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Revision of Puerto Rico fiscal plan must consider 15% smaller population

By on October 31, 2017

SAN JUAN – The government estimates that about 15% of the population of Puerto Rico will leave the island in 2017, an issue that worsened after the devastation caused by Hurricane Maria a month and a half ago. This means at least 510,000 people would move abroad, or more than the 445,000 residents who left from 2006 to 2015, according to data from the Puerto Rico Statistics Institute.

The number is also greater than estimated by the City University of New York, whose report finds that about 10% of residents would leave this year from Puerto Rico, which until months ago, had a population of 3.4 million.

Natalie Jaresko, executive director of the fiscal board (Juan J. Rodríguez / CB)

Outmigration estimates will be crucial in the preparation of the government’s new fiscal plan, which will now be for five years, not 10, and for which a draft must be submitted by Dec. 22, the fiscal control board requested Tuesday during its 10th public meeting, held at the College of Engineers, in Hato Rey.

“Hurricanes Irma and Maria fundamentally changed the reality of Puerto Rico, and the revised fiscal plan should take that reality into account,” said the executive director of the board, Natalie Jaresko, during the three-hour meeting.

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The former Ukraine finance minister does not believe the new developments alter the mission of the board to achieve fiscal balance on the island, restore economic development and a return to financial markets, as established by the federal Promesa law. Puerto Rico was already facing the biggest municipal bankruptcy process in the United States and now it will have to recover from one of the worst hurricanes to hit the nation,” said Jaresko, who called the situation on the island a humanitarian crisis.

A halt to outmigration sought

“We need to start looking at the factors that will encourage the population to stay on the island, those things that are critical for every family, for every resident: healthcare, education…, first responders, the ability of the government to provide the very basic services and quality [of life] that would provide residents an inspiration to stay,” said the director of the fiscal board, an entity that was already taking into account migratory movement because of the effect they would have on the fiscal plan, among them, less government revenue.

To obtain accurate estimates, Jaresko suggested continuing discussions with the Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym) and consulting local demographers to collaborate in the process.

New fiscal plan elements

In addition to outmigration, the new fiscal plan must take into account the halt in government revenue and the infrastructure problems caused by the major hurricane, the investments that must be made in recovery work and the federal funds that will come as a result of the emergency, Jaresko said.

A review of the subsidies eliminated in the government fiscal plan must also be considered. The plan certified in March reduced funds to municipalities and the University of Puerto Rico (UPR), and had included substantial government cuts.

Likewise, the fiscal plan should include: structural reforms that are carried out “as soon as possible, no later than fiscal year 2022,” the last one covered in the document; recovery efforts for energy infrastructure, aqueducts, transportation and housing; as well as metrics and standards for matters such as education and jobs.

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Before the delivery of the new draft fiscal plan, the board will hold three public hearings, two in San Juan and one in New York, to learn creditors’ position regarding the macroeconomic effects of the hurricane on the island, fiscal measures and economic development matters. Two private hearings will be held with them.

Revisions of other fiscal plans requested

The central government draft fiscal plan must be accompanied by new fiscal plans for the Electric Power (Prepa) and Aqueduct and Sewer (Prasa) authorities, public corporations that also sustained considerable damage from Maria.

The board will address those fiscal plans on Jan. 12, with the intention of certifying them on Feb. 2.

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Meanwhile, the UPR, Highways and Transportation Authority (HTA), Government Development Bank (GDB) and Cooperatives Supervision & Insurance Corp.(Cossec) must submit new drafts of their respective fiscal plans on Feb. 9, to receive a response from the board on Feb. 23.

The government’s representative to the board, Christian Sobrino, was confident the administration of Gov. Ricardo Rosselló would work “hard to comply” with the delivery dates, as long as the response to the hurricane emergency allows. “If both can’t be done, we’ll opt for saving lives,” he said.

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