Issued January 14, 2019
Washington, D.C. — The two million-member Service Employees International Union (SEIU) announced its strong opposition today to the Commonwealth’s proposed settlement with wealthy investors who hold bonds from the Puerto Rico Sales Tax Financing Corporation, also known as COFINA. A hearing on the settlement will take place today in San Juan, and a judge is expected to rule on it soon.
“This deal punishes the working people of Puerto Rico to bail out wealthy investors,” said Mary Kay Henry, SEIU’s International President. SEIU has been a watchdog in this bankruptcy, working with other unions to look out for the interests of the working people of the Commonwealth.
“Like many of the proposals the Fiscal Control Board has made in the past two years, the deal in front of Judge Swain would give Wall Street billions in profits while Puerto Rican families foot the bill, this time by applying the highest sales tax in any US jurisdiction for forty years, further crippling island families’ ability to recover,” said Héctor Figueroa, president of SEIU 32BJ. “If this plan goes into effect, it will hurt teachers, professionals, retirees, public employees, local business owners, and health workers. We urge Judge Swain to reject the deal and tell the Board to come up with one that serves Puerto Rico’s people instead of serving banks and billionaires.”
Puerto Rico has already had to close 300 schools, lay off thousands of workers, bankrupt its pension funds to $0, and delay crucial repairs to hospitals, roads, and other critical infrastructure to pay off debt. SEIU objects to this deal because it condemns Puerto Ricans to continue paying 11.5% of sales tax for the next 40 years, and in doing so does nothing to alleviate the financial situation of the Government or its people. The 11.5% sales tax is higher than in any other US jurisdiction, despite the fact that Puerto Rico has a per capita income of $11,688, 77% less than average per capita income on the mainland.
The sales tax is regressive and hurts working people, serving as a barrier to getting basic necessities. When Puerto Rico first raised the sales tax to 11.5%, consumer activity immediately went down, affecting the poorest of consumers. Puerto Rico cannot focus its economic reforms solely on attracting wealthy investors--it also must put money into workers’ hands so that they can spend on island and stimulate recovery.
Even with the high sales tax, the settlement is not sufficient to ensure the provision of essential public services, forcing the continued closure of schools and hospitals and making money unavailable for important infrastructure repairs. Despite all that, the debt going forward will grow each year by 4%, even though the underlying economy is projected to grow by only 1.6%.
The fact that Puerto Rico will have to continue paying this debt for 40 years puts young workers in a quandary, forcing them to decide whether they want to bear the cost of this deal for the next generation, or leave to the mainland. The record amount of young people taking airplanes to Florida endangers the future economic recovery of Puerto Rico by incentivizing its future productive workers to leave.
The fact that the Government of Puerto Rico and Oversight Board agreed to pay $13.3 million dollars in “consummation costs” to the hedge funds who negotiated this deal defies logic. SEIU will not support hedge funds getting richer while the people of Puerto Rico have to shoulder the burden of the highest sales tax in the U.S. and a crumbling infrastructure, especially since it never audited the debt to determine how much it really owes.
SEIU believes that a fair and equitable deal on Puerto Rico’s sales tax would consist of cutting Puerto Rico’s debt so that its people pay the same percentage of their income to debt as the average state. In order to accomplish that, this deal would have had to cut Puerto Rico’s debt by 84%, much more than the 33% that the Oversight Board is asking the Court to approve without an audit of the debt.
SEIU is calling on the judge to reject the settlement, and is urging Congress to invest in Puerto Rico, starting with providing for Medicaid parity. Right now Puerto Rico bears more of its Medicaid costs than any other state. Treating Puerto Rico like a state for this purpose will provide important financial relief to Puerto Rico’s strained health care delivery system.
SEIU makes these comments on its own behalf, and not as part of any Committee or group participating in the Title III proceedings.
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