Puerto Rico Retirees Could Face 8.5% Cut to Pensions, in Latest Blow for Island
In the last three years, Puerto Ricans have experienced multiple crises including a deadly hurricane, a government corruption crisis and now a rare seismic sequence -- all this while grappling with a decade-long economic recession then financial crisis that has led to bankruptcy for the U.S. territory
By Cristina Corujo ••
María Burgos finds comfort in her dogs. She says being with them helps her manage stress.
Retired government workers in Puerto Rico are bracing for a possible cut to their monthly checks even as the already financially strained island faces one of its most difficult moments with recent earthquakes.
For Myra Rivera, a 69-year-old former teacher and translator, any reduction to her pension is unfair.
"That's robbing," she says.
In the last three years, Puerto Ricans have experienced multiple crises including a deadly hurricane, a government corruption crisis and now a rare seismic sequence -- all this while grappling with a decade-long economic recession then financial crisis that has led to bankruptcy for the U.S. territory.
Puerto Rico’s central government is nearly $70 billion in debt, while the retirement system has at least a $55 billion shortfall.
As part of the plan to restructure and repay the Puerto Rico Retirement System’s debt, the Financial Oversight Management Board suggested cuts to pensioners.
The fiscal plan submitted on Sept. 27 proposed an 8.5% reduction to all government retirees who receive more than $1,200 per month. Meanwhile, the cost of living in Puerto Rico is increasing, causing uncertainty among pensioners.
Rivera worked for 26 years in the Department of Education. When she retired eight years ago, she thought her financial plan was more than enough to cover her needs. By the time she retired, the island was already in the middle of the financial crisis.
"Cost of living is increasing, but my income is reducing," Rivera said.
While some say an 8.5% cut is the best-case scenario for pensioners in this crisis, the island’s bad financial health is forcing citizens to count every penny.
Pensioners are blaming politicians and other government directors for creating this financial storm while accusing the board of not having their best interest in mind.
"People who caused the problem pretend we are the ones who have to pay," Rivera said.
Puerto Rico’s Retirement System
“Ever since the first day, the system was running on [a] deficit,” says Lourdes Ramos, a member of Puerto Rico’s House of Representatives.
For years, payments to pensioners exceeded the amount of capital the system collected and the deficit continued to grow.
This forced the government to find other ways to pay government retirees. In 2017, the government decided the money to pay pensioners would come from the island’s general fund.
Pension payments represent more than 20% of the government’s collection.
Current government employees are part of a new system, similar to a 401k program.
Although this new system gives hope to government employees that will join the pension group in years to come, pensioners are still at risk of facing cuts as a way to negotiate the debt.
Effects of the Possible Cut:
Right now, there are 167,000 citizens receiving pensions, according to the government. At least 39% earn more than $1,200. Rivera is among them.
The 8.5% cut proposed by the board was calculated with the idea that people with a $1,200 monthly income will not see cuts, while those who receive more won’t fall below that number. Those who will receive $1,200 after cuts will have to juggle bills with an annual income of $14,400.
On average, a two-bedroom and one-bathroom house in San Juan can cost $600, while a utility bill can be at $200. Going to the grocery store could cost Puerto Ricans $250 per month. These expenses exceed $1,000 without transportation, healthcare, and other monthly bills.
This has caused austerity measures among Puerto Rican retirees, which leads to other social problems.
"Every day is so hard," said María Burgos, a 55-year-old woman, who retired last year due to health issues.
Burgos worked for 30 years in the Department of Education as a teacher and school director. Last year she was involved in a car accident where she suffered back injuries. Work pressure was affecting her and she decided to put her health first by retiring. But now she sometimes regrets it, because her pension is not enough.
"Maybe I should have waited more time before retiring," Burgos said. To meet all her bills, she has been forced to use credit cards as a safety net.
"I finance my water and electric bill," she said.
Now, Burgos has decided to look for a part-time job. She has worked as a tutor last semester, but due to the earthquakes, she hasn’t been able to start tutoring the kids, since school has been delayed. Burgos is also waiting to see if other opportunities arrive.
