A six-year fiscal plan for Puerto Rico that includes comprehensive pension reform and fiscal sustainability measures was certified Thursday by the Financial Oversight and Management Board.
The board was empowered by 2016's Puerto Rico Oversight, Management and Economic Stability Act to oversee restructuring of Puerto Rico's fiscal problems.
Chairman Jose B. Carrion III said in a statement that the proposed fiscal plan for the commonwealth, the Puerto Rico Electric Power Authority and the Puerto Rico Aqueduct and Sewer Authority "map the transformative change agenda Puerto Rico needs" after years of economic decline, excessive borrowing, and fiscal mismanagement.
Covering a period of six fiscal years from 2018 to 2023, the plan provides a framework for economic growth that would allow the government to fund pension payments, and restructure Puerto Rico's debt "in a sustainable fashion," the board statement said.
On pension reform, the commonwealth plan calls for freezing pension benefit accruals by July 1, 2019, and enrolling all employees in defined contribution plans, as well as Social Security. Benefits would be reduced progressively to an average cut of 10%, with no cuts for participants whose combined pension and Social Security benefits are below the poverty level of $1,000 per month.
If all the structural reforms are implemented, the board projects sustained 1.8% real annual GNP growth by 2023 and $80 billion or more in revenues for the commonwealth over 30 years, allowing for elimination of structural deficits.
Puerto Rico Gov. Ricardo Rossello has agreed to many of the draft proposals in the plan, but so far has refused to accept pension and other labor reforms sought by the board, which has the authority to enforce a final plan.
"Our position is firm regarding pension cuts and other measures that we consider unnecessary and would hamper economic development," Christian Sobrino, the governor's representative on the oversight board and his chief economic development adviser, said in a statement.