On October 16, legislators members of the government cabinet and the Board could meet to attend to the project of the Debt Plan of Adjustment.
On October 16, legislators members of the government cabinet and the Board could meet to attend to the project of the Debt Plan of Adjustment. (Archivo)

After Puerto Rico House and Senate accelerated the debate on the bill that creates the enabling legislation for the Debt Plan of Adjustment (POA), seeking to have it ready by last Monday, House Speaker Rafael “Tatito” Hernández Montañez said he will not move forward with the amendments introduced by the Senate until the Fiscal Oversight Board expresses its opinion on the final language of the measure.

The House leader, who had separated today’s session to concur with the changes introduced by the Senate on Wednesday, said he wants to gather, under the same roof, preferably in a “neutral” place on October 16, Board representatives, the governor, and the Legislature to discuss the measure. The targeted date to have a bill approved was last Tuesday when the October hearing on the central government’s debt restructuring process under PROMESA Title III was held.

Hernández Montañez said he has no objections to the Senate amendments that have circulated.

Although yesterday the fiscal entity did not react to Hernández Montañez’s announcement nor has it expressed about House Bill 1003 version with the amendments included in both legislative bodies, in a letter signed October 1, David Skeel, chairman of the Board said the Legislature “is well-aware of the Oversight Board’s parameters for the legislation enabling the issuance of bonds necessary to effectuate the 7th Amended Plan of Adjustment (the “Plan”). "

Skeel adds that “the Oversight Board even provided draft legislation to you and the President of the Senate on September 24, 2021,” and the letter continues: “You have all of the information necessary to pass legislation that will be acceptable to the Oversight Board. Accordingly, the Oversight Board will await the final legislation passed by the House and the Senate before providing further comment”.

Last Wednesday, however, the Board filed a brief with Judge Laura Taylor Swain, who addresses the territorial government’s bankruptcy, expressing concern that the Legislature had modified the original agreement between the parties.

The Board attorneys told Swain that with the approved amendments there is no “certainty” that the POA before the judge’s consideration can be implemented and pointed at the Legislature and the governor for “undermining” the restructuring process. The fiscal entity argued that it would need additional “guarantees” from the judge to implement the POA, but did not go into details.

Pedro Pierluisi said yesterday that he is inclined to sign the enabling legislation for the Debt Adjustment Plan (POA), but warned that it is necessary to wait for the House to concur with the version approved in the Senate.

“I am going to review it. Based on the information I have, I am inclined, I think, that I can sign it. But I must review it with my work team,” the governor said yesterday as he left the Convention Center where he participated in an activity.

From the Board’s perspective, the agreement with the Legislature focused on raising, from $1,500 to $2,000, the monthly benefit threshold for pensions that would be subject to the 8.5 percent cut proposed by the fiscal entity, as well as “allowing” the government to create a mechanism to compensate those pensioners who would be affected by the cut. This, if the Legislature approved the bond exchange necessary to restructure the central government’s current debt. In the House version of Bill 1003, at the request of the Executive Branch and the unions, the bond exchange was conditioned to excluding pension cuts from the plan.

Meanwhile, among the amendments made to the bill in the Senate, they approved legislation to also eliminate the freezing of retirement benefits such as increases to compensate for inflation.

The argument among different lawmakers, including legislative presidents, is that the final product of House Bill 1003 would force the Board to amend the POA to include, in addition to zero cuts and additional funds to municipalities, a series of initiatives promoted by the Senate, such as zero cuts to the University of Puerto Rico (UPR), the creation of an investment fund for small businesses and a study to determine the feasibility of implementing a universal health system.

In a press release, Hernández Montañez warned that the measure will not be considered if the Board does not guarantee in writing that it will comply with the established agreements regarding zero cuts to pensions, $62 million for municipalities, and resources for the UPR. Among other things, he said they will not approve a bond exchange authorization without “guarantees” from the Board. That was the argument raised by lawmakers such as Carlos “Johnny” Méndez Núñez, José Enrique Meléndez, Héctor Ferrer Santiago and Jesús Manuel Ortiz about the alleged mistake of authorizing new bonds without a commitment from the fiscal entity.

