Sunday, July 5, 2020

Puerto Rico Gov’t Sues fiscal board for challenging 6 laws

By on June 12, 2020

Gov. Vázquez administration alleges ‘intrusion on public policy’

SAN JUAN – The government of Puerto Rico filed six complaints in court against the island’s Financial Oversight and Management Board after the federally created panel challenged six laws enacted by Gov. Wanda Vázquez, said Omar J. Marrero her representative to the board and executive director of the Puerto Rico Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym). 

“The reasons the Oversight Board has given to challenge and attempt to unilaterally invalidate these six laws are various, but they all represent an intrusion on the public policy of the government and, therefore, a violation” of the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), which established the board, Marrero said in a statement Friday. 

The official argued that under Promesa, the board can only question new bills passed by the government if their impact on revenue and expenses is not certified or their implementation is inconsistent with the certified fiscal plan.

In the case of the six laws challenged by the board, the government said it submitted “a certification pursuant to Promesa and certified that the laws are not significantly inconsistent with the certified fiscal plan.”

In his statement, Marrero listed the laws challenged by the board and the administration’s arguments, as follows: 

Acts 82-2019, 90-2019 and 138-2019: these laws regulate medication prices, regulate pharmacies and the practice of medicine through amendments to sections of the Insurance Code, new regulation requirements and offices. The Oversight Board argues that these laws are inconsistent with the certified fiscal plan because they might be preempted by federal laws and speculates that federal funds could be lost. Nothing in PROMESA allows the Oversight Board to speculate on whether a state law is in conflict with other federal laws. Therefore, this is not a valid reason under PROMESA to challenge laws passed by the elected government. 

Act 176-2019 reverts the vacation and sick leave accrual rates for public employees to the accrual rates existing prior to Act 26-2017. In addition, maximum accruals are maintained. The Oversight Board challenged this law arguing that it is inconsistent with the certified fiscal plan because the government did not provide a “productivity analysis” of public employees to determine if the new accrual rates will affect services and revenues. This is not a valid reason under PROMESA to challenge laws. 

Act 181-2019 provides for a salary increase for employees of the Firefighters Bureau and a revenue source to pay for this increase. The Oversight Board challenged this law arguing that the revenue and expense estimate provided by the government is “speculative” because it is based on assumptions. By definition, every estimate is based on assumptions, and a revenue and expense estimate is the only thing PROMESA requires at the time a law is certified. Therefore, the reason adduced by the Oversight Board to challenge this law is not a valid argument under PROMESA to challenge laws either. 

Act 47-2020 provides tax incentives and credits for healthcare professionals in an attempt to promote that these professionals stay in Puerto Rico, particularly during these times of crisis caused by the COVID- 19. The Oversight Board challenged this law because said entity differs from the public policy reasons the Legislature and the governor had to enact it. In addition, the Oversight board questioned the revenue and expense estimates that the government certified. These are not valid reasons under PROMESA to challenge laws, particularly as concerns the Oversight Board putting in question the government’s public policy behind the approval of the Law. 

“The Government duly complied with the process provided by Section 204 of PROMESA to certify to the Oversight Board that these laws comply with the certified fiscal plan. However, the Oversight Board has decided to act outside the legal frame provided by PROMESA and has challenged these laws, unilaterally declaring them null. This has created uncertainty in the current legal system. In light of this, the government had no other alternative but to go to court. No doubt, our administration would have preferred to not have to resort to the courts, but it is important to clarify the extent of the powers of the Oversight Board and the extent of the powers of the government,” Marrero said. 

Marrero stressed that Congress “was clear on the fact that, under PROMESA, the government of Puerto Rico maintains its powers” to establish public policy.

“The Oversight Board’s stubbornness in wanting to interfere in public policy matters has brought us here. Puerto Rico’s debt restructuring process cannot go forward successfully while the Oversight Board continues creating these legal uncertainties. Despite this legal recourse, the Government of Wanda Vázquez Garced will continue working hand in hand with the Oversight Board for the benefit of the people of Puerto Rico, but evidently we will not always be in agreement,” he said, adding, “We trust that the federal District Court for Puerto Rico will put an end to this dispute and clarify the extent of the powers of the Oversight Board.”