Puerto Rico governor submits fiscal plans minus oversight board requests
SAN JUAN – Adding to the differences between the Financial Oversight & Management Board and the Puerto Rico governor over his administration’s fiscal plan, Ricardo Rosselló reiterated Thursday that the board’s role is to dictate fiscal matters and public policy is the government’s.
“This should not be seen as a war. This should be seen as an alert,” Rosselló said, noting that his government will not execute a fiscal plan it objects to even if the fiscal oversight board certifies it. “Let the board give the number. That is its job, but it cannot put the number and adjust it, too.”
The government submitted to the fiscal board Thursday the fiscal plans for the central government and several public corporations but not with all the changes recommended by that panel.
Regarding the central government’s fiscal plan, Rosselló said that much progress was made to cut $1.5 billion in spending the board requested and that there is only a dispute over $100 million of that amount.
The governor rejected board requests to cut pensions, reduce sick and vacation leave days, eliminate the Unjustified Dismissal Law and eliminate the so-called Christmas bonus for workers. Of the 48 revisions the board requested made to the government’s fiscal plan, only 20 were made after they were classified as either public policy, structural, technical or economic issues, Rosselló said.
“We are recognizing the powers that the Board has, but also defending the powers that the government of Puerto Rico has,” the governor said during a roundtable with reporters Thursday.
Referring to a letter he sent to the fiscal board, Rosselló said much was done to achieve the fiscal objectives and that the administration is at loggerheads with the panel over $100 million. He reiterated his willingness to seek consensus with the board over the contents of the fiscal plan but that it cannot tell the government which specific areas should be cut.
“We are going to hold on to our position,” the governor said.
The letter request that the board approve a fiscal plan the government agrees with so that a debt adjustment plan under the Promesa federal law’s Title III bankruptcy process can move quickly. If the board imposes its own fiscal plan, the process to adjust the island’s massive debt would be harder. “The priority of the government is the well-being of Puerto Rico and we ask that this be [the board’s] priority,” he said.
The governor also said the estimate is that, during the next five fiscal years, legal and bankruptcy-related expenses will amount to $1.4 billion.
As for accepting a different fiscal plan imposed by the board, Rosselló reiterated that neither the executive branch nor the legislature could be forced to implement it. “We do not have to go to the court,” he said, “We are doing what’s in the law.”
Promesa, which also established the fiscal board, states that if the government does not agree with the panel’s recommendations, it must explain to the president of the United States and Congress the reasons for rejecting them. Rosselló said he sent a letter last year explaining his rejection of some of the measures of the previous fiscal plan and that nothing came of it.
The governor also went over the growth figures and said negative growth of 12% is established for 2018 but 6.7% growth is expected for 2019, culminating with a growth of 0.6% in 2023, due to declining private insurance money.
The percentage of private insurance claim payments was lowered to $15.8 billion from $29 billion, which Christian Sobrino, the governor’s representative to the fiscal board, explained were insurance payments to multinationals, or money that would not stay in Puerto Rico.
The percentage of disaster recovery funds for the island was also lowered, from 12.5% to 12%.
The earned-income tax credit (EITC) will be implemented in the first quarter of 2019, not the third quarter. The revenue percentage was lowered to 5% from 6%.
As for how to deal with traffic congestion, Rosselló said the board was given ideas that are part of his administration’s’ Plan for Puerto Rico but did not specify which ones.
Although there was talk of a $6.4 billion surplus in five years, Rosselló said that if the impact of all economic and structural measures were included and the central government’s debt paid, the government would end up with a $2.1 billion deficit in 2018 and with a deficit of $1.5 billion in 2022.
“We are in deficit in each of the years,” Rosselló he said.
On the federal response, Rosselló said he was disappointed with the U.S. Army Corps of Engineers’ response but not with the Department of Defense’s response. He said FEMA’s bureaucracy delayed aid even though the island has not been declared a high-risk jurisdiction. “There are successes and mistakes,” he said.
Sobrino added that there exist jurisdictions under Chapter 9 bankruptcy that have suffered disasters and were not imposed as many requirements as Puerto Rico.
In addition to energy reform, the fiscal plan includes other proposals that will be submitted to the Legislature such as tax reform and the Business Incentive Code.