Puerto Rico governor delivers State of the Commonwealth address
SAN JUAN – After the traditional introductory protocol, in which the presence of Florida Gov. Rick Scott was highlighted, Puerto Rico Gov. Ricardo Rosselló began his second State of the Commonwealth address by recalling the fiscal challenges he faced upon taking office.
The governor said that the current situation represents “a unique opportunity to make lasting and profound changes in the reconstruction of Puerto Rico. This is our moment.”
Rosselló then highlighted the achievements of his first year of administration, among which he mentioned the approval of the fiscal plan last year, which recently had to be revised to take into account the economic impact of Hurricane Maria; his defense of public employees, to whom the island’s Financial Oversight and Management Board was prepared to require reduced working hours but decided to postpone due to the hurricane; and his refusal to cut pensions, a measure the fiscal board continues to recommend.
The governor also delved into the seven reorganization plans he has presented to the Legislature after the approval of the New Government Act, which makes possible the consolidation of government agencies “to achieve significant savings without dismissing public employees.”
“The days of spending without control and without accountability are over. Whoever cannot handle this responsibility, cannot be in this government,” Rosselló said.
The governor reiterated his intention to give teachers a $1,500 raise a year and said he would do the same for the Police. Rosselló did not indicate where the money would come from to cover these increases. It should be noted that any government measure that entails a fiscal impact must be approved by the fiscal board.
The governor also announced filing a bill Monday that would establish the legal framework to sell the assets of the Electric Power Authority (Prepa), as he had advanced in a televised message in January.
In the public power utility’s fiscal plan, the government had said generation units, or powerplants, would be put on the market while the transmission and distribution would be operated under a limited concession.
Under the bill, which will be a special law “limited to the transformation of Prepa,” the Public-Private Partnerships Authority will be the entity in charge of the privatization and concession process.
The announcement came hours after the Puerto Rico Energy Commission (PREC) sued the fiscal board for intervening with the commission’s regulatory powers over the utility.
It was not immediately known whether the bill would change PREC. The fiscal plan contends the regulator is being intransigent and the administration does not want the commission to regulate Prepa’s budget. His administration has also declined to allow PREC to make energy policy decisions.
In a release after the governor’s message, the secretary of Public Affairs and Public Policy, Ramón Rosario Cortés, said the bill “recognizes Prepa employees’ right to their position and salary. These employees will decide if they accept offers from the contracted private entities or if they keep working under the Government as Single Employer,” with “their current benefits and salary,” the governor added.
“Today, I filed with the legislative bodies the bill that defines the procedures for this transformation, with the privatization and concession components defined. This process will be done in a transparent manner, with a model that has paid off; namely, the Public-Private Partnerships Act,” the governor informed.
The law will authorize the “allocation of resources from transactions to capitalize the retirement systems of the Puerto Rico Electric Power Authority (PREPA) employees, which are bankrupt. The goal is to stabilize the price of energy at 20 cents per kilowatt-hour and have a more reliable, efficient, and environmentally friendly system, according to a release issued by the governor’s office, La Fortaleza, after the message.
The governor also stressed that the new fiscal plan establishes that less tax revenue is needed to incentivize the economy. His administration said that reducing the number of government agencies from 118 agencies to about 35 will result in $620 million in annual savings for fiscal year 2023.
Rosselló announced that the Department of Public Safety (DPS) has saved the island’s Treasury $28 million. The Office of the Commissioner of Municipal Affairs (OCAM by its Spanish acronym) was also reorganized to join it to the structure of the Puerto Rico Office of Management and Budget (OMB).
Additionally, the seven reorganization plans—which include the Puerto Rico Department of Economic Development and Commerce (DDEC by its Spanish acronym), the Puerto Rico Public Service Regulatory Board, the Puerto Rico Department of Labor, the Model Forest, the Board of Education, the Puerto Rico Department of Natural and Environmental Resources (DNER), and the Institute of Puerto Rican Culture represent “estimated savings of over $340 million for the next five years,” according to La Fortaleza.
Regarding healthcare, the governor said “the first step was taken to change the health structure to a new model, with only one region, where you can receive services throughout the Island and where you will be in control, not insurance companies,” adding that “to achieve this, we established greater controls in the detection of fraud in the transactions of the medical plans.”
Rosselló said he “achieved a federal allocation of nearly $5 billion” for the commonwealth healthcare plan and that the regulation of the medical cannabis industry will ensure a health-focused approach and contribute to the economy.
During his message, the governor also acknowledged the emergency challenges faced during the aftermath of hurricanes Irma and Maria. He stressed the importance for the government to have a more effective and accurate process than the one carried out when accounting for storm-related deaths.
Rosselló recalled the collaboration established with George Washington University and the University of Puerto Rico to review the protocols, its results, to estimate the loss of life and to design a resilient public health response.
“That is what the road to recovery is about: recognizing and rectifying mistakes. That way we will correct what was done wrong, we will review what was done well, and we will prepare ourselves better for a new season of hurricanes, which is to begin in just three months,” the governor said.
