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