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.
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