Puerto Rico board willing to certify fiscal plan agreed to with governor

The fiscal board’s executive director, Natalie Jaresko; and chairman, José Carrión (Jaime Rivera/CB)

SAN JUAN – Although Puerto Rico’s Financial Oversight and Management Board recertified the fiscal plans of the commonwealth government and other instrumentalities Friday with numerous cuts after the Legislature opted not to eliminate the wrongful employment termination law, or Act 80, the entity said it would recertify if its conditions are met.

Board Chairman José Carrión said the agreement with the governor that the panel would not push for the repeal of certain labor benefits–such as the statutory year-end part of worker salaries know as the Christmas Bonus–in exchange for the repeal of Act 80, was left without effect after the Legislature failed to act. However, Carrión also said that if the Legislature passes a budget without Act 80, the body would again certify the fiscal plan.

“The answer is yes,” the chairman said.

The budget measures were under the consideration of House and Senate conference committees late Friday after the board held a press conference. Once the budget is approved, the board will look at it to determine if it complies with the fiscal plan that was certified Friday. The Legislature was not expected to repeal Act 80.

That new fiscal plan reflects a surplus reduction of $40 billion, to $14.46 billion, over a 30-year period, an amount that reflects a reduction of federal funds received, a lack of reforms requested by the board and poor economic growth. “What was reflected in this plan was the non-elimination of Act 80 and the lack of growth,” board Executive Director Natalie Jaresko said.

Board Executive Director Natalie Jaresko (Jaime Rivera/CB)

While Carrión acknowledged that his panel cannot force the Legislature to repeal Act 80, as part of the approval of the budget, he said the board would go to court to force the government to comply with the fiscal plan in the event it refuses to do so.

The Promesa law “is clear about what we can do and not do” or what “we cannot force” them to do as it establishes a balance of power. “We reached an agreement that could not be made concrete. It’s not due to a lack of dialogue,” Carrión said.

What happens if the government refuses to comply with the fiscal plan? “We’re going start with the premise that it will comply with the law…. If they don’t, then we will go to court,” Carrión said.

The board maintained it is not asking the government to dismiss workers. The governor has said the government’s size will be reduced through attrition and the consolidation of agencies. There are no plans to reduce public-employee working hours.

Jaresko said minor changes were made to the budget of the University of Puerto Rico, and that its estimated revenue is $1.2 billion in 2018 and $1.4 billion in 2019. The revenues of the Puerto Rico Highway Authority, an entity whose budget was found in violation of Promesa, is expected to see revenues of $1.2 billion in 2018 and $1.6 billion in 2018.

Board member Ana Matosantos said the new fiscal plan does not contain labor reforms and thus fails to achieve the needed reductions in poverty and increases in household income, lower funding in infrastructure and lower funding for municipalities.

Board member Ana Matosantos (Jaime Rivera/CB)

The reduction to the Legislature included in the recertified fiscal plan Friday is from $134.9 million to $111.2 million, or $23.7 million less for fiscal 2019. Cuts were also made to agencies and the courts. The board opted not to cut the budgets of the Government Ethics an Comptroller’s offices, so they can fight corruption, the panel said. The board also reverted an agreement to create a $50 million fund for towns and provide $25 million to the University of Puerto Rico. It also repealed the Christmas bonus in the recertified fiscal plan.

“This Spring, the Board outlined the changes we consider necessary to achieve economic growth and to provide a clear, feasible, achievable path to restructuring the debt. We reached an agreement with the Governor that funded important investments. The agreement would have made a University of Puerto Rico education more affordable for low income students, funded the Christmas bonus for working people, provided for infrastructure projects to support growth, as well as established the critical foundation for restructuring bond and pension obligations. While we are disappointed that the agreement was not approved, we recognize that fact does not change our charge or Puerto Rico’s reality,” member Ana Matosantos said “on behalf of the entire Board” in a release issued shortly after the press conference.

The plan maintains: “all the other critical structural reforms needed to improve the business climate on the Island, attract new investment, and create jobs. These include reforming the energy sector to provide reliable and affordable electricity to residents and business, the implementation of an Earned Income Tax Credit (EITC) and welfare-to-work programs, as well as measurable Ease of Doing Business reforms, among other important fiscal initiatives,” according to the release.

The fiscal board’s executive director, Natalie Jaresko; and chairman, José Carrión; and members Ana Matosantos and David Skeel (Jaime Rivera/CB)

The release further says the board will review the government’s budget for fiscal year 2019, “as soon as the Legislature submits it for approval by the Board. Should the Board determine that the budget is not compliant with the New Fiscal Plan, the Board will certify a budget for the Commonwealth of Puerto Rico, the University of Puerto Rico, the Highway and Transportation Authority, the Puerto Rico Electric and Power Authority, the Puerto Rico Aqueduct and Sewer Authority, before July 1st, 2018,” reads the release.

The board also announced it will adjust revenues within the fiscal plan after the end of the current fiscal year, “when actual revenues are reported.”

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Puerto Rico oversight board to amend fiscal plans in reaction to gov’t ‘noncompliance’

SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced Friday its “intent to recertify” fiscal plans for Puerto Rico and certain government instrumentalities.

In a letter to Gov. Ricardo Rosselló, Senate President Thomas Rivera Schatz and House Speaker Carlos “Johnny” Méndez , the board stated that it will make changes to the commonwealth’s fiscal plan as a result of the Legislature’s “failure to pass labor reform, in part by repealing Puerto Rico’s Wrongful Discharge Act, also known as Law 80.”

