Saturday, September 21, 2019

Fiscal board certifies its version of 2020 budget for Puerto Rico government

By on July 1, 2019

The Puerto Rico Capitol in San Juan (CB photo)

Legislature passes larger budget, which could result in court fight

SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced Monday that it certified a fiscal year 2020 consolidated budget of $20.2 billion, including General Fund, Special Revenue Fund and Federal Funds.

The executive director of the board, Natalie Jaresko, sent a letter to the legislative leaders Sunday, giving them a deadline.

“If the Legislature submits a budget by 5:30pm Atlantic Standard Time, the Oversight Board will be able to review it for consistency with the certified Fiscal Plan to either approve it or issue a notice of violation. If the Legislature fails to submit a budget by 5:30pm Atlantic Standard Time, the Oversight Board will have no choice but to develop a revised, compliant budget for the Commonwealth for fiscal year 2020 and submit it to the Governor and the Legislature before the beginning of the new fiscal year tomorrow,” Jaresko said in her letter to House Speaker Carlos Méndez and Senate President Thomas Rivera Schatz.

The Legislative Assembly ended up passing a $9.62 billion budget hours later, which included some $380 more in spending than the board’s version. Méndez said the Constitution gave him until 11:59 p.m. of June 30 to pass a budget.

The legislature’s budget added $286 million to cover municipalities’ contributions to the government’s health and retirement plans.

“We are going to approve a budget that the Board will be able to veto and do whatever it wants, but we have acted in accordance to what is required of us by mandate of our Constitution,” Rivera Schatz said minutes before the legislation was passed by voice vote. “The federal Senate went to recess and did not address the [fiscal board’s] appointments, what do you think? Maybe they confirm them, maybe not. They were declared illegitimate by a court. The Board had an individual named Zamot who was in charge of the strategic development projects: one of high-cost housing and left there amid hints of illegal acts. That’s the Board.”

The Senate president further said the island’s main problem is its colonial status.

“If we were a state we would not have a Board. We would have the tools to move forward. People who were not elected or have our vote decide for us today. While we are a colony, we will be subordinated to the whim of some person in the federal government,” Rivera Schatz said, defending the budget presented by the executive branch.

According to the press release with the Senate president’s remarks, the budget bill says the state has more than $6 billion in cash, “and even if we were paying the debt, which is frozen through the litigation of Title III of PROMESA, we would have over $4 billion in the Federal Treasury,” Rivera Schatz added.

The fiscal board said in its press release Monday that its certified budget “ensures adequate funding for government services and focuses resources on priorities of public safety, healthcare, and education. It secures pensions now and enables them to be secured in the future. It maximizes the potential of federal disaster funding and includes significant capital expenditures to improve Puerto Rico’s infrastructure, while continuing to right-size the government with efficiencies in personnel and non-personnel spending.”

Gov. Ricardo Rosselló had said he would wait to see the board’s budget to determine the next steps to take, but that he would not discard taking the matter to court to implement his proposed spending plan.

“Obviously we will take the actions we understand are pertinent, I have spoken and I have said I will not limit myself to using resources in the courts and what is appropriate now is to certify and validate the budget in the Legislative Assembly,” the governor replied to questions from the press.

Puerto Rico fiscal board Chairman José Carrión, foreground, listens while Gov. Ricardo Rosselló delivers a speech, on July 27, 2017. (CB file)

“The budget the Oversight Board certified is a budget that the Government of Puerto Rico can afford and that provides sufficient funds for the services the people of Puerto Rico need and deserve,” board Chairman José B. Carrión said. “The Government has to remain within this budget to comply with the fiscal plan. That is the law under PROMESA.”

The board bulleted what the central government budget includes:

• The $9.1 billion General Fund, which is the fund the government uses for its day-to-day operations. The General Fund increases by about 3.4% from the previous fiscal year, reflecting the need to cover healthcare costs in light of the reduction of federal Medicaid appropriations, and an increased focus on public safety. 

• The $3.5 billion in Special Revenue Funds, which is comprised of revenue the government generates from fees and services dedicated to particular uses, reflects a more than 30% increase. This increase is partly a result of including previously unbudgeted expenses to ensure transparency of all government spending going forward. 

• The $7.6 billion in Federal Funds, reflecting a more than 17% decline in expected funding from the U.S. Government, primarily as a result of reduced appropriations to fund the Island’s Medicaid program. 

“The budget prioritizes spending in areas identified as government priorities,” the board said, adding it includes the following:

• $4.3 billion for healthcare, reflecting continued agency consolidation and personnel efficiencies, as well as critical investments, including $25 million for the Comprehensive Cancer Center, $12 million over two years to enable the Psychiatric Hospital to increase standards of care and achieve Medicare certification, and $6 million in targeted investments of equipment and medical products. 

• $2.9 billion for education to improve educational outcomes – reducing the achievement gap in proficiency tests and improving the graduation rate – and reflecting savings from the schools that have already been closed in previous years that reflect the decline in students. Teachers and school directors will receive a salary increase of $500 a year in addition to the $1,500 and $5,000 increase they received in fiscal year 2019, respectively. 

• $2.6 billion in PayGo that ensures central government pensions are fully paid. 

