Puerto Rico Gov. Ricardo Rosselló's latest government fiscal plan sticks to his resistance to austerity measures ordered by the Oversight Board.
The governor presented a proposed version of the central government fiscal plan on Monday, after the board said the the previous plan would have to be revised to reflect new estimates of population changes and revenues. The central government had $56.8 billion of net tax-supported debt as of 2017, according to Moody’s Investors Service.
Against the board’s directions, the governor’s plan retains a Christmas bonus and funds government worker pensions at 100%. The board had directed the elimination of the bonus and cutting spending on pensions by 10%.
However, the fiscal plan includes other measures from the board’s June 29-approved fiscal plan. In an attempt to control salary and non-salary employee expenditures, the governor’s plan continues limiting paid holidays to 15 days annually, prohibiting the carryover of sick and vacation days between fiscal years, and prohibiting the liquidation of sick days and capping the liquidation of vacation days at 60 days. The plan points out that the Puerto Rico government approved these measures in 2017.
Both the governor’s plan and board’s plan anticipate increasing teacher and police salaries.
The governor’s plan anticipates $6.2 billion of surplus available after structural reforms and post-reform measures but before any debt service is paid, from fiscal year 2018 to fiscal year 2023.
This money wouldn’t be available for the Highways and Transportation Authority, University of Puerto Rico, Puerto Rico Electric Power Authority, Puerto Rico Aqueduct and Sewer Authority, Children’s Trust, or Puerto Rico Sales Tax Financing Authority Corp. (COFINA) bonds, the governor’s plan says. The surplus is “presented for illustrative purposes only and does not represent anticipated future payments on restructured debt,” the governor’s plan said.
“Puerto Rico cannot afford to meet all its contractual debt obligations, even with aggressive implementation of these reforms and measures,” the governor’s plan said. “Puerto Rico is committed to repaying an affordable and sustainable amount of its outstanding debt and to treating its creditors equitably; however, it needs a comprehensive restructuring of its debt to have renewed access to the capital markets and to create the basis for a sustainable economy.”
In a separate statement, Rosselló said, “this fiscal plan insists on the funds we need for our progress and the protection of the most vulnerable sectors such as our pensioners and public employees.”
On Aug. 2, Board Executive Director Natalie Jaresko said that better-than-expected revenues in fiscal year 2018, which ended on June 30, and revised federal disaster spending estimates, meant that the board should increase the central government fiscal plan’s revenue projections.
While the Oversight-Board-certified Puerto Rico central government fiscal plan from June 29 projected a net decrease of population of 12% over five years, the board now expects that fewer people will leave the island. Jaresko indicated this will have at least some negative effect on local government finances by increasing government healthcare costs.
On Aug. 7 Puerto Rico Title III bankruptcy judge Laura Taylor Swain said that while the board could impose a budget and a fiscal plan on the governor, it couldn’t include everything that it had been trying to include in its fiscal plan. She said the board couldn’t mandate the end to the Christmas bonus. Instead it could approve a budget that assumed the elimination of the bonus. It would be up to the governor as to how the actual cost savings would be achieved.
In a letter on Aug. 1 the board told the governor that it expects to certify a central government Puerto Rico fiscal plan on Sept. 21.
