published on January 27, 2022 - 2:11 PM
Written by Associated Press

(AP) — Pay raises for teachers, firefighters, corrections officers and other employees were included in a revised fiscal plan approved Thursday that will serve as Puerto Rico’s economic blueprint criticized by some as the island emerges from bankruptcy.

A federal control board that oversees the U.S. territory’s finances noted that many government workers have not seen a pay raise since 2014, a year before Puerto Rico announced it was unable to pay its more than $70 billion public debt load accumulated over decades through mismanagement, corruption and excessive borrowing to balance budgets.

The fiscal plan was approved a week after a federal judge signed another plan to slash the island’s debt after a nearly five-year bankruptcy battle, marking the largest debt restructuring in U.S. history. It goes into effect March 15.

“This is a very important moment for (Puerto Rico),” the fiscal plan stated. “For the first time in years, it can manage its resources without the cloud of uncertainty of bankruptcy.”

Teachers will see an average increase of 27% compared with what they earned in fiscal year 2019, firefighters 17% and correctional officers 15%.

Even medical residents will see a 20% increase, their first since 2003.
Some of those increases, however, are conditional.

Teachers, for example, will receive half of their increase on July 1, with the other half tied to them finishing a payroll and attendance system and providing for student attendance keeping. Correctional officers face similar requirements.

The Association of Puerto Rico Teachers criticized the conditions as well as the pay change, saying it only increases base salaries to $2,220 a month instead of the $3,500 it had requested.

“Do you think a teacher can live on the misery he earns and at the end of his days, not even have a dignified retirement?” the association said in a letter to Gov. Pedro Pierluisi.

The governor said in a statement that while the board did not accept all of his initiatives, including a call for greater pay increases for public employees, he called the plan “a step in the right direction.”

The revised fiscal plan also includes more than $130 million per year for the next five years for civil service reform in a bid to improve evaluations, recruitment and organizational structure. In addition, the plan includes debt service payments for the first time since the board was created by U.S. Congress in 2016, a year before the island filed for the biggest municipal bankruptcy in U.S. history.

The fiscal plan also aims to strengthen health care, public safety and education infrastructure and services and boost a pension reserve trust to help employees including police officers and symphonic orchestra members by setting aside $10.3 billion over the next decade. Puerto Rico entered the bankruptcy process with more than $50 billion in public pension liabilities.

“This fiscal plan is another step in Puerto Rico’s recovery,” said David Skeel, the board’s chairman.

Puerto Rico now faces $1.5 billion in yearly debt payments as part of the restructuring, instead of the $3.9 billion it once paid. In addition, a new deficit is not expected until 2048.

“This is a historic day,” board member John Nixon said before approving the revised fiscal plan. “While this is a huge step…there are still several things that we need to work on.”

The plan notes that since 2005, Puerto Rico’s economy has shrunk, poverty has increased, electricity has remained expensive and unreliable and “the public sector has provided declining levels of service at a high cost to residents.”

Power outages have worsened after Hurricane Maria hit the island in September 2017, razing the power grid and destroying or damaging thousands of homes. Shortly before the board’s meeting began, the judicial center in the capital of San Juan announced that a power outage forced them to move some cases to another city and reschedule others.

Puerto Rico also has struggled to recover from a string of strong earthquakes that hit the island’s southern region two years ago, the strongest ones to strike in a century.

As the U.S. territory seeks to emerge from bankruptcy and natural disasters, some have criticized the board and the debt restructuring plan, saying they haven’t cut enough debt or provided a path for economic development.

“The next few years are going to be harder for certain sectors of the population,” said Daniel Santamaría Ots, senior policy analyst for Espacios Abiertos, a Puerto Rico think tank. “The vulnerable will suffer the most.”

He also noted that the bankruptcy process has cost Puerto Rico some $1 billion in consultants, lawyers and other expenses, adding that electricity and water rates are increasing, along with toll booth fees and university credits for undergraduate students.

“From now on, we will have to pay debt again in a context of austerity with no growth,” he said.

Meanwhile, Sergio Marxuach, policy director and general counsel for the Center for a New Economy, a nonpartisan local think tank, wrote in a report released Thursday that while the plan to lift Puerto Rico out of bankruptcy is not perfect, it offers some debt relief.

“It is a really difficult task to determine, with any certainty, whether the proposed plan is adequate, the time horizon is too long and there are too many variables,” he stated. “We believe that both the best-case scenario put forward by the (board) and the worst case scenario favored by those who oppose the plan are unlikely to occur.”

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