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Swain’s World: Balance of power on Puerto Rico fiscal board’s side

By on April 30, 2018

Editor’s note: The following article originally appeared in the April 26 issue of Caribbean Business.

In the showdown between the Financial Oversight & Management Board (FOMB) and government of Puerto Rico over the latter’s refusal to comply with certain aspects of the fiscal plans certified last week, the FOMB has all the tools at its disposal to prevail.

After the FOMB certified its own fiscal plans for the government and covered entities, namely the commonwealth, Highways & Transportation Authority, Aqueduct & Sewer Authority, Electric Power Authority, Government Development Bank and University of Puerto Rico (UPR), government officials said they were not going to comply with parts of the plans.

Gov. Ricardo Rosselló reaffirmed his administration will not obey or implement the public policy measures the board certified by majority vote. Rosselló was referring to the reduction by half of private-sector vacation and sick-leave days, as well as elimination of the statutory Christmas bonus by 2019 and a controversial pension reform that would cut retirement checks by an average of 10 percent. UPR chairman Walter Alomar also said he was not going to comply with the UPR fiscal plan in areas involving tuition hikes and pensions.

“As we have always said, matters of a fiscal nature, in terms of what the numbers are, are the responsibility of the oversight board, but the public policy of Puerto Rico is established by the government of Puerto Rico,” Rosselló said.

Oversight Board Chairman José Carrión III has said that while he is willing to talk to the administration, the FOMB will have to consult with its lawyers on the matter. The government’s representative to the FOMB, Christian Sobrino, said that if the oversight board goes to court with a petition, the government will respond to it and “we will win” the dispute.

Attorney John Mudd, who often writes about the oversight board, says the governor’s power to veto the fiscal plans is irrelevant because Judge Laura Taylor Swain can order the government to comply with them or dismiss the Title III bankruptcy case.

The matter is unclear, however, because the P.R. Oversight, Management & Economic Stability Act (Promesa) does not say what is to occur should the government not comply with the fiscal plan.

–Read the rest of the story in CB’s epaper here.



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