Puerto Rico gov presents budget with priorities on education, health and public safety
(June 9, 2019 – Ponce) Today, Governor of Puerto Rico Ricardo Rosselló presented before the Legislative Assembly the $9,624 million budget for the next fiscal year, which will focus on the areas of education, health, and public safety; include the salary increase for teachers and the police force; and rule out additional cuts to pensions, and to the Christmas Bonus for public employees.
It was informed that this budget will be based on a new methodology which will allow to measure the results in the allocation of resources, for a greater visibility of public funds administration.
During his speech, the governor—who also presented a budget report, accessible to citizens through virtual media—emphasized that “the unity of Puerto Rico will be the triumph of all.”
“Today, I want to show you with evidence that, faced with critical economic and fiscal situations, in the face of catastrophic situations caused by nature, we have taken the right actions. I want to show you that today we have cash in hand to pay pensions and comply with the commitments of our public policy,” said Rosselló.
The chief executive reported that the aspiration for education is to invest between 4 to 5 percent of the gross domestic product (GDP), by describing this as the best practice globally.
He also noted that, initially, an increase of $400 million was to be allocated to education in this next budget. Nonetheless, the Financial Oversight and Management Board rejected this amount, for which an increase of $262 million was allocated.
This increase is directed to areas such as special education, transportation, educational vouchers, teacher salaries, social security payments, the restructuring of the agency, and university scholarships.
On the other hand, it was reported that the aspiration for the Department of Public Safety is the investment of over $500 million in the next four years for salaries, for social security, and to modernize police equipment.
The chief executive said that “both teachers and the police represent a priority in our administration. Their role is fundamental to build a new Puerto Rico, safer and better educated. In the budget that I submit for your consideration, salary increases are included for teachers and our police officers. Not only do they deserve it, but it constitutes a measure of social justice for these important public servants.”
Meanwhile, the allocations in health are focused on guaranteeing medical options through the Vital government health plan and maintaining service quality.
Additionally, sustainable spending is added by eliminating to municipalities the payment of pensions through the Pay As You Go system and the payment to the Puerto Rico Health Insurance Administration (ASES, for its Spanish acronym).
Rosselló stressed that the Government currently has over $6 billion in cash—as a result of economies and efficiencies in Government operation—in contrast to the $300 million that the Government had available in January 2017.
“Some detractors will argue that this is because the debt is not being paid. We clarify to them that, precisely due to economies that have no precedent in our history, we can restructure the debt to sustainable levels, comply with our retirees, and provide services to the people,” said the chief executive.
As part of his message, Rosselló reviewed the actions taken by his administration to adjust public finances. He also pointed out that, despite the challenges they have faced at the federal level and before the Financial Oversight and Management Board, “time proved us right.”
He also maintained that the data, as well as the economic and fiscal projections—in which the Board based its demands to the Government of Puerto Rico—were incorrect, which led to the certification of six fiscal plans.
“The Board, with an operational budget of public funds that has exceeded $60 million per year, has not been able to fulfill its responsibility to justify its requirements to the Government. Their economic projections have distanced themselves far from the real behavior of the economy and the income of the State, sometimes by billions of dollars,” stated the chief executive.
Rosselló also emphasized that “all the projections that our administration has presented have been met and we have exceeded the expectations of annual tax collection. After slightly more than two years, it has been proven who was right.”
The governor finalized his message by inviting Puerto Ricans to “unite for the causes of Puerto Rico.”
“I call you to work together to achieve the reunification of Puerto Rican families, in a more secure, better educated, fairer, and non-discriminatory Puerto Rico; where the dignity of the human being is above any other consideration, affirming before the world our pride of having been born on this Island,” Rosselló concluded.
The full text of Rosselló’s address follows:
Budget Address of the Governor of Puerto Rico
The Honorable Ricardo Rosselló
Complejo Ferial in Ponce, PR
June 9, 2019
Ladies and Gentlemen; mayor of Ponce and other mayors who honor us with their presence; members of the Constitutional Cabinet and agency chiefs; members of the Supreme Court and Members of the Judicial Branch.
