Puerto Rico Senate president: Firms lobbying fiscal board over video-lottery terminals

SAN JUAN – Puerto Rico Senate President Thomas Rivera Schatz denounced Tuesday that lobbyists close to the chairman of the island’s fiscal oversight board, José Carrión III, do not want video-lottery machines legalized for personal interests.

“There are lobbyists from Scientific Games and Caribbean Cage close to the chairman of the board, relatives, friends of the chairman of the board, who want to stop the machines of Puerto Rican business people because of their own interests,” Rivera Schatz said at a press conference before the close of the ordinary session.

The lawmaker declined to answer whether passing the tax reform bill would be futile given the fiscal board’s objections. He said the matter was being discussed with House lawmakers. “I think we’ll have this issue resolved today,” he added.

On Monday, the executive director of the fiscal board, Natalie Jaresko, said the video lottery terminal provision was inconsistent with the certified fiscal plan, since the board had yet to “receive data supporting” its implementation “is revenue neutral and will not cannibalize existing Fiscal Plan revenue streams.”

Jaresko also said it was “important the bill text accounts for the full costs of implementation, operations, and regulations” from the proposal.

“The board has no moral authority here to request a report from anyone. The board should be accountable for the expense it has represented for the people of Puerto Rico without solving a single problem,” Rivera Schatz said.

He further said there are studies on the number of off-casino gaming machines on the island.

“Today, the machines are out there [making money] without contributing [taxes], as simple as that. They [terminal owners] want to legalize themselves and want to contribute. Furthermore, the income of those machines will be taxed. The board’s arguments are simply unsustainable,” he stressed.

In addition, he said the board issued contradictory government requests.

“For example, in a letter the fiscal control board sent us, it suggests we review the Act 154 tax of 4 percent that represents $2 billion of our budget. It suggests that we raise that tax. That is an option. What’s happening is the argument they use for the video lottery [machines] is it could endanger what the casinos generate. If that is the argument, there are voices that say that if the tax imposed by Law 154 is raised, it would endanger about $2 billion of the budget,” he said.

“There are constant inconsistencies on the part of the Fiscal Control Board and it is our responsibility to work for Puerto Rico, not for the board,” he added.

Fiscal board: Video-lottery terminal section in tax reform is inconsistent with fiscal plan

Fiscal board questions amendment to retirement law that would benefit mayors

Fiscal board Executive Director Natalie Jaresko (CB file)

SAN JUAN – The executive director of Puerto Rico’s Financial Oversight and Management Board, Natalie Jaresko, on Monday questioned Senate Bill 1148, which proposes to retroactively change the date that applies to participants that entered the Employees Retirement System (ERS) on or after Jan. 1, 2000, to benefit a few dozen mayors.

The mayors, most of which already get substantial pensions, would instead be covered by the old ERS’s defined-benefits program, she said.”Based on our review of the Bill, we believe it is not consistent with the certified Fiscal Plan for the Commonwealth.”

The commonwealth created System 2000 to close the defined benefit program for all new participants and “try to protect the financial condition of the Commonwealth’s largest retirement system,” she said.

At that time, all ERS participants who entered the system on or after Jan, 1, 2000, would be covered solely under System 2000.

“Amending this date now, 20 years later and when the financial condition of ERS is materially worse, would increase the amount of monthly PayGo payments. Therefore, the Bill is inconsistent with both the certified Fiscal Plan and the certified Budget for the Commonwealth,” she reiterated.

“Moreover, such an arbitrary benefit increase that applies to a select group of ERS participants that have comparatively high pension benefits would create a dangerous precedent, especially at a time when the assets of ERS have been depleted and ERS participants face reductions in their pensions.

“Finally, we request that you provide the fiscal analysis of the Bill. We would be pleased to discuss this matter in more detail with you and your staff at your convenience,” she wrote to Senate President Thomas Rivera Schatz and House Speaker Carlos Méndez Núñez.

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.

