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.”