I join the greeting of the president of the House of Representatives.
The exercise of governing effectively lies in exercising the direction and administration of the State by listening to the people.
I thank the presidents of both legislative bodies for the historic opportunity of holding a joint House and Senate Committee outside of the Capitol. This action confirms our commitment to bring the government closer to the people.
With great satisfaction, from the City of Ponce, birthplace of the illustrious Puerto Ricans Luis A. Ferré and Rafael Hernández-Colón, I will explain the scope of the budget that we have prepared for the 2019-2020 fiscal year.
Contrary to the past, it is a budget based on a new methodology, in which results can be measured in the allocation of resources, giving greater visibility to the administration of public funds.
The new budget seeks to incorporate substantial improvements in the fiscal position of Puerto Rico, establishing clear priorities that are fiscally sustainable. At the same time, the budget meets our objective of investing in initiatives that improve the quality of life of citizens and stimulate the maximum economic development possible in our Island.
With this new modality, we break with the way budgets have been prepared during the past 50 years. Now, the way in which the Budget will be prepared will also be an instrument of citizen participation.
There are three important areas of investment that stand out in this budget:
1. Police and public safety:
Resources are allocated in the integration of the Department of Public Safety; for salaries, payment of social security and modernizing police equipment. The aspiration for the next 4 years is to invest over 500 million dollars in this area.
Our aspiration is to achieve the objective of investing between 4 to 5% of GDP in education. This is the best practice globally. We started in that direction by investing 400 million dollars for this next fiscal year. I must point out that the Financial Oversight and Management Board rejected it, and we established another more modest calendar of 262 million dollars. This investment is directed to special education, transportation, educational vouchers, teacher salaries, social security payments, restructuring of the Department and funds allocated for university scholarships, among other needs.
The allocations are aimed at achieving our objective of guaranteeing medical options for the population through the VITAL Plan and maintaining the quality of the services. In addition to this, we add sustainable spending, eliminating the Pay-Go and ASES payments from the municipalities.
The budget that we submit to the consideration of the Legislative Assembly totals the amount of 9.6 billion dollars.
Today, I want to show you, with evidence, that in the face of critical economic and fiscal situations, in the face of catastrophic situations caused by nature, we have taken the right actions. I want to show you that today we have cash in hand to pay pensions and fulfill the commitments of our public policy.
I will show you that the Financial Oversight and Management Board has obstructed the work for the benefit of Puerto Ricans; disappeared at critical moments, such as hurricanes, to then provoke more bureaucracy and seek to impose unjust measures against the most vulnerable, based on economic projections and incorrect data.
I will show you that we have fought in favor of Puerto Rico, based on viable proposals; in projections and accurate studies, contrary to what the board has presented.
Therefore, far from giving all the numerical details of the budget and the actions taken, I have prepared a report for the entire Legislative Assembly. Moreover, with the benefit of technology, I am sharing this report, along with the message and the budget, in all my social networks.
To understand the scope of the new Budget and the priorities on which it is based, we must review the history and what has happened in Puerto Rico since we took office on January 2, 2017.
Since 1977, public debt in Puerto Rico has maintained an increase rate, with the periods from 2001 to 2012 being the fastest growing years. During those years, the debt rose from 23 billion to almost 61 billion.
It has been under our Administration that for the first time the public debt has been reduced by approximately 10%. Our efforts to reduce this amount will continue.
From 2006 to the present, the economy in Puerto Rico did not reflect growth rates. Today, official indicators and statistics show that economic activity is growing for the first time in the past 13 years. This, without still having received most of the federal funds for reconstruction.
When we started governing, we found a completely depleted retirement system, as we can see in the graph that I present to you.
Since the late 1990s, no government administration made significant contributions to the retirement systems; being the last, product of the sale of the Telephone Company.
Now, with the responsible actions we have taken, we assume the payment of pensions in the central government through the Pay-Go system.
While in the 50 states of the nation the average government spending per citizen has increased by 26%, in Puerto Rico it has decreased by 19%, thanks to the economies generated by our Administration, maintaining the government operation and services to the people.