Puerto Rico House speaker, lawmakers ask fiscal board to reconsider fiscal plan

SAN JUAN – The speaker of Puerto Rico’s House of Representatives, Carlos “Johnny” Méndez Núñez, along with several lawmakers, expressed themselves Wednesday against the fiscal plan certified by the island’s Financial Oversight and Management Board and requested that the panel revise it.

“What the [fiscal board] proposes is an austerity plan that would further aggravate the economic and fiscal situation of Puerto Rico. The Board certified a Plan that aims to further cut government services to create a surplus of $17 billion for the year 2023 that can only benefit creditors. That Plan goes against the strategies of economic development that we have been implementing for almost 2 years and we see its positive results in the recent jobs and economic activity statistics,” Méndez Núñez said in a joint statement.

Rep. José “Pichy” Torres, denounced that the board “proposes further cuts to pensioners, to our public employees, including the elimination of their Christmas bonus, and they intend to render inoperative important agencies such as the Police, Fire, Justice, among others. All this to have available for other purposes about $17 billion that Puerto Rico needs for its recovery.”

House Vice President Lourdes Ramos added that “the governor and this legislature will continue to defend the most vulnerable [citizens] and we will fight in all forums to protect the pensions of our retirees and the funds we need for the agencies to provide services and pay our public employees. We have had the will to make major needed transformations such as the reforms in PREPA [Puerto Rico Electric Power Authority], in Health, in Education, Labor, Permits and reducing about $2billion in operational expenses of the Government to guarantee and pay our pensioners and those of the University of Puerto Rico. That promise is going to be fulfilled.”

Majority Leader Gabriel Rodríguez Aguiló said that “this Fiscal Plan…will have a disastrous effect on the jobs we can create, in education, in security and even in the most basic services such as trash collection for our residents. With these austerity policies, we will aggravate the difficult economic and fiscal situation we have had for more than a decade.”

Fiscal board certifies fiscal ’19 budget for Puerto Rico power company

SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced Sunday evening that it has unanimously approved a revised budget for the Puerto Rico Electric Power Authority (Prpea) for fiscal year 2019 that aligns with the utility’s fiscal plan certioned in Aug. 1.

“The Oversight Board’s commitment to providing the people of Puerto Rico with better, less costly and more reliable electricity service is proven in this revised budget for PREPA,” board Executive Director Natalie Jaresko said. “The Oversight Board is pleased to submit a FY19 budget for PREPA that complies with PREPA’s certified fiscal plan, and allows the utility to pursue the goals required therein: successful restructuring of PREPA’s debt obligations, the privatization of the utility’s generation assets, and the concession of PREPA’s transmission and distribution (T&D) system, which will strengthen PREPA’s appeal to investors and private capital to Puerto Rico’s energy grid.”

Key changes mentioned in a board release announcing the revised budget include updates to macroeconomic inputs and “clearer budgetary enforcement language regarding fuel and purchased power, labor and resiliency.”

The board also announced it unanimously certified a Revised Compliant Budget for the Medical Services Administration (ASEM by its Spanish acronym) of $85.7 million for fiscal 2019.

ASEM’s Revised Compliant Budget is $33.7 million higher than the budget originally certified. “The increase stems from a revised estimate in ASEM revenues as a result of further due diligence with the Government, and is needed to pay ASEM medical professionals and independent contractors,” according to the release.

Related documents may be downloaded at the board’s website, at https://oversightboard.pr.gov/documents/

Fiscal board certifies Puerto Rico Energy Bureau, water utility budgets

University of Puerto Rico student council condemns approved budget

SAN JUAN – The University of Puerto Rico (UPR), Río Piedras campus’ Student Council denounced that the school’s budget was approved behind closed doors, it said, amid a doubling of the tuition costs of enrollment and fewer exemptions.

“Ultimately, they raised the budget of the Chancellor’s Office from $1.4 million to around $4.7 million. That is why they banned the entrance of our representative on Wednesday, August 8, using cheap excuses,” council interim President Gabriel Negrón said in a statement.

