Puerto Rico pensioners are facing devastating effects of bankruptcy

Puerto Rico pensioners are facing devastating effects of bankruptcy
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Puerto Rico is facing a dire fiscal and economic crisis. It is one that many have called the largest and most complex bankruptcy in U.S. history. Amid the range of issues facing the island, from disaster recovery efforts to financial woes, lies an often overlooked human tragedy. Despite being a key piece in the island’s economic recovery, thousands of pensioners in Puerto Rico are facing the devastating consequences of an economic calamity. They are American citizens who devoted their lives to public service and put money away for their retirement.

There are about 167,000 public pensioners in Puerto Rico, and more than half are over the age of 70. On average, they receive about $12,000 in pension benefits a year, well below the federal poverty line considering the number of people within a household supported by this modest amount. Most rely on pensions to pay for their basic needs like food and housing, and many support not only themselves but also their extended families. Because of the economic crisis, an increasing number of pensioners care for their grandchildren and even their elderly parents.

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Already walking a financial tightrope on modest incomes, our retirees saw pensions cut significantly back in 2013, and have not seen a cost of living adjustment in more than 10 years, and to boot, the cost of living on the island is about 13 percent higher than in cities on the U.S. mainland. Making matters worse, over the years, the government routinely failed to remit the required funds to the public pension systems to ensure that benefits could be paid. Yet, during all these years while our pensions were being cut and pension systems were being shortchanged, bondholders were getting paid billions of dollars in full debt service payments.

As Puerto Rico’s bankruptcy proceeds through the federal court system, the island’s retirees are facing a startling reality of fighting with bondholders for their fair share. But Puerto Rico’s pensioners did not bankrupt the island. We worked hard and were confident in that the modest pensions we earned would be available to us in retirement. That promise has already been shredded, and to take even more from us now would be unjust and, even more so, unwise.

Unlike creditors angling for a larger slice in Puerto Rico’s bankruptcy, most retirees live, pay rent, and buy goods and services on the island. This means that practically every dollar we receive will support Puerto Rico’s economy. Less money for pensions would set off a chain reaction by curbing economic activity on the island, further reducing tax receipts, and ultimately limiting the government’s capacity to meet obligations. Puerto Rico’s pensioners are already on a financial ledge. Additional reductions to pensions would force many to leave the island and seek federal assistance such as Medicaid, putting more pressure on our nation’s struggling social services.

Puerto Rico’s financial restructuring is being executed under a federal law known as Promesa, which established the Financial Oversight Management Board to oversee the negotiation and debt restructuring process. In the recently approved fiscal plan, the board proposed aggregate pension cuts of 10 percent, which could result in up to 25 percent cuts for various individuals. This action would have a devastating impact on pensioners, on extended families, and on the economy.

In most financial restructurings, it seems fair to ask every creditor to bear a share of the burden. But through no fault of our own, retirees have already seen forced cuts to our hard-earned pensions while bondholders continued to get paid. We are facing threatening circumstances and any further cuts to our pensions and retirement benefits would cast our ability to cover our most basic needs into serious danger, driving many into extreme poverty. The board’s position is not justified. Cutting the pensions is not the answer to protect the wellbeing of a vulnerable segment of our society and safeguard the economic recovery of Puerto Rico.

Miguel Fabre Ramirez is president of the Official Committee of Retired Employees of the government of Puerto Rico. He was appointed by the U.S. trustee to represent more than 167,000 retirees of the government of Puerto Rico in the federal case before Judge Laura Taylor Swain.