"I'm tired of this,” Burgos said.
Rivera and Burgos still have faith these cuts could be stopped, preventing more financial damages to pensioners.
Stopping the Cuts
Construyamos Otro Acuerdo (COA) is a campaign organized by Puerto Ricans to fight against decisions the Financial Oversight Management Board is making.
This group of Construyamos Otro Acuerdo meets every week in Caguas, Puerto Rico.
"The board's agreements are not the people's agreements," says Marcos Martínez, a pensioner and member of the campaign.
COA started with a small group of people speaking out against what they consider are proposals that are unfair for Puerto Ricans. As time passed, the group expanded across the island. Right now, the campaign has three groups that meet every week.
The campaign started when pensioners felt a lack of representation from the Official Committee of Retirees (COR).
Marcos Martínez speaking about different alternatives in how pensioners can promote their message of "no cuts."
In June 2017, the U.S. Trustee appointed COR as the committee that would represent government retirees during the restructuring process of Puerto Rico's debt.
The U.S. trustee program is described on their website as a component of the Department of Justice that seeks to promote the efficiency and protect the integrity of the federal bankruptcy system.
According to the description on the COR’s website, they are representing "the collective interests of pensioners from the Government Retirement System, the Teachers’ Retirement System, and the Judiciary Retirement System.”
“They don’t represent us,” was a constant comment from members of COA during a weekly meeting held in October in Caguas, Puerto Rico.
Among COA members’ biggest criticisms against COR is that the members were not chosen by pensioners. The U.S. Trustee invited retirees to submit resumes from which they picked all members of the committee. “It wasn’t a democratic process,” Rivera said.
COR’s message has been focused on promoting a reduction to the initial percentage the board had suggested.
Originally, the board proposed a 25% cut to pensioners’ checks.
While the recent deal represents a partial relief, retirees like Rivera and Burgos think a 8.5% cut is still unacceptable because they weren’t the ones who created the debt. "It's my money and no one should place their hand in my pocket," Rivera said.
Miguel Fabre, a former judge and COR’s president knows that $1,200 is not enough to live on in Puerto Rico. He says that there shouldn’t be any cuts, but Puerto Rico’s poor fiscal health is making it impossible. “We have to understand that this is a bankruptcy case, and in a bankruptcy case everyone has to yield,” he told NBC.
This hasn’t been the only conflict COR is facing. One of its lawyers, Hector Mayol has been accused by Ramos of having conflicts of interests. Mayol administered Puerto Rico’s Retirement System for four years and prior to his arrival in 2009, he used to work for Samuel A. Ramirez & Co. as managing director in Puerto Rico’s offices.
In an interview with NBC, Mayol said the firm was part of the selling group in a bond issuance done in 2008 for Puerto Rico’s Retirement System. Although he confirmed he knew about the bond transaction he said he did not directly work on it.
Mayol owned bonds in Puerto Rico’s Public Building Authority and in the Retirement System. He told NBC he sold his bonds on July 2017, a month after the U.S. Trustee appointed COR.
“I did it to avoid any accusations, when my firm was being considered to represent pensioners,” he added.
What’s next?
After the Oversight Board presented the fiscal plan, with the proposed 8.5% cut to pensions and reductions in other sectors, Gov. Wanda Vázquez supported the decision saying, “it’s the best alternative in this crossroad.”
But every decision has to be approved by Laura Taylor Swain, the federal judge in charge of Puerto Rico’s bankruptcy case.
Before approving this cut, it’s expected that Swain will oversee what bondholders, pensioners and other members involved in this issue think of the suggested cuts through a voting process. There is still no designated date for this vote. Following the latest quakes shaking the island, including a 6.5-magnitude earthquake, it’s expected that any determination will be delayed. This increases the level of uncertainty among islanders.
Ricardo Arduengo/AFP via Getty Images
Cars drive through an area heavily affected by a landslide after a powerful earthquake hit the island in Ponce, Puerto Rico, Jan. 12, 2020. A 5.9-magnitude earthquake rocked Puerto Rico on January 11, the latest in a series of powerful tremors that have shaken the U.S. territory in recent days.