The student body demanded that the campus’ administration remedy the impact of the austerity measures with the adoption of an “extraordinary” extension and an orientation on the matter “immediately.”

“It is an existing alternative in the regulation systemic-wide that would allow students to pay an amount less than that established in the extension of their bill. It is at the discretion of the Dean of Students,” Negrón said, adding that students who have “difficulties paying,” could “go to the office to explain their situation.”

The council said undergraduate Río Piedras campus students previously paid $855 a semester, but must now pay $1,755.

Puerto Rico fiscal board will revise energy regulator’s budget

PREC holds a hearing in November 2017 to investigate Prepa’s August rate hike. (Agustín Criollo/CB)

SAN JUAN – The Financial Oversight and Management Board (FOMB) will be taking a second look at the Puerto Rico Energy Commission’s (PREC) budget.

The decision was made after the energy regulator complained that its revenues were cut by 70%. The fiscal board limited PREC’s expenditures to $1.8 million, of which $1.6 million is for payroll and expenses and $207,000 for operational expenses.

PREC gets its budget from two sources. The first is a $5.8 million yearly allocation from Prepa and the second is from a fee charged to private power companies that does not exceed 0.25%, suggesting the allocated budget is in violation of PREC’s charter law.

“If not amended, the Consolidated Budget established by the FOMB, will end the independent, fact-based regulation of Puerto Rico’s electric industry,” the commissioners said in a letter to the fiscal board.

After reviewing the letter, the board agreed with PREC’s budget analysis.

By Aug. 20, the board said, the governor will submit a revised budget, which will be considered approved if it complies with the fiscal plan.

Puerto Rico bankruptcy hearing Wednesday to address suits against fiscal board, among other matters

The U.S. District Court for the District of Puerto Rico (CB file photo)

SAN JUAN – At the omnibus hearing Wednesday, July 25, over Puerto Rico’s insolvency numerous issues will tackled including controversies around the disclosure of documents used by an independent investigator that is probing the causes of the island’s debt; the lawsuit filed by Gov. Ricardo Rosselló amid budget the government’s budget wrangle with the Financial Oversight and Management Board; and a motion to compel the Treasury Department to make certain payments.

The island’s financial oversight board is seeking to dismiss the Rosselló’s complaint to prohibit it from implementing and enforcing certain initiatives through the certified fiscal plan and budget the governor alleges are nonbinding recommendations. He says the board is trying to impose public policy, which is prohibited by Promesa.

At the hearing, the fiscal board also wants a Puerto Rico legislature lawsuit against it dismissed. Lawmakers are requesting a declaration that the board exceeded its authority by attempting to force lawmakers to repeal Act 80, known as the unjust dismissals law, as well as to prohibit the panel from enforcing its own version of the government’s fiscal year budget.

The hearing will start with a status report provided to the fiscal board on the Puerto Rico Electric Power Authority’s (Prepa) operations, leadership,  projected financing needs and claims-filing process.

Afterward, the hearing will move to a Creditors’ Committee Informative Motion seeking the discovery, or the disclosure, of documents obtained by the independent investigator probing the causes of Puerto Rico’s debt.

The investigator wants to obtain approval of procedures to resolve confidentiality disputes and to dispose of the documents once a report is provided next month. The committee, however, appears not to trust the investigator and is seeking to do its own inquiry.

The hearing will also address a request by certain Employees Retirement System bondholders for relief from the automatic stay on litigation established by the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa).

Also, the Retirees’ Committee has filed a motion to compel the Puerto Rico Treasury Department to comply with court orders to pay their legal fees. The committee opposes the island Treasury’s decision to impose a 29% tax for services abroad. Treasury Secretary Raúl Maldonado said he will examine each bill separately to determine whether to deduct the tax. Professionals working with Cofina have a similar request.

