Puerto Rico’s financial oversight board agreed to remove proposed public employee pension cuts from a plan to slash the island’s debt, a major concession aimed at securing lawmakers’ approval for a bond restructuring that will put an end to its more than four-year bankruptcy, Bloomberg News reported. The board included a 8.5% reduction to some pension benefits in the debt adjustment plan that it filed to the bankruptcy court in March. Governor Pedro Pierluisi and island legislators have balked at any pension cuts. The board’s concession was made to end a clash with lawmakers over legislation authorizing new bonds to replace existing debt, an exchange that will allow the government to cut what it owes to investors. Still, the panel maintains Puerto Rico must freeze the teacher and judges pension systems, a move the island’s Senate is trying to block. “When the legislature and governor enact acceptable legislation, the oversight board will amend the plan to eliminate cuts to the accrued pensions of retired public employees and current employees of the commonwealth,” Prof. David Skeel, the board’s chairman, wrote in a letter dated yesterday to Pierluisi and the island’s legislative leaders. The board last week warned that it may be forced to withdraw its debt restructuring plan from the court if lawmakers pass legislation that includes Senate amendments that would increase the island’s expenses by tens of billions of dollars. Such a step would put court confirmation of the plan at risk and prolong a bankruptcy that began in May 2017.
