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A Chronicle of a Furlough Foretold

By on August 3, 2017

(Juan J. Rodríguez/CB)

SAN JUAN – As Gov. Ricardo Rosselló’s administration and the financial control board lock horns over the matter, the seven-member panel may announce Friday, Aug. 4, a furlough program that could affect more than 100,000 public employees in Puerto Rico, sources with ties to the board said.

The reduction of workdays across the central government would kick in Sept. 1.

The following is a timeline of related developments:

March 8

The financial oversight board warns Gov. Ricardo Rosselló about the need to implement a reduction in work hours of public employees to save $35 million to $40 million monthly. The proposed furlough program would include four days a month for employees under the executive branch, as well as two days a month for teachers and other public servants. Public safety personnel would be exempt. The board also recommends a similar furlough program for employees of public corporations and the legislative and judicial branches.

March 8

The Rosselló administration argues to the board that the furlough measure is not necessary, while questioning the entity’s liquidity projections. It notes new fiscal adjustments such as the freezing of certain special assignments and tax credits, and ensures the administration’s fiscal plan addresses the problems identified by the board.

March 9

In rejecting the administration’s first proposed fiscal plan, the board requests the government include the furlough program in the document, among other requirements.

March 13

The board certifies the revised version of the fiscal plan—with amendments. The latter included a July 1 date for the beginning of the furlough program. However, it states the measure can be eliminated or reduced. If the government secures a cash reserve of $200 million by July 1, the furlough program would be delayed until Sept. 1. If the government demonstrates it achieves the “necessary savings” by Sept. 1, the measure could be reduced or eliminated, under the board’s sole discretion.

May 4

The administration says it has achieved $120 million of the $200 million cash reserve to avoid the reduction of the work day starting July 1.

June 14

The administration admits the furlough program is still in place for July 1, although assures it will comply with the $200 million cash reserve to avoid implementing the measure.

June 15

As part of the commonwealth’s Title III bankruptcy proceedings, the board files a motion in which it asserts the federal Promesa law establishes that its certifications—including for the fiscal plan—are not subject to court review.

June 1

The board warns the administration about public discourse suggesting the furlough program would not be implemented. It further says conditions that would avoid the furlough not only include the $200 million cash reserve, but also are demonstrating the government achieves targeted savings.

June 22

Citing sections of Promesa, Gov. Rosselló argues to the board that the government is not bound to accept the furlough program proposed by the board. Specifically, the administration points to Section 205 of the federal law, which would leave to the government’s discretion the implementation of “recommendations” such as the furlough measure.

June 27

The board asks the administration to provide further evidence on how it will implement reductions in government spending that, according to the fiscal plan, must total $440 million during fiscal year 2018. Of the estimated amount, the entity says some $200 million still lacks implementation plans that demonstrate how it will be achieved.

June 30

The administration meets the $200 million cash reserve and the board postpones the furlough program until Sept. 1. The body also warns it would go to court if necessary to force implementation of the measure. For its part, the Rosselló administration says it will be “diligent” to meet the conditions that would avoid the furlough.

July 6

Gov. Rosselló meets with board director Natalie Jaresko and chairman José Carrión to discuss implementation plans for the fiscal adjustment measures. According to La Fortaleza, the governor reiterated his opposition about the furlough program during the meeting.

July 24

The government announces a new budget reserve equivalent to 5% of the agencies’ budgets, which is expected to generate some $100 million in additional adjustments.

July 26

Amid reports of imminent announcements by the board on the implementation of the furlough program, the administration announces it will unveil an initiative to help avoid the measure. The latter involves an incentivized, voluntary retirement program for public employees that would achieve savings of up to $1 billion over the next 10 years, according to the administration. It further says the furlough could have a negative impact of $500 million on the local economy.

Sept. 1

Date set by the board for the beginning of the furlough program.

Sept. 30

Date on which the board will decide whether to eliminate or reduce the proposed elimination of public employees’ Christmas bonus.

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