“The Legislature has complied. Now, it is the Board’s turn. We complied with the approval dates in both bodies as designed,” said Hernández Montañez and added that the wise thing to do now is to wait for the Board to express to ratify the measure. “We are calling the Board, the governor and the Senate leadership for next Saturday, October 16, so that we can settle the agreements between the parties,” he continued. “What we agree will be reaffirmed next session on Monday, October 18,” indicated Hernández Montañez who also noted the chair of the House Treasury and Budget Committee, Jesús Santa Rodríguez, will represent the body in the technical meetings that begin October 11.

Santa Rodríguez will be in charge since Hernández Montañez, Senate President José Luis Dalmau, and other lawmakers such as Marially González, Gretchen Hau, Angel Matos, José “Conny” Varela, Carmelo Ríos and Javier Aponte Dalmau will be attending the National Conference of State Legislatures in Dublin, Ireland.

The Legislative Leaders International Symposium will be held October 10-14.

Hernández Montañez’s announcement triggered criticism from the PNP minority including Méndez Nunez, Meléndez, Lourdes Ramos, Juan Oscar Morales and José Aponte Hernández.

“Here, what we have here is an agreement between the Board and the House Popular Party to include ambiguous language in the bill to allow pension cuts without affecting the issuance of bonds. What was the hurry to approve it last Thursday (September 30)? None, it was not to change the language, so that pension cuts would be allowed. Since the Senate acted and introduced that amendment, due to our delegation’s insistence, now the president wants space. What we have here is a nefarious agreement to cut pensions,” said Méndez Núñez.

Senate Treasury Committee Chairman Juan Zaragoza said Hernández Montañez’s position does not surprise him because, in effect, it is part of a strategy.

“It is one of the strategies discussed from the beginning and it was that if the Legislature has a list of the Senate’s requests, why not wait for them to answer (Board) to include them? But strategically the decision was to include them (the Senate amendments) to put pressure on them to answer us. I am not surprised by Tatito’s (Hernández Montañez) position because it was one of the options we had,” Zaragoza told El Nuevo Día.

Zaragoza said Wednesday that in the consideration of House Bill 1003 the Legislature had the negotiating power with the Board to include their goals in exchange for the fiscal entity’s proposal, which consists of the exchange of $7,400 bonds plus paying $7 billion to bondholders. Zaragoza also noted that the legislative body was going on the “offensive.”

“Now, we´ll see what the Board says,” concluded Zaragoza, who added that his last conversation with Hernández Montañez was a week and a half ago when he told him to “put what you understand there,” referring to amendments to House Bill 1003 because he was going to concur with the changes.

Santa Rodríguez stressed that the legislative body has not received specific objections from the Board.

“The reality is that every time we make a proposal, and I’m sure the Senate does too, we ask the Board for its opinion. So far, we have not received anything, and before we have the bill there, I want to be sure that the conditions we are setting here are the right ones. I think that line is good, I think we have to get them to talk,” said Santa Rodríguez.

“And if there is a major issue, we will sit and talk again,” he added.

For the next few days, Santa Rodríguez will work with his team and Hernández Montañez’s advisors to review the final language with the Senate amendments.

The PNP position

Before knowing that the House concurrence process was postponed, PNP Alternate Speaker Gabriel Rodríguez Aguilo anticipated that the additional amendments in the Senate regarding pensions could even increase the number of PNP votes in the House.

However, he indicated that first, the delegation would have to analyze all the amendments.

“There are colleagues who will not change, such as Lourdes Ramos, but there could be more votes. What happens is that Juan Zaragoza included other amendments, the list and we have not discussed them. In my experience, until I read the measure and interpret it, I cannot say if I am for or against it. It is a very technical measure and too important to vote blindly,” he said.

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