Impact of Judge Laura Taylor Swain’s Orders on the FOMB’s Motion to Dismiss the Governor’s and Legislature’s complaints.
The August 7, 2018 Opinions issued by Judge Laura Taylor Swain on the lawsuits brought by the Governor of Puerto Rico and the Legislature challenging the power of the Fiscal Oversight and Management Board (FOMB) to approve a Fiscal Plan and budget for Puerto Rico are not related to the adjustments to the pensions proposed by the FOMB in the certified Fiscal Plan.
Because retirees rights to their pensions are considered contract rights under Puerto Rico law, pension cuts can only be implemented through a confirmed Plan of Adjustment. The confirmation of the Adjustment Plan is part of the last stage of the Title III cases to restructure the debt, and when the time comes retirees will have the opportunity to learn about its content and vote in favor or against said document. At present, we are in the stage of a certified budget by FOMB. The Disclosure Statement and voting process must take place before the court can confirm an Adjustment Plan.
The COR is paying close attention and actively participating in the Title III proceedings that could have a direct or indirect impact in the pensions of government retirees. We will keep the community of government retirees informed about the matters that could impact their pensions in agreement with our responsibilities as an official committee.
To read a summary of Judge Laura Taylor Swain’s Orders click here.
To read the Orders, download these documents:
Federal Judge, Laura Taylor Swain, entered an order denying the challenge by the investment fund Aurelius on the constitutionality of the Puerto Rico Financial Oversight and Management Board under the Appointment Clause of the Constitution of the United States and the motions to dismiss Puerto Rico’s Title III petition and relief from the Automatic Stay.
The Official Committee of Retired Employees of the Government of Puerto Rico (COR, for its acronym in Spanish) was one of the interested parties that opposed to Aurelius challenge, because -if granted- it would negatively affect the government’s capacity to pay pensions and benefits to retirees.
According to Swain’s order: “Having examined the factors argued by the parties, the Court finds that Congress’ invocation of the Territories Clause is consistent with the entity it purported to create, that the method of selection that Congress fashioned for the membership of the Oversight Board is consistent with the exercise of plenary congressional power under that Clause, and that neither Presidential nomination nor Senate confirmation of the appointees to the Oversight Board is necessary as a constitutional matter to legitimize the exercise of the Oversight Board’s powers under PROMESA because the members of the Oversight Board are not 'Officers of the United States' subject to the Appointments Clause.”
On May 29, 2018, the Retiree Committee filed a proof of claim on behalf of government retirees from the Employees’ Retirement System, the Judiciary Retirement System and the Teachers’ Retirement System asserting a claim for their pensions and other post-retirement benefits in the Title III cases of the Commonwealth of Puerto Rico, Employees’ Retirement System, and the Highway and Transportation Authority in the amount of at least $58 billion.
As we previously indicated here, because the Court’s bar date order does not apply to claims for pensions or other post-retirement benefits, retired public employees do not need to file individual proofs of claim. Retirees with claims not related to their pensions or post retirement pension benefits now have until June 29, 2018 to file the Proof of Claim, according to the Order to extend the general claims bar date filed by the Federal Court on May 25, 2018.
During the last few months we have listened to the debate about the reality of government retirees. Let’s analyze this group, which is made of 167,000 retired public servants with a pension.
Government retirees built Puerto Rico’s economy. They gave their most productive years of their lives to public service trusting that upon retirement they could count on a fair income, based in part on their own contributions to the Retirement System. This formula represented stability and security. The amount of the pension was pre established. Many decided to go into public service for the security that the pension income represented, even if it meant lower salaries compared to other sectors of the economy.
The fact is that retirement pensions and benefits have been reduced drastically during Puerto Rico’s complex fiscal situation, which began over a decade ago. The benefits of pensioners who retired on or before June 30, 2013 have been reduced by $500, while those who retired after July 1, 2013 have seen a reduction of $1,200 a year, plus the elimination of the Christmas bonus ($600.00), summer bonus ($100.00) and medicine allowance ($100.00). In addition, since 2007 pensioners no longer receive the 3% cost of living adjustment that was distributed every three years, resulting in a further reduction in the value of their pensions as other costs increase due to inflation.