The law’s repeal was a requirement of the amended fiscal plan certified by the board on May 30, a condition agreed to with Rosselló, instead of requiring that island workers’ statutory year-end bonus, the so-called Christmas bonus, be made voluntary for employers, as well as that vacation- and sick-leave days not be cut to no more than seven days each.

“The New Fiscal Plan includes a blueprint of structural reforms and fiscal measures that, if implemented, would give Puerto Ricans what they need and deserve – a growing economy with more and better jobs, resilient infrastructure, and an effective and efficient public sector,” fiscal board Chairman José Carrión wrote in the letter. “Although, structural reforms are still essential to stem the loss of jobs and businesses on the Island and overcome Puerto Rico’s long-term financial crisis, without a comprehensive labor reform, the path forward becomes more difficult,” he says in Friday’s release.

The board intends to recertify a fiscal plan to reflect the impact of the Legislature’s “inaction on labor reform” by reverting to measures called for in the April 19 plan, including “right-sizing cuts” to “make the public sector more efficient and affordable.”

The plan will maintain all the other “critical structural reforms needed to improve the business climate on the Island, attract new investment, and create jobs,” the board said. These include reforming the energy sector to “provide reliable and affordable electricity to residents and business, a limited labor reform with the implementation of an Earned Income Tax Credit (EITC) and welfare-to-work programs, as well as measurable Ease of Doing Business reforms, among other important fiscal initiatives,” the board’s release reads.

In addition to the amendments to the commonwealth’s Plan, the board will also make “technical changes to the University of Puerto Rico Fiscal Plan,” such as eliminating a $25 million fund for scholarships, as well as to the Highways and Transportation Authority’s fiscal plan, “in line with the adjustments to the Commonwealth Plan.”

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A $50 million annual fund for municipalities is also on the chopping block.

The letter concluded that the board will review the general fund budget that is due to be submitted by the Legislature before the end of this fiscal year, July 30.

“Should the Board determine that the budget is not compliant with the New Fiscal Plan, the Board will certify a budget for the Commonwealth of Puerto Rico, the University of Puerto Rico, the Highway and Transportation Authority, the Puerto Rico Electric and Power Authority, the Puerto Rico Aqueduct and Sewer Authority, before July 1st, 2018,” it assured.

The board will hold a press conference on the matter Friday at 3 p.m.

Read the full text of the board’s letter here.




Assured Guaranty asks FOMB to reconsider certification of Fiscal Plan for Puerto Rico

The head of Assured Guaranty Corp. and Assured Guaranty Municipal Corp., is asking the Financial Oversight and Management Board (FOMB) to reconsider its certification of the commonwealth fiscal plan.

The firm insures about $1.6 billion of commonwealth general obligation bonds and about $1.9 billion of revenue bonds issued by other entities including the Highway and Transportation Authority, Cofina and the University of Puerto Rico.

On October 6 of last year, Assured withdrew a lawsuit othe legality of the the fiscal plan the Oversight Board approved on March 13 of 2017 that at the time the monoliner said violated the Puerto Rico Oversight, Management, and Economic Stability Act among other laws.

“Assured withdrew its lawsuit because it had been led to believe that the Oversight Board sought to “reset” its relations with Puerto Rico’s creditors and that the Original Fiscal Plan would be redrafted. Assured hoped that this “reset” would entail a more open fiscal plan development process aimed at producing a constitutional and Promesa-compliant fiscal plan benefitting from the input and support of creditors,” stated the letter written by Dominic J. Frederico, president and CEO of Assured.

“Unfortunately, the Oversight Board again formulated a fiscal plan without appropriate transparency of information and assumptions, and without collaboration with creditors,” he added in the letter dated Tuesday.

He said the fiscal plan approved on April 19 of this year violates Promesa.

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First, he said, the new fiscal plan does not respect lawful priorities and lawful liens in that it prioritizes general government expenditures instead of debt payments. It also violates Promesa dispositions that prevent the transfer of resources from one entity to another. The plan diverts revenues from the Highway and Transportation Authority, the Convention Center and the Infrastructure Financing Authority that were used to pay debt, to the commonwealth general fund.

The Fiscal plan also does not identify essential services and does not provide for a method to access capital markets.

“In addition to these legal defects, the Revised Fiscal Plan suffers from flawed methodologies and assumptions that result in an artificially pessimistic projection of Puerto Rico’s future revenues,” the firm said.

The Revised Fiscal Plan also suffers, he said, from the ongoing lack of up-to-date audited financial statements or other public information sufficient to develop or assess a realistic fiscal plan.

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Oversight board to certify Puerto Rico fiscal plans at public meetings this week 

SAN JUAN – The Financial Oversight and Management Board for Puerto Rico announced over the weekend that it will hold public meetings on the island this week where it is expected to discuss its certification of the government’s revised fiscal plans for the island and six of its government entities.

On Thursday, April 19, and Friday, April 20, the fiscal panel established by the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) will elaborate on its consideration of the Commonwealth, the Puerto Rico Aqueduct and Sewer Authority (Prasa), the Puerto Rico Electric Power Authority (Prepa), the University of Puerto Rico (UPR), the Highway and Transportation Authority (HTA), the Government Development Bank (GDB), and the Public Corporation for the Supervision and Insurance of Cooperatives’ (Cossec by its Spanish acronym) fiscal plans.

The board’s 12th and 13th public meetings will take place in the Puerto Rico Convention Center in San Juan at 1 p.m. Thursday and
9 a.m. Friday.

Both meetings will livestreamed and will be available on the website sometime afterwardon the board’s website.

A preregistration form as well as the “required security and attendance protocol,” is
available at the board’s website.

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