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People arrive with supplies for affected residents in Guanica, Puerto Rico, on Jan. 12, 2020, after a powerful earthquake hit the island. A 5.9 magnitude earthquake rocked Puerto Rico on January 11, the latest in a series of powerful tremors that have shaken the U.S. territory in recent days.
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A person inspects rubble and destroyed power lines in Guayanilla, Puerto Rico, on Sunday, Jan. 12, 2020. Puerto Rico was hit by a series of earthquakes over the past 15 days, leading to a state of emergency, various power outages and millions of dollars of damage.
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A Caterpillar Inc. excavator sits on a destroyed bridge in Guayanilla, Puerto Rico, on Sunday, Jan. 12, 2020. Puerto Rico was hit by a series of earthquakes over the past 15 days, leading to a state of emergency, various power outages and millions of dollars of damage.
Ricardo Arduengo/AFP via Getty Images
A barber gives free haircuts to people at a shelter in Guanica, Puerto Rico on Jan. 12, 2020, after a powerful earthquake hit the island. A 5.9 magnitude earthquake rocked Puerto Rico on January 11, the latest in a series of powerful tremors that have shaken the U.S. territory in recent days.
Carlos Giusti/AP
William Mercuchi’s house sits damaged after a 6.4 earthquake hit Yauco, Puerto Rico, the day before, as seen in this Jan. 8, 2020, photo.
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A building collapses after the previous day’s magnitude 6.4 earthquake in Yauco, Puerto Rico, Jan. 8, 2020. More than 250,000 Puerto Ricans remained without water on Wednesday and another half a million without power.
Carlos Giusti/AP
Maritza Quiñones Rodriguez, 51, cries as she and other neighbors remain outdoors using camping tents and portable lights for fear of possible aftershocks after a 6.4-magnitude earthquake struck in Guanica, Puerto Rico, Tuesday, Jan. 7, 2020.
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Paramedics assist a man suffering from seizures as he and neighbors remain outdoors using camping tents and portable lights for fear of possible aftershocks on their first night after an earthquake in Guanica, Puerto Rico, Tuesday, Jan. 7, 2020.
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Volunteers distribute food to neighbors who remain outdoors using camping tents and portable lights for fear of possible aftershocks after a 6.4-magnitude earthquake struck in Guanica, Puerto Rico, Jan. 7, 2020.
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Neighbors place Martin Velez, 96, on a bed outside a shelter after an earthquake struck in Guanica, Puerto Rico, Tuesday, Jan. 7, 2020.
Carlos Giusti/AP
Store owners and family help remove supplies from Ely Mer Mar hardware store, which partially collapsed after an earthquake struck Guanica, Puerto Rico, Tuesday, Jan. 7, 2020. A 6.4-magnitude earthquake struck Puerto Rico before dawn on Tuesday, killing one man, injuring others and collapsing buildings in the southern part of the island.
Ricard Arduengo/AFP via Getty Images
The Inmaculada Concepcion church, built in 1841, is seen partially collapsed after an earthquake hit the island in Guayanilla, Puerto Rico, on Jan. 7, 2020. A 6.4-magnitude earthquake hit the island – the latest in a series of tremors that have shaken the island since December 28.
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A view of damages at Guanica town after 6.4-magnitude earthquake hit Puerto Rico on Jan. 7, 2020.
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A view of damages at Guanica town after 6.4-magnitude earthquake hit Puerto Rico on Jan. 7, 2020.
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The Inmaculada Concepcion church, built in 1841, is seen partially collapsed after an earthquake hit the island in Guayanilla, Puerto Rico, on Jan. 7, 2020.
Ricard Arduengo/AFP via Getty Images
The Inmaculada Concepcion church, built in 1841, is seen partially collapsed after an earthquake hit the island in Guayanilla, Puerto Rico, on Jan. 7, 2020.