We received the Government with less than 300 million dollars available. To get an idea of how serious the situation was, 285 million dollars of the general fund were required to pay the monthly payroll. That, without considering the remaining operational expenses of the Government. No administration in history had to take over the government in such dire financial conditions.
We immediately began to adjust so that we could achieve the economies that would allow us to comply with the operation of the Government, while maintaining the provision of essential services to the people.
During the early hours of January 2, 2017, I signed executive orders to freeze vacancies in the Government, to prohibit the creation of new positions; and to reduce political appointments by 20% in all agencies, among other measures of immediate action.
Although we took corrective measures to straighten out public finances from the first minute that we took office, on January 18 we received a communication from the Financial Oversight and Management Board, in which they required actions that involved the dismissal of tens of thousands of employees and the reduction of the salaries of the remaining public employees; in addition to a dramatic reduction in pensions in Puerto Rico.
The letter also required the reduction of one billion dollars to the health system, leaving almost 700,000 Puerto Ricans without healthcare coverage.
Given this situation, we called attention to the serious damage that these measures would cause in the economy and in the quality of life of the most vulnerable sectors in Puerto Rico. We demonstrated that they were unjustified measures by presenting alternatives of fiscal responsibility that did not go against the people.
Time has proved us right. With the initiatives we executed, we managed to reduce over 23,000 jobs in the government payroll, without firing public employees. In the same way, we transformed the health program with the new Vital Plan, preventing hundreds of thousands of Puerto Ricans from losing their medical coverage.
As part of several initiatives to activate economic development, on January 26 the labor reform was approved.
On February 4, the Single Employer Act was approved, which has allowed 1,200 public servants to participate in mobility at government agencies.
On February 20, the law that creates Invest Puerto Rico was signed, with the objective of marketing our Island as an investment destination.
On March 13, the Board certified the first Fiscal Plan submitted by the governor, where we maintained our objections and rejected the pension cuts, the elimination of the Christmas bonus and the decrease of working hours.
In this regard, once again time has proven that these abusive measures are not necessary to rehabilitate public finances.
During that month, the Equal Pay for Equal Employment for Women Act was also approved.
On March 30, the law that created the DMO was signed, establishing the entity responsible for marketing Puerto Rico as a tourist destination.
On April 4, we signed into law the Permit Reform, which has had the effect of reducing the average time to receive a construction permit from 98 days to 20 and the use permits, from 23 days to a week.
On April 18, the Board amended the first Fiscal Plan.
On July 9, the law to allow medical cannabis in Puerto Rico is signed, establishing the conditions for the development of that industry in our Island.
On August 4, the Board orders a reduction in working hours. We reiterate that this measure was not necessary and, explaining the negative effect it would have on the economy of Puerto Rico, we did not put it into effect. We showed that the Financial Oversight and Management Board was wrong and based on incorrect data and assumptions. Once again, time proved us right.
On August 23, we insured the pensions of our retirees, by signing Act 106, establishing the Pay-Go system, in which the central Government takes over the payment of pensions.
September 20 is a date that marked Puerto Rico. That day we received the catastrophic impact of Hurricane Maria. As a result of that experience, today we are better prepared, with an active and dynamic emergency plan that adjusts to the reality of our Island.
On October 25, the Board appoints Noel Zamot as Transformation Officer for the Puerto Rico Electric Power Authority. We challenged that appointment in the courts and on November 13 we prevailed in our position. Subsequently, on June 20, 2018, I signed the Law for the Transformation of PREPA.
I remind you that this official left office after a suspicious management from the Financial Oversight and Management Board. Once again, time proved us right.
During the difficult months of October, November, and December of 2017, while attending to all the complex emergencies and situations caused by Hurricane Maria, the Financial Oversight and Management Board disappeared from the panorama. Instead of presenting themselves as an entity in solidarity with our people, they were accomplices in their inaction of the blow we received through the federal tax reform.
Meanwhile, we continued working to lift up Puerto Rico. On December 18, we signed the New Government Act, through which government agencies have been reduced from 124 to 102, producing savings in excess of 150 million dollars.
