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Governor Still Mulling Future of Fiscal Bills

By on July 14, 2016

After quickly signing the fiscal-year 2017 budget into law, Gov. Alejandro García Padilla is still evaluating various bills approved late last month, at the end of the legislative session, as lawmakers continued to nudge their own fixes to Puerto Rico’s fiscal woes.

One such piece of legislation is House Bill 2959, which takes over “clawed back” revenue—funds taken from certain public entities that had been earmarked to repay their debts—and appropriates some $450 million of these funds for paying general-obligation (GO) debt due this fiscal year.

Also pending are HB 2964, which repeats the $400 tax revenue anticipation notes from public corporations—so-called internal TRANs—issued last fiscal year, and HB 2962, which allows a 40% cut to the central government’s debt with the Government Development Bank.

“We are evaluating [HB 2959] and various other bills that we received during the end of the legislative session. Once we finish that process, the governor will make a decision,” La Fortaleza Chief of Staff Grace Santana told this newspaper on July 8. The governor has until the end of the month to sign or veto these bills.

garcia padilla grace cesar

Gov. Alejandro García Padilla, Chief of Staff Grace Santana and Justice Secretary César Miranda

At least two sources told Caribbean Business there are some concerns in La Fortaleza with the bill, particularly over the use of clawback funds. The measure also seeks to prop up contributions to the island’s underfunded pension systems.

“At this moment, we are in no position to specify the particular use that would be given to these funds,” Santana said in response to Caribbean Business’ inquiries over the use of the $269 million that has been clawed back to date.

Under its Constitution, Puerto Rico can take control of these previously pledged revenue streams, but only to pay its GOs if no other resources are available.

“Due to the passage of Promesa [Puerto Rico Oversight, Management & Economic Stability Act] on June 30, we are currently evaluating the new juridical framework upon which the commonwealth should address its obligations with creditors,” Santana added, while acknowledging that the administration has discussed whether to use these funds to partially cover GO debt payments due July 1.

Under Section 405, Promesa states that the federal fiscal-control board, in its sole discretion, would determine if Puerto Rico is able to make interest payments during the federal law’s moratorium period. However, it is unclear who would make that call in the time before the board is constituted.

Two weeks ago, the commonwealth defaulted on about $800 million due on constitutionally protected debt, including roughly $350 million in interest; clawback funds were not used to cover these payments. When the measure was first triggered late last year, about $169 million was used to cover a $400 million payment due Jan. 2 on commonwealth-guaranteed debt.

Of the $269 million collected since January, $143 million remains corralled at the troubled Government Development Bank (GDB), which continues to operate under cash outflow restrictions. The remaining $146 million sits in a “clawback account” held in a private bank.

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