Puerto Rico oversight board publishes fiscal plan fact sheet
SAN JUAN – Puerto Rico’s Financial Oversight and Management Board (FOMB) on Monday issued a statement clarifying what it called “misconceptions and untrue accusations” regarding the fiscal plan it certified for the commonwealth.
The fiscal board said the plan “is the roadmap to regain economic growth and sustainability which is a requirement for ensuring Government can provide more efficient and reliable services. A variety of untrue accusations have been made over the past week regarding what the Certified Fiscal Plan does or doesn’t do.”
The board assured the “only changes made to the New Commonwealth Fiscal Plan are growth projections as a result of poorer than expected structural reform implementation progress, actual fiscal year 2018 revenues and expenditures, and updates to the amount of federal disaster relief funding expected.”
The new document did not change “agency efficiencies savings required from the April to the June to the October Certified Fiscal Plans,” the board stressed, nor the “philosophy in the Certified Fiscal Plans with regard to Pension Policy.”
The Employment Retirement System (ERS) “was bankrupted by decades of insufficient funding from government contributions and is currently depleted (less than 1% funded),” the board said.
“FOMB has developed a pension policy that protects the lowest income individuals and reduces other pensions progressively, while acknowledging that some reduction in pensions is appropriate and necessary in the bankruptcy process. The overall reduction in pensions in the Certified Fiscal Plan remains 10% in fiscal year 2020 and has not been changed since the March 2017 first Certified Fiscal Plan,” the board said.
The fiscal plan “provides for measures to improve the affordability and efficiency of services being delivered to the people of Puerto Rico,” the board pointed out, saying, “Every elected official and every resident on the Island will agree that government can deliver services more effectively with the use of new technologies, improved processes, and do so at a lower cost. The population has decreased by 10% in the last 10 years or 12% between 2007 to 2017 (prior to Hurricanes Irma and Maria) and the cost of Government needs to adjust accordingly.”
The plan provides “more resources” to residents “in many key areas, not less,” among which the following are listed in the “Certified Fiscal Plan Fact Sheet” it published:
- A locally funded Earned Income Tax Credit for those earning under $42,000 depending on children and marital status – a cash incentive to those working estimated to put $200 million per year back in the hands of those taxpayers annually (P. 48) [of the Commonwealth – Revised Fiscal Plan – October 23 2018].
- A $5,000 increase in salaries for school directors starting this fiscal year (P. 80).
- A $1,500 increase in salaries for teachers starting this fiscal year (P. 80).
- $21-24 million per year to purchase new textbooks for public school students (P. 80).
- $122 million to be paid this year to police who are owed a total of $366 million for past promotions and salary scales, which has not been paid over the last 10 years (General Fund Budget, P. 7).
The board also said structural reforms are not intended to benefit the island’s creditors, but its people, entrepreneurs and businesses, using some the following points as examples:
- Energy reform will bring more reliable electricity at 20 cents per KWH [killowat-houe] or less.
- Ease of doing business reform will enable entrepreneurs and businesses to access permits more easily, register property more easily, and reduce the administrative burden of paying taxes, among others.
- Human capital and welfare reform will give incentives to individuals to come in from the informal sector where they have no Social Security and no labor protections — into the formal sector where they do.
- Infrastructure reform will improve traffic congestion, increasing safety and reliability of roads, bridges and other infrastructure by prioritizing and ensuring available funds are used in the most effective way possible to make doing business on the Island easier and more efficient.
- Structural reforms create growth and increase tax revenues such that the generated funds can be reinvested in education and job training initiatives that will prepare people in Puerto Rico (particularly young people) for the workforce and contribute to lower unemployment on the Island.
Read the full text of the board’s Certified Fiscal Plan Fact Sheet here.