Fiscal board to give government ‘a break’ of one year in new Fiscal Plan
SAN JUAN – The executive director of the Financial Oversight and Management Board (FOMB), Natalie Jaresko, said Tuesday that the Government of Puerto Rico will be given a one-year moratorium on austerity measures, so it can prioritize the implementation of structural and technological reforms.
Jaresko said Puerto Rico should take advantage this year and focus not only on increasing savings, but also make changes in the way it operates, how it provides services, how it interacts with businesses and in creating a constant economy. This pause includes the subsidy cuts to the University of Puerto Rico and to the municipalities, Jaresko said in a press conference.
There will be no increase in government cuts, neither in personnel nor in other line items in fiscal year 2021, she said, adding that they are taking time to instead of focusing on the budget, focusing on the changes that have to be implemented. The budget will be the same for most agencies, but the changes they have to make are more important. Because the way in which the government met fiscal goals in previous years was with the simplest method. Applying early retirement plans in large parts of the Government. That is not the most efficient way and it is not the way in which it is projected in this Fiscal Plan. What is projected is going back and doing the hard work of reorganizing the government. In the Police, it is done by moving officers from the offices and sending them to the field and putting civilians in the offices. That is why this time, instead of focusing on budget cuts, we are going to emphasize the changes that have to occur for those fiscal goals to be met, she added.
According to Jaresko, the budget will be around $9.4 billion to $9.5 billion. However, the objective of the FOMB will be to ensure that changes are made at the agencies that haven’t made them yet.
“It is important to highlight that the Government failed to conclude important Reforms that would boost economic development or change the way they provide services to the people of Puerto Rico. Efforts to reform labor laws are stalled. The process to facilitate doing business has not changed the burden on entrepreneurs or allowed new companies to come to the island. For this reason, this Fiscal Plan will implement a one-year moratorium on everything that has to do with cuts, to focus exclusively on implementing structural reforms and efficiency measures.
She mentioned, for example, what happened in the Department of Education with the closing of schools. Significant savings were supposed to be achieved when reducing the number of utility payments and administrative staff. The schools were closed, but the savings were not seen, the board’s executive director said.
She said as an example that in this Fiscal Plan the Department of Education will have to create a plan for the return to classes; implement an attendance system for all employees, implement a system that measures daily attendance of students; improve English teaching and retroactive payment of salary increases to transitional teachers.
Jaresko said changes do not necessarily achieve the desired effect, adding that board-approved teacher pay increases were poorly implemented and ended in lawsuits, and that it allocated funds for the Social Security payment to the police which was delayed for six months. So it will be critical to monitor changes and investments in real time, she said.
In the case of the Department of Public Safety, funds are included for the later stages of salary increases for police officers, adding academies, and purchasing equipment for the Fire Department.
There is money to invest in the internet infrastructure in rural areas, as well as technological training for public employees, businesses and their employees so that they can adapt to the changes, Jaresko said. The estimate for this is $450 million.
In addition to the board’s interest that the structural changes of the government are finally achieved, the pause responds to the economic impact of the measures taken by Gov. Wanda Vázquez Garced, to mitigate the spread of the 2019 novel coronavirus disease.
The impact on the economy by COVID-19 was severe, Jaresko said, adding that board research concludes that the economy of Puerto Rico is going to contract by 4 percent this fiscal year. The outlook is similar to what happened following Hurricane Maria, she said.
According to Jaresko, for the fiscal year 2021, there will be a small increase of 0.5 percent, helped by federal funds the island will receive from the Coronavirus Aid, Relief and Economic Security (Cares) Act and the pending funds for recovery from hurricanes Irma and María.
According to the executive director, for fiscal 2025, the economy will reach neutral (zero) growth.
Put simply, she said, the economy of Puerto Rico is going to contract for the next five years.