Friday, September 22, 2017

Puerto Rico government to fight furlough in court



By on August 4, 2017

FAJARDO, Puerto Rico – The governor’s representative to Puerto Rico’s fiscal control board, Christian Sobrino, insisted Friday that the Ricardo Rosselló administration will not implement a public employee workday cut due to the $600 million impact it would have on the economy, a position it is ready to defend in court.

Nor will the administration reduce public pensions by 10 percent, he added, despite members of the fiscal board declaring in its ninth public meeting—the fifth held in Puerto Rico—that the government would be in breach of the certified fiscal plan if it does not perform the cuts. For the oversight panel created by Promesa, a federal law, both reductions are part of the fiscal plan certified on March 13, when the government should have expressed its objections.

“I would like to think that reason will prevail and that there will be no litigation … If [the board members] want to go to court, we are going to defend ourselves … If they sue us, we will win and there will be no workday reductions,” Sobrino stressed during a press conference at the conclusion of the meeting in a Fajardo resort.

A Chronicle of a Furlough Foretold

Sobrino, who is also president of the Government Development Bank (GDB), explained that before the case is brought before a federal court, the government must explain in writing why it will not put the furlough in effect or cut pension benefits. That document must be sent to the board, the U.S. Congress and President Trump.

If litigation were to ensue, it would be paid in full by the Government of Puerto Rico, for it allocates the board’s operating funds, as provided by Promesa. Sobrino said the board’s defense would be paid for with the $60 million budget allocated for it, which could increase if the entity so requires it.

Puerto Rico’s fiscal board approves implementation of furlough program

The government’s position in this dispute is that the two-workdays-a-month furlough is a “recommendation” and is not part of the certified fiscal plan because it was only included in the certifying document and not in the plan’s language.

Regarding the pension system’s 10 percent cut, which the fiscal plan stipulates should happen by fiscal year 2020, Sobrino said a pension systems reform is underway and being discussed in the Legislature, and which will not include the reduction.

The government says decisions such as these are part of the public policy the governor assumes and maintains his position that section 205 of Promesa establishes the protocol regarding recommendations the board makes and allows, subject to an explanation, and that the territory’s executive or legislative branches may reject them.

“When one looks at the legislative record of the Promesa law, it says that the purpose that a measure other than an appropriate recommendation accepted by the Government could not be imposed was to ensure that the only way to carry out that type of action in Puerto Rico be with the cooperation of the governor; if there is no cooperation, then under section 205 there is no way to activate [the furlough],” Sobrino insisted.

In an aside, Chairman José Carrión replied to a question by Caribbean Business that since he anticipated there would be litigation, the board’s legal advisers were analyzing how they will proceed.

“Besides the cost this could have in lawyers, there is the issue that if we don’t start Sept. 1, the litigation takes time and that means that we will probably have to implement more furlough days,” Carrión said.

Gov’t and board clash during meeting

After the board’s executive director, Natalie Jaresko, announced that a two-workdays-a-month cut for public employees, except the police, should begin in September and run through the end of the fiscal year in June or until $218 million in savings is achieved, Sobrino engaged in a heated discussion with the official and other board members.

“The board doesn’t have the power to impose its recommendations, Promesa is clear on that… We believe there shouldn’t be a furlough. The board will set the guidelines, but it won’t replace the government… The furlough won’t happen,” Sobrino said defiantly during his first meeting as the government’s spokesperson before the board.

Upon this, board member Carlos García declared that the fiscal entity is concerned over the government not achieving the necessary savings to date, according to projections, which is why if the furlough program were postponed, it could be “worse” and lead to more than two days cut a month.

“[The furlough] was not a recommendation. It was a condition to certify the fiscal plan. The government acknowledged it,” García said, to which Sobrino replied: “The governor didn’t agree with those conditions.”

Ana Matosantos, the only woman on the board, added that the decision to require a furlough “is very difficult” and that it was made because the government’s implementation plans fell short, to which Sobrino retorted that the board’s projections are incorrect.

Despite Sobrino’s defiance, the board unanimously approved–with one member absent–the public employee furlough program.

 

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