers of the local government to legislate. That’s why recent actions taken by the Board in an attempt to force pension cuts in spite of opposition from the elected government are so concerning.
The Puerto Rican government is well within its rights under PROMESA to oppose a restructuring plan proposed by the Board, and to articulate how it believes its debt should be restructured — a decision that will impact Puerto Rico for generations. The government did just that through the unanimously passed Dignified Retirement Act.
Under PROMESA, the legal framework necessary for implementing a restructuring plan must be in place before it can be confirmed by a judge. Therefore, the local government must pass the necessary legislation before the plan can be implemented. Congress specifically sought local input when designing this power-sharing arrangement and decided that the elected Puerto Rican government must maintain its exclusive power to legislate — including in the context of the debt restructuring process.
The Dignified Retirement Act describes the conditions that must be met in order for the government of Puerto Rico to cooperate in the implementation of a debt restructuring plan, including providing for full payment of government pensions and protection of essential government services. The Board, on the other hand, continues to advocate for a debt restructuring plan that would impose an 8.5% cut on any pension payment exceeding $1,500 per month received by retired public servants.
While the press has given much attention to the Dignified Retirement Act, the Board may very well face an insurmountable obstacle to getting its current debt restructuring plan confirmed and implemented. The Board needs the Puerto Rican government to enact legislation to implement the plan, and the government has made clear that it will not advance the implementation of a restructuring plan that would cut pensions and jeopardize essential services.
We urge all parties to arrive at a fair resolution that protects the vulnerable retirees who are facing a cut to their benefits. The Board is not Puerto Rico’s appointed governor or legislature, and it must work with the local legislature to arrive at a mutually agreed resolution instead of putting retirees at risk.