The Official Committee of Unsecured Creditors of the Commonwealth of Puerto Rico, as agent of the Commonwealth of Puerto Rico, is also seeking to discuss a renewed motion to establish procedures to deal with the 5.5% sales and use tax revenues, but the matter appears to be uncontested.

Judge to hear arguments in Puerto Rico budget suit against fiscal board July 25

SAN JUAN – U.S. District Judge Laura Taylor Swain will hear at a July 25 omnibus hearing a complaint Gov. Ricardo Rosselló filed against Puerto Rico’s Financial Oversight Management Board to stop it from “micromanaging” the government and “usurping” home-rule authority.

The lawsuit, filed last week, is the result of wrangling over the budget. The fiscal board rejected an $8.7 billion budget passed by the island’s legislature, contending it was not compliant with the fiscal plan the panel had certified for the commonwealth. The board then proceeded to impose its own budget, which cuts funds for municipalities and workers’ year-end pay, known as the Christmas bonus, as well as funding for the University of Puerto Rico.

The differences emerged after the legislature refused to yield to the fiscal board’s request to repeal Act 80 of 1976, known as the wrongful dismissal law–to make Puerto Rico an at-will employment jurisdiction.

The court agreed to a government request to accelerate the addressing the lawsuit. The board has until July 12 to answer the complaint, and if it opts to seek a dismissal, the government will have until July 17 to file a reply, after which the board would have until July 20 to file a response.

In the event the board answers the complaint, the government may move for judgment on the pleadings or seek summary judgment by July 16 and the board will have until July 20 to respond, with any reply due July 23.

“In either event, the Court will hear oral argument on the motion in connection with the omnibus hearing scheduled for July 25, 2018,” the court’s order reads.

In the adversary complaint, the government is seeking a court ruling declaring the board lacks the authority to impose policy initiatives on the government through a fiscal plan or budget. Also, that the “substantive policy mandates” in the board’s fiscal plan be declared null and void.

The lawsuit says that despite the fact the board has the power to make policy “recommendations” to the government, “no one can dispute that the Governor is free to reject those recommendations.”

If the governor declines to adopt a board recommendation, the law that created the fiscal panel, Promesa, requires that the decision is explained to the president of the United States, speaker of the U.S. House and majority leader of the U.S. Senate.

The fiscal board cannot compel the governor to comply with its policy recommendations, whether those recommendations are “free-standing or advanced” in a fiscal plan, the government reiterates in its filing.

“And the Board certainly cannot force those recommendations on the Commonwealth via a budget. Specifically, the Oversight Board cannot do what it is attempting to do: impose mandatory workforce reductions, change the roles and responsibilities of certain government officials, criminalize certain acts under Puerto Rico law and otherwise seek to micromanage Puerto Rico’s government,” the lawsuit reads

Minority lawmakers want to sue Puerto Rico fiscal board over budget

SAN JUAN – The spokesman for the minority Popular Democratic Party in Puerto Rico’s House of Representatives, Rafael “Tatito” Hernández Montañez, said Tuesday that, if the island’s Legislative Assembly were to resort to the courts to challenge the budget approved by the fiscal oversight board, they would join the lawsuit.

“To defend the prerogatives of the Legislative Assembly, which approved a budget that is less than that approved by the fiscal control board and the establishment of the allocations. The distribution of the allocations is the best admissible evidence in a court of what public policy is,” Hernández Montañez said at a press conference Tuesday.

The lawmaker acknowledged, however, that any legal move is subject to the actions of Gov. Ricardo Rosselló.

“For the [legal] battle to take place, there must be noncompliance of the fiscal plan and the budget approved by the board, according to the Promesa law [which created the island’s fiscal board]. What we are telling the governor is to challenge what the law says. We must then wait until the board’s plan is implemented, so that the Legislative Assembly has…legitimacy and a case for damages. It has to be everyone to have enough weight,” said the representative.

The minority spokesman said that, although his party’s lawmakers could sue without the legislative majority, the lawsuit would be “weak.”