Oversight Board Sets ‘Goals, Objectives and Parameters’ for Fiscal Plan
SAN JUAN – The Financial Oversight and Management Board for Puerto Rico created under the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) communicated with Gov. Ricardo Rosselló Nevares on Wednesday regarding what it considers the “goals, objectives and parameters” that must be included in the new administration’s fiscal plan.
In the letter to the governor, the oversight board outlines five areas that the Rosselló administration must include in its fiscal plan for the government to generate, between now and fiscal year 2019, additional revenue and/or savings totaling $4.5 billion a year.
The five areas include “revenue enhancements” through adjustments to the island’s tax system and improvements in tax administration; “government right-sizing, efficiency and reduction”; reducing health care spending; reducing higher education spending; and “pension reform.”
“The measures listed above make up one ambitious but viable proposal. We…also welcome the opportunity to work with your Administration to develop and implement the necessary reforms and the terms of the debt restructuring that will allow Puerto Rico to achieve fiscal balance and regain access to credit markets at reasonable interest rates. The Board is providing you with the fiscal framework, and within such framework we expect that you and your Administration will make the public policy determinations consistent with PROMESA,” reads the oversight
board’s letter signed by its chairman, José Carrión.
In the letter, Carrión acknowledges that several of the measures implemented by the new administration since its inauguration in early January, are “steps in the right direction, but much more is required,” the release announcing the letter reads.
“From your executive orders declaring a fiscal emergency, imposing salary freezes, limiting the number of non-career personnel and other labor cost reductions and requiring agencies to build zero-based budgets, it appears that your administration shares this priority [of achieving savings through government right-sizing and efficiency improvements.] …Yet, we must be candid and stress that, to get closer to fiscal balance [required under Promesa], a lot more will need to be done beyond the measures already adopted by your Administration,” the letter reads.
The fiscal board also tells the governor that it is “favorably inclined” to extend the deadline for submitting its fiscal plan to the board until Feb. 28, “such that the Board may certify the fiscal plan by no later than March 15, 2017,” the release reads.
The fiscal board had established Jan. 15 as the deadline for the new administration to submit its fiscal plan, “as the plan submitted by the previous administration did not meet the requirements outlined in Promesa and as such could not be certified,” it says. Promesa’s stay on lawsuits against the government extends through Feb. 15.
This extension will be formally considered the board says, at its next public meeting, whose precise date has yet to be revealed but is slated for later this month, “and would be contingent upon the Government meeting and adhering to a set of conditions and timelines, including a commitment not to take more loans to provide short-term liquidity, develop a liquidity plan and
provide further financial information, among others,” the board says.
The Oversight Board also tells Rosselló it is “favorably inclined” to extend Promesa’s automatic stay on litigation until May 1, “subject to the same conditions.”
The board’s release also mentions that in its Dec. 20 letter to former Gov. Alejandro García Padilla and then Governor-elect Rosselló, it “reiterated its willingness to collaborate with the new administration in order to meet the outlined agenda leading to the certification of a Fiscal Plan on or before January 31, 2017. As per PROMESA, the certification of the Fiscal Plan is a priority to move forward Puerto Rico’s fiscal agenda.
In response to the oversight board’s letter, on Jan. 4, Elías Sánchez, the governor’s representative before the board, requested a 45-day extension to submit the new administration’s fiscal plan, as well as a 75-day extension, through May 1, to the legal stay against the government.
“We understand that the new administration shares the Board’s sense of urgency to collaborate promptly and decidedly in an effort to implement the needed structural reforms and reestablish economic growth and opportunities for the people of Puerto Rico,” Carrión says.