• $1.1 billion directed to public safety, which includes pay increases for police and firefighters and money for new equipment for both groups. Police officers will receive a 30% salary increase over two years; firefighters will receive a salary increase of $1,500 in the 2020 fiscal year. 

• $46 million in employer social security contributions for police officers, teachers, and judges who have not been covered previously under Social Security and would enroll during the 2020 fiscal year. 

“The central government budget continues to support the right-sizing of the Government of Puerto Rico to ensure that government agencies deliver services more efficiently and that the government is more appropriately sized to the population. The government’s payroll expenses decrease 11% across fund types, to $3.8 billion,” the board wrote.

The fiscal panel said the General Fund budget savings include “a roughly 10% reduction from the previous year in the government’s back office expenses. The General Fund budget also includes a 30% cut in professional services expenses, and an about 13% reduction in spending for the Legislature to bring it in line with other states’ spending on full time legislatures,” and that the board reduced its own budget by 11% “to fund payroll increases for the Department of Health and Emergency Medical Services, as well as funds to cover salary increases for firefighters.”

Capital expenditures in the General Fund increase 38%, to $298 million. Including federal funds, capital expenditures for the central government totals $942 million.

“The budget also reflects a significant improvement in fiscal transparency, which allows the people of Puerto Rico to have a better understanding of what the government spends money on,” the board said. “For the first time, the budget includes appropriations for the Municipal Improvement Fund, the Municipal Development Fund, and the Municipal Finance Corporation, which together total $209 million. All cash subsidies to industry, including the Rum Excise Tax cover-over that subsidizes rum production and the Rums of Puerto Rico subsidy to promote Puerto Rican rum, are also detailed in this budget to present the most accurate picture of spending and ensure fiscal responsibility.”

The board also certified the fiscal 2020 budgets for the Puerto Rico Electric Power Authority (Prepa), the University of Puerto Rico (UPR), the Puerto Rico Aqueduct and Sewer Authority (Prasa), and the Puerto Rico Highways and Transportation Authority (HTA).

At the Capitol’s upper chamber, the report of the conference committee on the budget was signed by Rivera Schatz and the Sens. José Nadal Power, Ángel “Chayanne” Martínez Santiago and Treasury Committee Chairwoman Migdalia Padilla Alvelo. Signing for the House were Méndez Núñez and Reps. Luis Pérez Ortiz and Pedro Julio Santiago Guzmán.

Other measures passed

On the last day of the fifth ordinary session, the House also passed the conference committee report on House Joint Resolution 1635, which establishes the new “Code of Incentives of Puerto Rico.”

Among the other approved conference committee reports, were House Bill 1716, which amends the “Law to Guarantee Payment to Our Pensioners and Establish a New Defined Contribution Plan for Public Servants”; as well as House joint resolutions 509 and 518, which reassign funds to the municipalities, agencies and government instrumentalities.

Likewise, House Bill 1578, which adds a new statute to the “Insurance Code of Puerto Rico”; House Bill 1976, to create the “Law to facilitate the Implementation and Use of Small Wireless Installations,” or Small Cells in the Telecommunications System in Puerto Rico”; Joint Senate Resolution 390, which reallocates funds to municipalities, agencies and public instrumentalities; and Senate Bill 1293, which modifies the “Act of the Inspector General of Puerto Rico.”

Others passed were conference reports for House Bill 799, which amends the “Government Personnel Retirement Act”; House Bill 1237, which modifies the “Pharmacy Law of Puerto Rico”; House Bill 1438, which adds a new subsection to the “Puerto Rico Public Safety Department Law”; House bills 1468 and 1698, which also add to and modify the “Law of the Department of Public Safety of Puerto Rico.”

Furthermore, conference reports on House Bill 1982, which adds an article to the “Agricultural Insurance Act of Puerto Rico”; House Bill 2038, to create the “Puerto Rico Government Gambling Commission Act”; House Bill 2112, which establishes the “General Services Administration Act for the Centralization of Purchases of the Government of Puerto Rico of 2019”; Senate Bill 713, to adopt a protocol to determine cause of death in cases in which environmental factors related to a weather event or catastrophic disaster were a factor; and Senate Bill 1050, which establishes the “New Weapons Law.”

On the other hand, the final report of the Federal and International Relations and Status Committee was received on House Resolution 1042, which investigated security protocols at the island’s airports; and the first partial report of the Integrated Development of the Northeast Region Committee, under House Resolution 1073, to investigate the situation of the municipalities that make up this region, in the areas of socioeconomic development, unemployment, housing, education, health and public safety, among others. All reports were referred to the related agencies.

Before concluding the session late Sunday evening, the term to submit reports by the committees on the Integrated Development of the Eastern Region; Treasury Budget and Oversight, Management and Economic Stability of Puerto Rico, “PROMESA,” were extended via  House resolutions 1460, 1461 and 1462 respectively.

The House of Representatives concluded the work of the fifth Ordinary Session, sine die.

The Senate also endorsed the conference committee report on House Bill 2038, which proposes establishing the “Law of the Gaming Commission of the Government of Puerto Rico,” as well as the report of the conference committee of Senate Bill 1050, which proposes a New Weapons Law.

Budgets certified by the board on June 30 2019

—CyberNews contributed to this report.

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