Furthermore, as a result of the reforms central government employees who will retire in the future will receive pensions that are substantially lower than current ones.
The profile of pensioners in Puerto Rico is unique. In many cases they are the main income in their family unit. With their income they help support their family, pay day care and schools for their grandchildren, take care of their own elderly parents and supplement the income of their adult children who are suffering the consequences of unemployment and low salaries.
In its latest report the Fiscal Oversight Management Board (FOMB) indicated the need of cutting pensions by an average of 10%, which means that in particular cases the cut could reach 25%. The impact of said measure in our already ailing economy would be severe. The intended cuts will represent less money circulating in our economy, therefore affecting contributions to the Treasury and commercial activity income across all sectors of the economy . Moreover, cutting the pensions would aggravate the vulnerability of retirees and increase their dependence in services and programs offered by the Government of Puerto Rico, which will have a yet unknown rising effect in government expenses thus frustrating supposed savings in pension payroll.
It is clearly unfair to impose additional reductions to retirees and active government employees, who have already suffered the effects of severe cuts in their benefits while bondholders and other creditors were getting paid. We are still waiting for the FOMB to express the basis to insist on the requested cuts. The FOMB’s positions is not justified, retirees and public employees have already made substantial contributions to Puerto Rico’s fiscal recovery.
The author, Miguel J. Fabre Ramírez, is the chairman of the COR, which was created by the U.S. Trustee to represent over 167,000 government retirees in the Title III case before federal judge Laura Taylor Swain. He is a retired Superior Judge, and is a past president of the Retired Employees of Puerto Rico’s Judicial Branch.
Read other updates here.
Official Retiree Committee says FOMB’s Overstatement on Detroit Pension Cuts is incorrect and Rejects Any Comparison Between Puerto Rico and Detroit
The Official Committee of Retired Employees of the Government of Puerto Rico (COR, for its acronym in Spanish) said today that it welcomes good-faith discussions of the circumstances surrounding Puerto Rico’s financial condition and its proposed fiscal plan, but that recent attempts by José Carrión, chair of the Federal Oversight and Management Board (FOMB), to justify the Board’s proposed cuts to pensions based on what happened to pensions in Detroit’s bankruptcy case is based on inaccurate data. Contrary to Carrion’s recent statements, Detroit did not cut pensions by 22% across the board. According official records, the pensions of retired police and fire department personnel in Detroit were not cut, while other pensions were reduced by only 4.5%.
Retired Judge Miguel Fabre, chair of the COR, stated that “these misstatements about what happened in other bankruptcy cases to justify the Board’s insistence on pension reductions are counter-productive to PROMESA’s goals. We welcome an honest discussion about the proposed fiscal plan, but that discussion must be based on accurate information.”
Public records demonstrate that retirees receiving their pensions through Detroit’s Police and Fire Retirement Systems experienced no cuts in their pension benefits, and that the only change in benefits experienced by these retirees was a reduction in the annual cost-of-living-adjustment (COLA) from 2.25% to 1%. In contrast, the last time retirees in Puerto Rico received a COLA adjustment to their pensions was more than ten years ago. Detroit retirees receiving their pensions through the General Retirement System experienced a cut of only 4.5% in their pension benefits and the elimination of future annual COLA increases. Fabre indicated that “the fact is that Detroit did not significantly reduce pension benefits from their pre-bankruptcy levels. In Detroit pensions were reduced, and in some cases, future increases in pension benefits were eliminated, but insisting on a 22% reduction is highly misleading.”
