Puerto Rico Gov. Ricardo Rossello promised to cover $2 billion in benefit payments of the Puerto Rico Government Employees Retirement System, Hato Rey, as part of a $9.56 billion budget presented to the Legislature Wednesday that also guarantees essential services for residents.
“So we take a difficult step for the budget, but we guarantee the pensions of all our retirees,” the president said in a message to the Legislature.
The pension fund, which is expected to be out of money by July, and several others were added to the government's bankruptcy case underway in U.S. District Court in San Juan. The commonwealth has an estimated $50 billion in unfunded pension liabilities and $74 billion in bondholder debt.
Puerto Rico's fiscal plan, approved March 13 by a federal oversight board, is expected to be finalized by June 30. It calls for a 10% cut in pension benefits based on income, with no cuts for people below the poverty line, and switching all active members and new hires into defined contribution plans. The governor said his budget was based on the fiscal plan.
In the message to the Legislature, Mr. Rossello said that “one of the most important differences in this budget is that, contrary to the previous ones, it is really balanced," opposed to previous administrations’ budgets that he said added new expenses and hid debt. “That is over, "he said.