RICARDO ARDUENGO
Paramedics carry away an injured patient after a earthquake hit the island in Ponce, Puerto Rico on Jan. 7, 2020. Eight people were hurt from the latest quake, with one man dead.
Ricardo Arduengo/AFP via Getty Images
A man carries a St. Jude statue from the Inmaculada Concepcion church ruins that was built in 1841 and collapsed after an earthquake hit the island in Guayanilla, Puerto Rico, on Jan. 7, 2020. A strong earthquake struck south of Puerto Rico early Tuesday morning – the latest in a series of tremors that have shaken the island since December 28. The shallow 6.4 magnitude quake struck five miles south of the community of Indios, the USGS said.
Carlos Giusti/AP
Debris from a collapsed wall of a building litters the ground after an earthquake struck Puerto Rico before dawn, in Ponce, Puerto Rico, Tuesday, Jan. 7, 2020.
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Amir Seneriz, president of the Logia Aurora Organization, inspects damages after an earthquake struck Puerto Rico before dawn, in Ponce, Puerto Rico, Tuesday, Jan. 7, 2020.
Courtesy Fabián Torres
A damaged wall crumbles in Yauco, Puerto Rico, following a 6.4 magnitude earthquake that hit Tuesday morning on Jan. 7, 2019.
Courtesy Fabián Torres
Cracks appeared on a damaged building in Yauco, Puerto Rico, following a 6.4 magnitude earthquake that hit Tuesday morning on Jan. 7, 2019.
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San Juan is plunged in darkness after a 6.4 earthquake rattled Puerto Rico early Jan. 7, 2020, leaving the island largely without power.
Courtesy Jesus Ramos
San Juan sits in darkness after power is knocked out following a 6.4 magnitude earthquake that hit Puerto Rico Tuesday morning on Jan. 7, 2019.
Courtesy Jorge Torres Ramos
Products scatter on the floor of a damaged grocery store in San Sebastián, Puerto Rico, after a 6.4 magnitude earthquake hit Tuesday morning on Jan. 7, 2019.
Telemundo Puerto Rico
A damaged house sits in Guanica, Puerto Rico, after a 5.8 magnitude earthquake hit off the southern coast of Puerto Rico on Monday morning, Jan. 6, 2019.
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Guanica, Puerto Rico, residents survey a felled utility pole after a 5.8 magnitude earthquake hit off the southern coast of Puerto Rico on Monday morning, Jan. 6, 2019.
Although Swain has the last word when it comes to any pension reduction, PROMESA expert Rolando Emmanuelli says neither the board nor Swain is able to make laws. Any bill involving this reduction has to be approved by the legislature. “It’s the only power Puerto Rico still has,” Emmanuelli said.
For Ramos and other members of the House of Representatives of Puerto Rico, cuts are not an option. “Discounts to pensioners are not happening,” Ramos told NBC.
Recently, the legislature passed a resolution that says no proposed cuts by the board will be passed. “We already said that such a project will not be approved,” Ramos said.
But uncertainty takes over with the new year. “The game can change,” Emmanuelli says.
In November 2020, Puerto Ricans have general elections. If the legislature shifts, they could “start working in favor of the board,” Emmanuelli says. Because a fiscal plan hasn’t been approved by Swain, decisions and recommendations can still be added.
Joe Raedle/Getty Images
An aerial view from a drone shows thousands of people as they fill the Expreso Las Amu00e9ricas highway calling for the ouster of Gov. Ricardo A. Rossellu00f3 on July 22, 2019 in San Juan, Puerto Rico. The protesters are calling on Gov. Rossellu00f3 to step down after a group chat was exposed that included misogynistic and homophobic comments.
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Singer Ricky Martin waves a flag as he joins with thousands of other people as they fill the Expreso Las Amu00e9ricas highway calling for the ouster of Gov. Ricardo A. Rossellu00f3 on July 22, 2019 in San Juan, Puerto Rico. The protesters are calling on Gov. Rossellu00f3 to step down after a group chat was exposed that included misogynistic and homophobic comments.
