While reiterating Puerto Rico gov’t lacks will for reforms, fiscal board certifies fiscal plans
SAN JUAN – Puerto Rico’s Financial Oversight and Management Board unanimously approved Tuesday five-year fiscal plans for the island’s government and the University of Puerto Rico.
Regarding the commonwealth’s fiscal plan, board member Ana Matosantos acknowledged that the fiscal plan had shortcomings because it does not reduce the budget gap, restore growth or free up money for creditors.
“Frankly speaking, I don’t like this fiscal plan,” she said, expressing concern that it cuts too deeply into public services for citizens.
As in previous versions, the commonwealth’s revised fiscal plan calls for a range of fiscal and structural reforms as well as stiff reductions in government spending.
While the board was holding its 15th public meeting Tuesday, President Trump tweeted that corrupt island officials were going to use federal funds to pay the public debt, which the board denied.
“Federal disaster funds do not run through the budget or the calculation of surpluses,” the board’s executive director, Natalie Jaresko, said.
For his part, Gov. Ricardo Rosselló replied to Trump’s tweet, saying, “I agree with you Mr. President, that’s why I’m opposing the Oversight Board’s outrageous plan that would severely hamper Puerto Rico’s recovery and growth.”
The fiscal plan takes into account about $82 billion in federal aid and private insurance claim payments related to damages wrought by Hurricane Maria, but only as a stimulus.
On Monday, Jaresko said that only if Puerto Rico implements certain structural reforms and fiscal measures would it be able to have a cumulative $30 billion surplus until 2033, after which it will it will run deficits mostly in tandem with the discontinuation of federal funds.
The required fiscal measures include pension reform, agency right-sizing, reduction of subsidies, healthcare reform and measures related to utilities, as well as procurement reform. Structural reforms that could help jumpstart the economy for the long-term involve energy, human capital, welfare and improving the ease of doing business. Jaresko said the board must do work “above and beyond” to be able to help jumpstart the economy.
Jaresko had criticized the government’s lack of political will to implement some of the reforms suggested by the board, including the ease of doing business and labor reform.
“There are additional measures to facilitate doing business that are not in the fiscal plan because there is no political will to adopt these reforms,” Jaresko said.
During the meeting, board member Andrew Biggs, a public pension systems expert, said in many respects that the fiscal plan accomplishes much, but is also an acknowledgment of the board’s and “greater failure of Puerto Rico’s government” because the structural reforms needed to spark the economy are absent.
“We cannot say precisely what will happen in future years. Without serious economic reform…Puerto Rico will remain poor in the future,” he said.
Biggs also said the political forces of the island refuse to reduce labor benefits, including the repeal of the Wrongful Termination Act, and added that the story he will take to Washington is that the government does not want to do what it needs to do.
Ex oficio board member Christian Sobrino, who represents the government, said he did not understand why “some of the board members are so grim when we have had a tremendous record of success since we started last year.” He noted that a substantial portion of the debt has been restructured, government revenue has outpaced projections and privatization plans for the energy sector are underway.
“We have accomplished a lot but labor reform is not the end all be all of this,” he said, adding that the government has reduced spending. “If you go to Washington, you should be advocates of Puerto Rico…Also talk about the success. I don’t get all that I want…but we move forward,” he said.
While investors hoped the surplus may be used to pay debt service, board members said they cannot use funds that are not recurrent to pay recurrent expenditures.
The board also approved the UPR’s fiscal plan to implement changes needed to face a government-subsidy reduction of $441 million by 2023, according to the fiscal plan. The plan calls for a tuition hike and urges the university to implement need-based tuition aid.
The plan calls for the creation of three university hubs. One of the conglomerates would be headed by the Río Piedras campus and would comprise the Bayamón and Carolina campuses. The second hub would be headed by the Mayagüez campus and include the Aguadilla, Arecibo and Utuado campuses. The Southeast Region Conglomerate would be made up of the Ponce, Cayey and Humacao campuses.
The Medical Sciences Campus would remain separate and autonomous. Jaresko said university President Jorge Haddock, who reportedly said Friday he was designing his own campus conglomerates, had yet to present his plan.
Haddock, who did not attend the meeting, said the plan would be detrimental to the UPR. Some members of the public criticized the board’s insistence on changing the university’s defined benefit pension plan to a defined contribution plan.
- Commonwealth – Revised Fiscal Plan
- UPR – Revised Fiscal Plan
- FOMB – Letter – Compliance Certification (Revised Fiscal Plan) (Commonwealth GF) (UPR)