Rosselló recognized the challenges municipalities and their mayors face after the hurricanes and said additional funds were allocated in the new fiscal plan to provide relief from the elimination of subsidies to the municipalities.
Rosselló also mentioned the largest allocation of federal funds to the island, “a result of the teamwork between the governor and resident commissioner Jenniffer González—despite the colonial discrimination that has been reflected in the process of allocation of these federal funds and in the United States tax reform,” reads a La Fortaleza-issued statement.
“Among the funds corresponding to the Medicaid program, amounting to almost $5 billion and the $11 billion corresponding to the funds for community development—better known as the Community Development Block Grants (CDBG)—we obtained directly over $16 billion,” the governor said.
These items include access to more than $47 billion in nutrition program funds such as the Nutrition Assistance Program (PAN by its Spanish acronym); as well as “education programs to build better schools, to recover agriculture, to encourage small and medium businesses, and programs for veterans, among others.”
With regard to tax reform, which will be presented to the Legislature shortly, the governor promised to reduce the business-to-business tax every year “until it is eliminated,” to lower the sales and use tax (IVU by its Spanish acronym) on prepared foods to 7% from 11.5% and the “removal of obstacles to the creation of businesses and incentives for the workers through the Earned Income Tax Credit.
Rosselló explained sais in his message that, when the new tax model is implemented, these would be some of the results: A married police officer with dependents would have more than $950 in savings a year, a single teacher without dependents would have more than $600 in savings annually, and a small business that makes $120,000 a year would see $1,700 in savings.
At the same time, his office’s release further adds, “about six new projects have been formalized for Roosevelt Roads, something never seen in these grounds, which will create 2,500 direct and indirect jobs. Furthermore, cruise tourism is expanding beyond the main Port of San Juan.
“There are already six public-private alliances, which include the energy sector; ground transportation initiatives and seaports; transportation to the islands of Vieques and Culebra; parking lots and student residences, among others. This will achieve the creation of 25,000 jobs, with an estimated investment of $1.2 billion.
“Rosselló also recalled that the Puerto Rico assets map was created and that the framework for a solidarity economy will be established. The law of financial support for the University of Puerto Rico was approved, as well as the amendments to acts 20, 22, and 73, so that these incentives have a greater effect on the economic development of the Island.”
Regarding agriculture, the already Agricultural Development Plan set in motion aims at doubling local production, La Fortaleza says in its release.
Also, the agenda to achieve statehood admission will continue to be promoted through the Puerto Rico Statehood Commission.
He also spoke of “a work requirement for the nutrition and welfare programs, and thus incentivize the workforce.”
Although the governor’s office did not release beforehand details on the topics he would touch upon, the fact is several island sectors expected him to focus on the restoration efforts related to the work on the island’s electric power infrastructure, which was severely damaged by Hurricane Maria. Tens of thousands of residents continue without electricity service nearly six months after the September hurricanes.
Former Gov. Aníbal Acevedo Vilá said before the message that “the country has immense, extremely complicated challenges” and stressed the importance of the governor using the occasion to recognize the mistakes of his administration.
“I believe that this message…probably has a unique context in modern history. And if the governor doesn’t acknowledge this afternoon what I’m going to emphasize now, he’s going to waste his time. The governor has a serious problem with his credibility,” Acevedo Vilá said. “If he doesn’t go and in some way admits some kind of guilt for his mistakes, in terms of the Whitefish contract, the time it took him to recognize the reality of the electric power situation, of our people…no matter what he says, nobody will believe him.”
“This may be the most important message for Puerto Rico in the last 50 years,” Eduardo Bhatia, the former Senate president and now Popular Democratic Party (PDP) minority leader, said in an earlier interview with Telenoticias.
“We need to have a certainty in what the governor says. Regrettably, the governor is all over the place in terms of his message. On the one hand, he says he knows, but he doesn’t know,” Bhatia said. “The problem is inconsistency. The governor has to speak about the homicides, the number of people who died because of the hurricane but weren’t counted; he has to talk about electric power.
“He announced a month ago that he was going to modernize the [Electric Power] Authority and has not said anything else. We are in limbo here and the governor has to make a clear decision today,” he added while demanding that the governor explain why he has not managed to get the federal government to trust him and disburse to Puerto Rico the billions in congressionally approved disaster loans.
He also indicated that the governor should face the island and admit he made a mistake when contracting Whitefish Energy Holdings and clarify whether the Federal Emergency Management Agency (FEMA) will assume the payment to that company or if it will have to be paid by the Government of Puerto Rico.
The governor announced the purchase of 300 new patrols for the police force. Likewise, 1,435 members—who were assigned for administrative functions—will be assigned to the streets; personnel from other agencies will assume these duties thanks to the Single Employer Act.
Regarding the escalation of murders, the governor said “there is no magic solution for such a complex problem. What we do have is the ability—in an intelligent, decisive, and firm way—to face crime, drug trafficking, and organized crime.”
The governor delivered his first message on Feb. 28 last year, when he spoke about the spending plan he would present to the island’s fiscal oversight board and also mentioned the reforms his administration would carry out in the areas of healthcare, education, permitting, taxes and government size. Currently, tax reform is still pending.