On March 5, 2018, we announced the increase of $ 1,500 a year for police officers and teachers.
On March 29, we enacted the Education Reform Act, focused on student welfare, creating educational vouchers and charter schools.
During that period, we waged an intense struggle alongside Resident Commissioner Jennifer González to achieve the allocation of funds for the reconstruction of Puerto Rico in Congress and before the federal Executive. I would like to emphasize that during this process the Financial Oversight and Management Board did not collaborate in anything for the benefit of Puerto Ricans.
Also, in March, I signed into law theBusiness Briefcase for Women bill, an initiative of the Office of the First Lady and the PRIDCO to facilitate the professional and economic development of women in Puerto Rico.
On April 19, the Board approves a second Fiscal Plan, proceeding in the same way with a third Fiscal Plan on May 31.
On June 29, the Board certifies a fourth Fiscal Plan, requiring again the elimination of the Christmas bonus. Given this situation, we objected, we took the necessary fiscal measures, and we continued paying the Christmas bonus. Once again, time has proved us right.
On July 30, I signed the Executive Order to increase to $15 per hour the minimum wage in construction for projects financed with federal funds. Currently, workers from over 30 projects in development are taking benefit.
During the month of August 2018, the first charter school in Puerto Rico began.
On October 23, the Board approves the fifth Fiscal Plan …
On November 27, six laws were signed to reform the insurance industry and end the abuse against insured citizens.
On December 10, the new taxation model becomes law, reducing the Sales and Use Tax (IVU) in prepared foods to 7% starting next October, eliminating the B2B to 80% of businesses, reducing tax rates to individuals and corporations, and putting into the economy about 2 billion dollars.
On February 12, 2019, I signed the Executive Order to promote the hemp industry.
On February 21, I issued the Executive Order to centralize the purchasing processes in the government and, together with the president of the Chamber, working legislation to that effect. Through these actions we achieved over 75 million in savings and the reduction of 250 regulations to only one.
On April 11, I signed the Energy Public Policy Act that will allow us to reach 40% of energy from renewable sources by 2025 and 100% by 2050.
On May 9, the Board certifies the sixth Fiscal Plan.
On June 1, the amount of 300 million dollars paid in reimbursements by our Administration is exceeded, impacting over 400,000 taxpayers.
I have summarized the most important events and actions that have marked our governance, prior to the preparation of a new Budget. This must be framed within an arduous process of recovery after the impact of two hurricanes and the struggle we have endured together with Resident Commissioner Jennifer González to obtain the approval of the federal funds that will allow us to rebuild Puerto Rico.
The development of the events that we have outlined shows, beyond all doubt, that the economic and fiscal projections in which the Board based its demands on the Government of Puerto Rico were incorrect.
The Board, with an operational budget of public funds that has exceeded $60 million per year, has not been able to fulfill its responsibility to justify its requirements to the Government. Their economic projections have distanced themselves far from the real behavior of the economy and the income of the State, sometimes by billions of dollars.
We had to face an erratic Board, whose data and projections proved to be incorrect. Precisely that erratic behavior has led them to have to certify six tax plans.
On the other hand, all the projections that our administration has presented have been met and we have exceeded the expectations of annual tax collection. After slightly more than two years, it has been proven who was right.
The economies have been achieved, among several initiatives of sound public administration, by freezing positions in government offices; prohibiting the creation of new positions, and the 20% cut in political appointments. This has represented a reduction of 23,000 jobs, without dismissing employees from the Government of Puerto Rico.
The Employee Classification Plan was reduced from 176 to only 2, achieving an additional 5 million dollars in savings.
To these measures, considerable cuts to professional services contracts are added, which amount to 53 million dollars.
In summary: of just 300 million dollars available in January 2017, today the Government has 6 billion dollars, product of economies and efficiencies in Government operation.
Some detractors will argue that this is because the debt is not being paid. We clarify to them that, precisely due to economies that have no precedent in our history, we can restructure the debt to sustainable levels, comply with our retirees, and provide services to the people.
The resources to comply with the payment of pensions are there. There is no reason to justify an additional blow to our pensioners, which, if it occurs, would have an adverse effect on all sectors of our economy.
