Government will seek to pay both essential services, debt
SAN JUAN – The government of Puerto Rico will seek to comply with debt-service obligations, but only to the extent that it has ensured the provision of essential services or if Promesa’s fiscal control board orders it.
That would be the idea behind a bill presented by the executive branch that would create the Puerto Rico Financial Emergency & Fiscal Responsibility Act, which would repeal parts of the moratorium legislation signed by former Gov. Alejandro García Padilla, while granting broad powers to the governor related to the government’s fiscal management.
Nevertheless, the executive orders issued by García Padilla under his moratorium law would “continue in full force and effect” until Rosselló decides to amend, rescind or replace them. These orders suspend payments of a large part of the public debt, while retaining certain revenue streams that would otherwise be used for debt-service.
It remains to be seen how Rosselló will manage the government’s cash flow, particularly with regard to retention of these pledged revenues. It is also uncertain whether the governor will take action affecting the debt service of the Sales Tax Financing Corp.’s (Cofina), whose creditors continue to be paid. On Wednesday, the government’s representative in the board Elías Sánchez all “legal structures” will be kept as they are for the time being, when asked about Cofina.
From the outset, the proposed measure would grant civil and criminal immunity to financial institutions that provide to the government such services as clearing.
The governor may also order the creation of a “lockbox,” or a separate account, under the control of the Puerto Rico Fiscal Agency & Financial Advisory Authority (FAFAA), into which the funds necessary to ensure the provision of essential services would be deposited.
In addition, the governor would have the power to “issue executive orders as the governor deems necessary or advisable to assure the payment of a debt obligation of the Territory or an instrumentality of the Territory,” reads a draft of the bill obtained by Caribbean Business.
Likewise, the governor would be able to issue executive orders that establish a priority order for the disbursement of public funds when these are insufficient to cover what is budgeted for the fiscal year.
Along with FAFAA—to which any responsibility or authority included under the measure may be delegated—the governor will enjoy broad oversight powers over government entities.
Some of these powers include the ability to appoint trustees, control disbursements made by the Government Development Bank (GDB), limit allocated-fund spending, review and approve payrolls, appoint or remove administrators and heads of entities under the executive branch, hire inspector-generals for public entities, and authorize an entity to take out loans. The governor may also redirect special funds to the General Fund.
Moreover, the governor would be empowered to “sell, lease, convey, assign, or otherwise use or transfer the assets, and liabilities, of a government entity within the Executive Branch,” provided it does not endanger the health, safety or well-being of residents or unconstitutionally affect the obligations of the government .
As for the GDB, the bill provides for a series of actions that the governor may take regarding the management of funds currently frozen in that institution, as well as possible options regarding the bank’s future.
The House of Representatives is expected to address, as soon as today, the La Fortaleza bill, while the legislative process is expected to end at some point during this week in order for it to be promptly signed into law.