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Statements from the Puerto Rican League of Cities following the detrimental decision of the Court of Appeals for the First Circuit in Boston

Writer's picture: Liga de Ciudades de Puerto RicoLiga de Ciudades de Puerto Rico

Updated: Aug 19, 2024

(San Juan, Puerto Rico - July 30, 2024) — The executive director of the League of Cities of Puerto Rico, Cristina Miranda Palacios, reiterated through written statements that the organization will continue fighting the battle in favor of local governments and their communities in other public spaces and forums.


"The ruling of the Court of Appeals for the First Circuit in Boston demonstrates that the Fiscal Control Board and the state continue to leave our people helpless, who depend on the essential services offered by municipalities, the government entity closest to the community. Our local governments have assumed the provision of essential services to citizens, many of them the responsibility of the central government, without the allocation of available funds, despite a continuous imposition of unilateral austerity measures and without real proposals that strengthen them. our local governments so that they can continue the essential services that are essential for the well-being of our people and our communities," said Miranda Palacios.



Miranda Palacios' expressions come after the Court of Appeals for the First Circuit in Boston ruled against the League of Cities of Puerto Rico, in a struggle between the Fiscal Control Board (JCF) and the Government's instrumentalities ( ASES, AAFAF, Retiro and CRIM). The lawsuit has its genesis in Law 29-2019, better known as the “Law for the Reduction of Administrative Burdens of Municipalities,” and which was promulgated by then-governor Ricardo Rosselló Nevárez. This measure was presented as one that sought to do some justice to the already dilapidated municipal finances by exempting it from paying contributions to the central government health card and PayGo. However, this law was really a “rescue” to the Central Government, as they failed to comply with the creation of a new fund for the municipalities that had been included in the 2017 Fiscal Plan, which included the phased elimination of the Equalization Fund. , and that would allow up to $426 million to be raised to cover the loss of $350 million projected by the municipalities.


The law was in force for about a year, until May 2020. The JCF sued Puerto Rico in the Title III Cases court to annul Law 29-2019. Federal Judge Laura Taylor Swain heard the petition and declared the law in controversy “null” and “without effect,” alleging that it did not comply with the Promesa Law and, consequently, with the certified Fiscal Plan. In the filed lawsuit, La Liga asked the court to: (1) resolve that the debts claimed by CRIM, ASES and the Retirement System were non-existent, based on the Board's incorrect interpretation that Judge Swain's decision on the nullification of Law 29 was retroactive; (2) to declare as illegal the withholdings made by these entities against the Municipalities under the pretext of recovering debts; and (3) to prohibit the defendant entities from attempting to collect what corresponds to the period from May 17, 2019 to May 6, 2020 during which Law 29 was in full force. The League also asked the court to prohibit the Fiscal Control Board from interfering with the fiduciary responsibilities that the CRIM and AAFAF have towards the Municipalities.


The Boston judges ruled that by declaring Law 29 null and void, the municipalities' pre-existing pension and health plan obligations "remain in full force and operation," even during the period in controversy, while the law was in force. Miranda Palacios shared that the position of the legal representation of La Liga continues to be that "Judge Laura Taylor Swain invalidated the law only prospectively, not retroactively, so withholdings from the municipalities to pay a debt that they did not owe were not appropriate." .


After this decision, local governments will not see the return of the funds that CRIM and ASES unilaterally withheld, estimated at over $350 million. They must also continue making their contributions to the Retirement Plan for public employees and the Government Health Plan. “Both payments are the responsibility of the central government. The municipalities have lost about $350 million due to this wrong decision, just at the moment when the viability of 43 of them is at stake, with the elimination of the Equalization Fund. Furthermore, they have continued to assume responsibilities from the central government without receiving fiscal resources for it. This is a matter of justice to local governments, who once again are left devoid of measures to strengthen their deteriorated municipal finances for the good of their communities,” said Miranda Palacios.


"Protecting the municipalities is actually protecting the country and our communities. In the League of Cities of Puerto Rico we are committed to systemic change to not continue perpetuating the same stagnation as always and endure 'whatever comes'. Let us do justice to local governments before the continuous delegation of roles and responsibilities by the central government, without the corresponding delegation of funds and resources," concluded Miranda Palacios.

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