Contrary to false information circulated by some people, our Administration has taken extraordinary measures to ensure the payment of pensions.
To understand the efforts we have carried out to continue paying our retirees, no state has adopted the payment of pensions as an operational expense in the government budget. Far from ignoring the problem, we have addressed it, doing more than any other government, including state governments in the United States.
All these measures have been executed with total transparency, cutting operational expenses and complying with the legal order.
I must reiterate that I will not be a participant in any injustice against pensioners in the public service. I will not abide additional cuts to their pensions.
Let us work together for our pensioners and for the most vulnerable sectors in our society. The unity of Puerto Rico will be the triumph of all.
While past governments unnecessarily withheld the funds of taxpayers, our administration does justice to citizens, promptly issuing the payment of tax returns, reducing the SUT to prepared foods and lowering the tax rates.
The result of this new tax policy has been an increase in the estimate of tax collections, stimulating the development of our economy. This is evidenced by all indicators that measure the behavior of economic activity.
Unemployment currently has one of the lowest figures in 40 years. The rate of economic growth is close to 4%, which had not happened for almost 20 years ago. Retail sales of cars and homes are experiencing a rise that exceeds the previous figures during the past 10 years.
After Hurricane Maria, Puerto Rico achieved in a year and a half the economic recovery that took Louisiana 10 years, after receiving the impact of Hurricane Katrina.
Today Puerto Rico develops new markets that represent a multi-million-dollar injection to our economy, standing out, among these, the medicinal cannabis industry, the promotion of industrial hemp and the sports booking events and video games.
To direct our economy, there are several measures before your consideration:
We achieved that 97% of Puerto Rico became eligible for the Opportunity Zones Program. Through this program and the Act 21 I signed on May 14, it is estimated that Puerto Rico can receive over 600 million dollars in capital investment for the development of projects that will stimulate economic growth and the creation of jobs.
To achieve the maximum potential for economic development, we must encourage the participation of the private sector. We currently have over 10 public-private partnership projects in the process of analysis and adjudication. In total, an investment of over one billion dollars is projected in infrastructure projects, energy production, water systems, maritime transportation to the municipalities of Vieques and Culebra, as well as training projects for the Puerto Rico Police. This is the most comprehensive and aggressive agenda of APP’s in the entire American nation.
Another sector that has shown a sustained growth has been the tourism industry. Under the new model of the DMO and the collaboration of the Tourism Company, Puerto Rico experiences a new drive. New hotels, the remodeling of existing ones, and the increase in cruises show that we are on the right path, contributing to the economic development of our Island.
The progress of our Island is possible if we work together. The unity of Puerto Rico will be the triumph of all.
Just a few days ago, President Trump signed the law that makes possible an allocation of funds for the recovery and reconstruction of Puerto Rico. For months, we were fighting in Washington with Resident Commissioner Jennifer González, along with leaders from the private sector and non-profit organizations, proving that we were right. Our perseverance in defense of Puerto Ricans prevailed over all the obstacles we had to overcome. But let us briefly review the story…
After the hurricanes, the Board disappeared. In the emergency, they were nowhere. During those months of emergency, two important projects were also being considered in Congress. The first was one of economic development. The tax reform at the federal level. To that extent, if Puerto Rico was considered foreign, they would give our people a huge blow; and if we were considered domestic, we would have instruments for our economic development.
On this very important matter, the Board remained absent, turning its back on Puerto Rico. The result: they crushed us in that federal tax reform. At the same time, a recovery bill was being considered by the U.S. House of Representatives. To that extent no direct funds were allocated for Puerto Rico … another blow for Puerto Rico, and the Board was absent from that debate.
Faced with this challenge, the resident commissioner, our team, and I worked so that this measure would not be considered in the U.S. Senate, and we could include a new measure with funds allocated for Puerto Rico.
After more than a month of intense effort, we demonstrated the results of working with unity of purpose, for a cause, over partisan differences. In the Senate, I worked with the Democratic minority to ensure that the 18.5 billion dollars of funds for Puerto Rico were included.