Equally incorrect is suggesting that the economic circumstances of pensioners in Puerto Rico is comparable to that of Detroit’s retirees. Data shows that while pensions in Detroit are relatively modest by U.S. mainland standards, they are still significantly higher on average than pensions in Puerto Rico, where the average pension is below the federal poverty level. The average pension benefit in Puerto Rico is about $12,000 per year, well below the $20,000 average pension benefit for general employees in Detroit, which after the adjustments was cut by $900. According to the COR, this data is sufficient proof to demonstrate that the case of government retirees in Puerto Rico is very different from that in the city of Detroit, and that any comparison with Detroit indicates that the Board’s proposed reductions to pensions are simply not justified.
The COR emphasized that any discussion about how Puerto Rico should emerge from its current financial difficulties must be based on facts, not information that has been manipulated. Fabre stressed that before Puerto Rico filed for Title III, government retirees had already suffered significant reductions to their pension benefits, something that the Board has ignored by insisting that pensions must be cut even further. “Additional cuts to pensions will be devastating, not only to retirees and their families, but, as economists have warned, to Puerto Rico’s efforts to restore economic activity and fiscal health.”
San Juan, PR- The Official Committee of Retired Government Employees (COR, for its acronym in Spanish), appointed by the United States Trustee in June 2017, is focusing all of its efforts to protect the collective interests of retired government employees and guarantee their pension benefits in the Title III cases of federal law PROMESA related to the Government of Puerto Rico.
“We fully support the position of the Government of Puerto Rico that excluded any adjustments to government pensions from the revised Fiscal Plan. We oppose the proposed cut by the Federal Oversight Management Board (FOMB) and continue to fight to resist this attempt against retirees,” said José Marín, a retired police sergeant.
“I guarantee that the COR is doing everything possible and using all the legal tools at hand to defend our pensions, which were already adjusted and presently 75% of government retirees receive a pension of $1,500 a month or less” said Marín.
Even if the FOMB were to certify a Fiscal Plan that included cuts to pension benefits, these cuts could not be imposed unless and until the Court confirms a plan of adjustment that also includes such cuts. The COR will continue to advocate against any cuts to pensions, whether in a proposed fiscal plan or in a plan of adjustment.
Regarding the letter sent by the federal court setting the deadline to file a proof of claim, the COR reiterated that government retirees don’t have to file a claim regarding their pensions and other retirement benefits. The COR represents the collective interests of the community of retirees in this specific matter.
Among the concrete actions that the COR is taking to defend the pensions and pension benefits of the community of 167,000 government retirees, are:
District Court Enters Bar Date Order: Retired Public Employees Do Not Need To File Proofs Of Claim For Pension Or Post-Employment Benefits
The Federal Court entered an order establishing deadlines and procedures to file proof of claims in Title III cases of the Government of Puerto Rico. The order, also known as Bar Date Order, establishes May 29, 2018 as the deadline to file said claims.
The Bar Date Order does not apply to claims for pensions or other post-retirement benefits, therefore, retired public employees do not need to file a proof of claim.
According to the order, the following groups are NOT required to file a proof of claims by the Bar Date’s deadlines to receive pensions or other post-retirement benefits:
It must be noted that the Federal Court’s Bar Date Order may apply to claims not related to retirement benefits, such as: tax reimbursements and damage claims, among other. If you believe you have such claims against the Commonwealth of Puerto Rico or other Title III debtor, please carefully review the Bar Date Order to determine if any deadline applies to your claims.
Read other updates here.
The Official Committee of Retired Government Employees (COR) issues statement regarding FOMB’s Letter to the Governor of Puerto Rico
San Juan, PR - On January 24, 2018, the Government of Puerto Rico released its new Fiscal Plan for Puerto Rico, which amends the Fiscal Plan that was certified by the Fiscal Oversight and Management Board (FOMB) in March 2017 to take into account the economic impact of Hurricanes Irma and Maria. On Monday, February 5, 2018, the FOMB issued a statement in response to the amended Fiscal Plan. Notwithstanding the devastating impact of hurricanes Irma and Maria on retirees and other residents of Puerto Rico, the FOMB reiterated its unchanged position from March 2017, that the Fiscal Plan must include (among other things) cuts of approximately 10% of the aggregate pension obligations and suggests the cuts be implemented progressively based on the size of pension benefits.