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People take to the Las Americas Highway in San Juan, Puerto Rico, July 22, 2019 on the 10th day of continuous protests demanding the resignation of Governor Ricardo Rossellu00f3. Protests erupted last week after the leak of hundreds of pages of text chats on the encrypted messaging app Telegram in which Rossello and 11 other male administration members criticize officials, politicians and journalists.
Joe Raedle/Getty Images
An aerial view from a drone shows thousands of people as they fill the Expreso Las Amu00e9ricas highway calling for the ouster of Gov. Ricardo A. Rossellu00f3 on July 22, 2019 in San Juan, Puerto Rico. The protesters are calling on Gov. Rossellu00f3 to step down after a group chat was exposed that included misogynistic and homophobic comments.
Carlos Giusti/AP
Thousands of Puerto Ricans gather for what many are expecting to be one of the biggest protests ever seen in the U.S. territory, with irate islanders pledging to drive Gov. Ricardo Rossellu00f3 from office, in San Juan, Puerto Rico, July 22, 2019. Protesters are demanding Rossellu00f3 step down for his involvement in a private chat in which he used profanities to describe an ex-New York City councilwoman and a federal control board overseeing the island's finance.
Eric Rojas/AFP/Getty Images
People take to the Las Americas Highway in San Juan, Puerto Rico, July 22, 2019 on the 10th of continuous protests demanding the resignation of Governor Ricardo Rossellu00f3. Protests erupted last week after the leak of hundreds of pages of text chats on the encrypted messaging app Telegram in which Rossello and 11 other male administration members criticize officials, politicians and journalists. In one exchange, chief financial officer Christian Sobrino makes homophobic references to Latin superstar Ricky Martin. In another, a mocking comment is made about bodies piled up in the morgue after Hurricane Maria, which left nearly 3,000 dead.
Scott Bair
People take to the Las Americas Highway in San Juan, Puerto Rico, July 22, 2019 on the 10th day of continuous protests demanding the resignation of Governor Ricardo Rossellu00f3. Protests erupted last week after the leak of hundreds of pages of text chats on the encrypted messaging app Telegram in which Rossello and 11 other male administration members criticize officials, politicians and journalists. In one exchange, chief financial officer Christian Sobrino makes homophobic references to Latin superstar Ricky Martin. In another, a mocking comment is made about bodies piled up in the morgue after Hurricane Maria, which left nearly 3,000 dead.
Carlos Giusti/AP
Thousands of Puerto Ricans gather for what many are expecting to be one of the biggest protests ever seen in the U.S. territory, with irate islanders pledging to drive Gov. Ricardo Rossellu00f3 from office, in San Juan, Puerto Rico, July 22, 2019. Protesters are demanding Rossellu00f3 step down for his involvement in a private chat in which he used profanities to describe an ex-New York City councilwoman and a federal control board overseeing the island's finance.
John Locher/AP
People take to the Las Americas Highway in San Juan, Puerto Rico, July 22, 2019, on the tenth day of protests demanding the resignation of Governor Ricardo Rossellu00f3.
Dennis M. Rivera Pichardo/AP
Demonstrators in kayaks gathered in front of La Fortaleza for an aquatic protest against Puerto Rico Gov. Ricardo Rossellu00f3 in San Juan, Puerto Rico, July 21, 2019. Protesters are demanding Rossellu00f3 step down for his involvement in a private chat in which he used profanities to describe an ex-New York City councilwoman and a federal control board overseeing the island's finance.
Dennis M. Rivera Pichardo/AP
Demonstrators gathered for an early morning yoga session, organized as part of the protest against Puerto Rico Gov. Ricardo Rossellu00f3, at La Rogativa Plaza near La Fortaleza in San Juan, Puerto Rico, July 21, 2019.
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Demonstrators gathered for an early morning yoga session, organized as part of a protest against Puerto Rico Gov. Ricardo Rossellu00f3 , at La Rogativa Plaza near La Fortaleza in San Juan, Puerto Rico, July 21, 2019.
