The Puerto Rico Oversight Board demanded major changes to the fiscal plan submitted by Gov. Ricardo Rosselló, seeking more cuts and more conservative projections for revenues.
The board made the demands in a seven page letter to the governor sent Thursday.
The board had certified a fiscal plan in June. However, revenues were coming in better than expected and emigration was less than expected and it wanted to revise the plan because of these and other factors.
“The June certified fiscal plan already identified the structural reforms and fiscal measures that are necessary to comply with [the Puerto Rico Oversight, Management, and Economic Stability Act],” wrote board Executive Director Natalie Jaresko to the governor. “Accordingly, the Oversight Board intended this revision to the fiscal plan to incorporate the latest material information and certain technical adjustments, not to renegotiate policy initiatives.
“Unfortunately, the proposed plan does not reflect all of the latest information for baseline projections and includes several new policies that are inconsistent with PROMESA’s mandate,” Jaresko continued.
In her letter Jaresko returned to two long-lasting topics of friction between the board and the governor. She said that the governor has failed to eliminate the annual Christmas bonus and if the governor doesn’t eliminate it than “agency efficiency personnel savings must be increased.”
Jaresko complained that Rosselló hasn’t included the board’s mandated 10% cuts to pension spending. She also said that his plan includes an implementation of Social Security that is more costly than that found in the board’s June-approved plan.
Beyond these oft-repeated topics of contention, Jaresko said that the governor’s plan includes $99 million in investment in things like public private partnerships and the Puerto Rico Innovation and Technology Services Office which were contingent on the repeal of a labor law. Since Puerto Rico’s Senate has declined to repeal this law on island employment conditions (Law 80), the governor shouldn’t include spending on these things in his plan.
Jaresko said that Rosselló has included $725 million in additional implementation costs associated with the planned government reforms. With regards to this sum and the $99 million sum, she said that if he is to include these sums than equal savings must be found.
In her letter the executive director told the governor that his plan improperly uses projected fiscal year 2019 revenues as a base from which to apply gross national product growth rates to figure out future levels of revenue. Since the current fiscal year (fiscal year 2019) will include substantial amount of recovery-related revenues and these are only temporary, using the current year in this way may over-estimate revenues for the coming years, she said.
Jaresko noted that the governor has included an additional $5.9 billion in Act 154 revenues over the next 40 years and asks him to explain them.
She said the governor assumes a higher than necessary $4.09 billion in baseline payroll expenditures. She called for this to be cut and that the lower total should be used to recalculate payroll in the government going forward.
Jaresko, on behalf of the board, also required a number of changes and/or explanations concerning the governor’s presentation of structural changes. She said that the governor’s decision to increase publicly funded unemployment insurance compensation and a requirement that federally funded construction projects pay workers $15 per hour means that a projected increase in GNP growth due to labor reforms should be cut to 0.15% from 0.3%.
Finally, Jaresko complained that the governor’s plan had removed implementation exhibits that included timelines and statements that the government would produce quarterly performance reports. She said these must be reintroduced.
Jaresko gave the governor until noon on Sept. 12 to submit an acceptable fiscal plan for Puerto Rico.
