Public Employee Press

Editorials
Crisis in Puerto Rico

Hedge fund vultures want public service workers and the poor to assume the burden of the debt crisis in Puerto Rico.

The island's governor, Alejandro Garcia Padilla, created a stir on Wall Street in June when he said Puerto Rico's $73 billion debt cannot be paid and must be restructured. In August, Puerto Rico failed to meet a debt payment - $58 million - for the first time in its history.

The solution called for by hedge funds managers is for Puerto Rico to deepen austerity policies that have resulted in layoffs of public employees, an erosion of public services, school closings, pension cuts, and higher prices for gasoline, electricity and water. These budget cuts would hit likely Servidores Publicos Unidos de Puerto Rico, an affiliate of DC 37's national union, the American Federation of State, County and Municipal Employees, which represents 23,000 public employees.

Hedge funds hold $5.2 billion in Puerto Rican bonds and commissioned a report, which calls for more school closings, improved tax collection and deep cuts in public services.

Unlike Detroit, since federal bankruptcy law does not cover the self-governing commonwealth, Puerto Rico cannot declare bankruptcy.

AFSCME, SEIU, the UAW and politicians in the tri-state area are urging the federal government to provide Puerto Rico with debt relief and access to bankruptcy protections. Pension trustees want the New York City Employees' Retirement System to disinvest from risky and costly hedge funds, which stand to profit from this debt crisis.

The elimination in 2006 of tax breaks for U.S. corporations operating in Puerto Rico and the 2008 financial meltdown have left Puerto Rico's economy in ruins. Unemployment stands at 12 percent, 45 percent of the people live in poverty, the health-care system is in a state of near-collapse and an exodus is occurring as Puerto Ricans leave to seek a better life in the United States.

Simply put, Puerto Rico cannot afford to meet the debt and experience further economic misery. And that's why unions are calling for debt restructuring and an end to austerity.