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Demonstrators crowd the streets in day nine of a string of protests against Gov. Ricardo Rossellu00f3 in San Juan, Puerto Rico, Sunday, July 21, 2019.
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Demonstrators protest against Gov. Ricardo Rossellu00f3 in San Juan, Puerto Rico, Sunday, July 21, 2019.
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Protesters struggle with police to detain politicians from leaving after they met with Ricardo Rossellu00f3, the governor of Puerto Rico, at the Yolanda Guerrero Cultural Center on July 21, 2019, in Guaynabo, Puerto Rico.
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Gov. Ricardo Rossellu00f3 is seen through a window as he speaks with mayors from his party inside the Yolanda Guerrero Cultural center on July 21, 2019, in Guaynabo, Puerto Rico. Protesters have called for the governor to step down through nine days of protest on the island.
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Protesters demonstrate against Ricardo Rossellu00f3, the governor of Puerto Rico, as police man a barricade set up along a street leading to the governor's mansion on July 20, 2019, in Old San Juan, Puerto Rico.
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Protesters hold a moment of silence for those lost during Hurricane Maria as they march against Ricardo Rossellu00f3, the governor of Puerto Rico on July 20, 2019, in Old San Juan, Puerto Rico.
Carlos Giusti/AP
Nicole Diaz wears make-up with hurricane Maria's death toll number drawn on her forehead during a protest against Governor Ricardo Rossellu00f3, in San Juan, Puerto Rico, Friday, July 19, 2019.
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Protesters march down a street leading to the governor's mansion to protest against Ricardo Rossellu00f3, the governor of Puerto Rico, on July 19, 2019, in Old San Juan, Puerto Rico.
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A worker use paint to cover over profanity written on the walls directed at Ricardo Rossellu00f3, the governor of Puerto Rico, on July 18, 2019. in Old San Juan, Puerto Rico.
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Puerto Rican singer Ricky Martin, center, Puerto Rican rapper Rene Perez, aka Residente, right, and Puerto Rican reggaeton singer Bad Bunny, top, take part of a demonstration demanding Governor Ricardo Rossello's resignation in San Juan, Puerto Rico on July 17, 2019.
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Demonstrators and police face off during a protest against Ricardo Rossellu00f3, the governor of Puerto Rico, on July 17, 2019, in Old San Juan, Puerto Rico. Police used tear gas and reportedly fired rubber bullets late Wednesday evening during the protest.
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Protesters are detained by police in San Juan, Puerto Rico on, July 17, 2019. Thousands marched in Puerto Rico for a fifth day on Wednesday to demand the resignation of Governor Ricardo Rossellu00f3 following corruption accusations and the leak of text chats in which he made sexist and homophobic comments.
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Thousands of demonstrators protest against Ricardo Rossellu00f3, the governor of Puerto Rico, in front of the Capitol Building on July 17, 2019, in Old San Juan, Puerto Rico on the fifth day of protests.
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Police fire tear gas at protesters in San Juan, Puerto Rico on, July 17, 2019
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A man walks past graffiti that reads "down with the government of the rich" in the street leading to the governor's mansion on July 16, 2019, in San Juan, Puerto Rico.
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A lone protestor confronts riot police in the street leading to the governor's mansion on July 15, 2019, in Old San Juan, Puerto Rico. Police used tear gas to disperse crowds on the third day of protests as thousands marched, calling on Gov. Ricardo Rossellu00f3 to step down after a group chat was exposed that included misogynistic and homophobic comments.
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Demonstrators hold up signs during a protest calling for the resignation of Governor Ricardo Rossellu00f3 in San Juan, Puerto Rico, on Monday, July 15, 2019. A day after two former Puerto Rico government officials and four others were arrested as part of a federal corruption probe, Rossellu00f3 was engulfed in a furor over the release of profanity-laced text messages in which he lashes out at his foes.
This back and forth period between the government, COR and the board is what pensioners are using to spread their message of “no cuts.”
“They are trying to erase us from the map,” Rivera said angrily. “We have to resist and fight,” she added.