“The FOMB's statement serves to stress the importance of the Committee, and the Committee’s commitment to use all of the resources at hand to forcefully defend accrued public pensions in Puerto Rico. The Committee is working on these specific issues, together with the Government of Puerto Rico and other entities that have clearly expressed their desire to protect accrued public pensions and other retirement benefits of retirees,” said José Marín, president of the COR.
The Official Committee of Retired Employees from the Government of Puerto Rico (COR) was authorized and appointed by the United States Trustee to represent the collective interests of over 160,000 public retirees in Title III cases to restructure the debt of Puerto Rico under Federal Law PROMESA.
On January 30, 2018, the District Court issued its Opinion and Order dismissing the Complaint brought by certain holders of general obligation bonds (the “GO Bondholders”) in the ACP Master, Ltd. Adversary Proceeding (Adv. Pro. No. 17-189). The Court’s Opinion and Order incorporated many of arguments set forth in the Retiree Committee’s legal memorandum in support of the motion to dismiss the Complaint.
The GO Bondholders’ Complaint sought declaratory relief that the GO Bondholders held a first claim and lien on: (1) the proceeds of certain taxes and fees generally used to repay certain Government instrumentality obligations, which can be “clawed back” by the Government under certain circumstances; and (2) certain proceeds of property taxes levied pursuant to Act 83 of 1991. The Complaint also sought injunctive relief requiring the Government to segregate the funds at issue for the benefit of the GO Bondholders.
On August 4, 2017, the Retiree Committee filed a motion to intervene in the Adversary Proceeding, to which it attached a proposed motion to dismiss the Complaint on the basis that it was premature and in conflict with PROMESA. The Government filed a motion to dismiss the Complaint on August 21, 2017. On November 8, 2017, the District Court entered an order permitting the Retiree Committee to intervene in support of the Government’s motion to dismiss. Five days later, on November 13, 2017, the Retiree Committee filed its brief in support of the Government’s motion to dismiss, which repeated the arguments made in the Retiree Committee’s August 4, 2017 motion to dismiss.
The Court’s Opinion and Order
The Court’s Opinion and Order dismissed the Complaint in its entirety, but it did not determine certain of the legal issues presented in the Complaint. It adopted the Retiree Committee’s arguments that much of the Complaint was premature and not ripe for adjudication.
Most significantly, the Court dismissed the GO Bondholders’ declaratory judgment and injunction claims that sought to restrict the Government’s ongoing use of the tax proceeds at issue. The Court held that Section 305 of PROMESA, which limits the ability of the Court to interfere with the Government’s exercise of political or governmental powers, prohibited the Court from entering a “decree that the territorial government or its instrumentality must conduct its affairs in a manner different from the one it has chosen.”
With regard to the counts of the Complaint seeking declaratory judgment on the legal status of the GO Bondholders’ claims, including whether the GO Bondholders’ claims are secured and the nature and extent of any such security, the Court held that it lacked subject matter jurisdiction to consider those claims. The Court’s conclusion was based on its finding that those claims were not ripe for adjudication or did not establish an actual case or controversy.
Do you want to learn more about the COR? Read more here.
The COR analyzes Puerto Rico’s new Fiscal Plan to determine its potential impact on pensions and benefits
The team of legal and financial consultants for the Official Committee of Retirees of the Government of Puerto Rico (COR) is analyzing the revised Fiscal Plan presented by the Government of Puerto Rico on January 24, 2018 to determine its impact, if any, over the pensions and benefits of Government retirees.
Appointed by the United States Trustee on June 2017, the COR speaks in behalf of the community of over 160,000 retirees from the Government of PR in hearings and other legal proceedings to guarantee the protection of their collective interests of retirees.
The COR is responsible of revising any Fiscal Plan for the Government of Puerto Rico, and analyze all of the proposals presented by the Government of Puerto Rico to modify the pensions and other benefits currently received by retirees.
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Do you want to learn more about the COR? Read more here.