That project passed with a majority of Democratic votes. Less than 12 hours later, it passed before the consideration of the House of Representatives, where the resident commissioner ensured Republican support. There, the measure with the majority of Republican votes was approved.
Throughout this process, although the Board was absent in Washington, Puerto Rico prevailed.
For decades, the constant has been to propose changes to the education system, but in the same way, the consistent response has been to keep unaltered the same system that does not work.
Our Administration initiated the most comprehensive transformation in the history of the education system. We created charter schools; we established the educational voucher program and decentralized the operations of the Department of Education. We will continue to make changes in the areas of contracts and operations to ensure better services for our children and greater visibility to the people.
We are investing in technology, providing tablets and computers for students; besides installing Wi-Fi networks in all schools.
The change in education has just started! It is based on our students and nothing will stop it. That is where the new Puerto Rico is born. That is why we make an investment of 262 million in this budget for the future of our children. I invite the people to be part of that educational transformation.
The statistics, both state and federal, show that we have two years with a reduction in criminal activity. That does not mean that we are satisfied, but it motivates us to continue our firm fight against organized crime and drug trafficking.
As of June 7, 2019, there have been 50 murders less than for the same date in 2018 and 36 less than for the same date in 2016.
At the end of last month, 1,490 crimes against property have been reported, less than the same date last year 2018. In crimes against the person, an increase of 76 more cases is reflected, in relation to the same date last year, and a reduction of 600 for the same date in 2016.
We will confront crime, violence, and drug trafficking together. The unity of Puerto Rico will be the triumph of all.
Both teachers and the police represent a priority in our administration. Their role is fundamental to build a new Puerto Rico, safer and better educated. In the budget that I submit for your consideration, salary increases are included for teachers and our police officers. Not only do they deserve it, but it constitutes a measure of social justice for these important public servants.
Puerto Rican brothers and sisters,
We are leaving behind a devastating fiscal and economic panorama. Today we are heading towards a new Puerto Rico.
In the coming weeks we will be awarding the first educational vouchers; giving parents of our most vulnerable children to choose where they are educated. Likewise, we will add several charter schools.
The regulation to expedite permits will take effect, facilitating the development of projects.
In August we will begin the home repair program with an investment that exceeds one billion dollars.
During that same period, the contribution to the Nutritional Assistance Program will be increased, improving the quality of life of thousands of Puerto Rican families. For the month of September, the San Juan 5 and 6 power generation plants will be generating energy with gas, reducing the energy cost for all.
The mitigation programs of the 3 billion dollars allocated will come into effect, and for that federal legislative session we will fight to obtain greater resources of funds in federal health programs.
In October the SUT drops to 7% in prepared foods and in November we begin to distribute computers to students from kindergarten through fourth grade.
By December, the transmission and distribution of the Puerto Rico Electric Power Authority will have been privatized through concessions, giving a giant leap to its transformation through private collaborators.
Our agenda of change and transformation stands firm and aimed to establish a free university program in Puerto Rico. May our Island be a center for new markets, such as e-gaming and industrial hemp.
We are on our way to being an island of innovation, intelligently rebuilding Puerto Rico and defending the most vulnerable sectors; to our pensioners and senior citizens, assuring them more resources and guaranteeing their rights.
We are going towards a future of equality, with equal pay for equal employment for women, creating opportunities for our young people.
That Puerto Rico is possible. To make it a reality, the moment demands unity, but not framed in strictly partisan interests, but in the common objectives that benefit Puerto Rican families.
I invite you to join us for the causes of Puerto Rico.
Let us join in the claim of equality as American citizens; let us join to work for a better quality of life, let us unite to defend our pensioners and senior citizens, and for a new generation that seeks opportunities to fulfill their dreams, here in our Island.
The unity of Puerto Rico will be the triumph of all.
I call you to work together to achieve the reunification of Puerto Rican families, in a more secure, better educated, fairer, and non-discriminatory Puerto Rico; where the dignity of the human being is above any other consideration, affirming before the world our pride of having been born on this Island.
May God bless Puerto Rico.