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Puerto Rico governor presents island’s fiscal 2019 budget

By on May 23, 2018

SAN JUAN – Puerto Rico Gov. Ricardo Rosselló presented to the island’s legislature Tuesday a 22% smaller budget than the one approved by the previous administration. It totals $8.73 billion, of which $7.02 billion would be allocated for government operations. The consolidated budget amounts to $25.32 billion.

Rosselló urged the legislature to evaluate what has been achieved after the island’s Financial Oversight and Management Board agreed to not continue requesting that the so-called Christmas bonus for public and private employees be eliminated or that vacation and sick leave be reduced by half, as well as that recovery funds be provided to municipalities.

“No one should hope that these disputes are subject to the mandate of a federal court. No one,” the governor said during his speech in the House of Representatives.

“I ask for your trust so that we can take this important step together. So that those families that are watching us in their homes and are considering leaving Puerto Rico, see in this budget agreement an initial step for a new opportunity to stay here, in their homeland,” Rosselló added.

The budget includes continuing the payment of pensions and the disbursement of $78 million approved by the Legislature to municipalities during the current recovery period, is also guaranteed.

The Municipal Economic Development Fund of $50 million a year is also created and the implementation of the “New Tax Model” is also included.

The agreement with the fiscal board also includes the allocation of an additional $25 million for the University of Puerto Rico and the creation of an emergency fund to face future natural disasters.

As part of the agreement with the board, Act 80, Puerto Rico’s Unjustified Dismissal Act must be repealed by the legislature, making the island what is known as an at-will employment jurisdiction, whereby workers can be dismissed without warning or having to establish “just cause.”

Rosselló stressed, however, that no other worker rights would be affected.

“Ladies and gentlemen legislators, you know everything that is at risk. I already exercised my responsibility and I fully trust in the commitment you have with Puerto Rico. All plans and agreements have their strengths and weaknesses.

This one unites us in the vast majority of its parts and could disunite us in a single area. My call to you is that we achieve this agreement together and take the step towards the first year of the economic growth of Puerto Rico in a decade,” the governor said.

The budget agreement considers a salary increase of $1,500 a year for public school teachers and guarantees an annual salary increase of $1,500 for the Police Department.

Rosselló said that after an agreement for the budget is reached, changes will be needed to rebuild a “new” Puerto Rico.

“The priorities are well defined: The reconstruction of Puerto Rico and the biggest transformation in the history of…the government. What does not work, will be changed so it responds in a more agile and efficient way to the people; and what works, will be modernized to make it better,” he said.

The governor emphasized the pursuit of making access to government services digital, as well as the education reform underway.

The new tax model, the governor said, aims to redistribute the tax burden, “doing justice to the worker and the middle class, by stimulating economic development and investment in our Island,” according to a release issued by the governor’s office, La Fortaleza.

Rosselló said a work bonus will be created, where employees can receive $300 to $2,000 a year. Also, the sales and use Tax (IVU by its Spanish acronym) on prepared food will be reduced to 7% from 11.5%, while the business-to-business tax will be gradually eliminated.

The governor highlighted the importance of the Plan of Action for the use of Community Development Block Grant (CDBG) funds allocated by the federal government as a consequence of the damages caused by Hurricane Maria.

According to La Fortaleza, the awarding and development of projects, “which in the first phase will exceed the $1.5 billion that will be used in a period of two years,” will start in August.

“Through the correct use of these resources, $817 million will be allocated for the rehabilitation of homes, with the relocation of communities from vulnerable areas to safe areas, developing the necessary infrastructure for these projects,” Rosselló explained.

The governor added that “$120 million will be used to provide financing for the construction of new housing projects. Similarly, over $19 million will be allocated to meet the specific needs of the homeless and survivors of gender violence.”

The plan for CDBG funds’ use includes more than $150 million to finance commercial projects, and invest in infrastructure and programs for the development of new businesses.

The second phase for CDBG fund use entails the allocation of an additional $18.5 billion, “for which the local government is in communication with the federal Government to proceed with compliance of what is required, through another Plan of Action that will define priorities and projects of critical infrastructure for the Island,” the release reads.

“The allocation of these federal funds represents our connection to the future; It represents a unique opportunity to activate our economy and transform the lives of thousands of families facing difficult conditions today,” the governor said in his speech.

“I reaffirm to the people of Puerto Rico that our Administration will be focused on ensuring that these funds are used correctly and those who attempt to challenge this warning will have to face the full weight of the law,” he added.

The governor stressed that the government’s economic and financial problems will not be solved by the influx of federal disaster funds.

“The root of the problem lies in the inequality suffered by the American citizens who live in Puerto Rico. It is a civil rights problem that cannot be ignored, neither in Puerto Rico nor in Washington. It is a problem that is solved with statehood,” concluded the governor.

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