The Puerto Rico Oversight Board released 5% of the current year’s approved budget even as it prepared to wrangle with the local government over future years’ plans.
The board on Monday said that it was releasing the money after it was satisfied that revenues have been coming in at least at budgeted levels through the first six months of the fiscal year.
“The certified fiscal plan and certified budget for Puerto Rico includes a provision that the government can only spend 95% of its budget in the first nine months of the fiscal year, to ensure that actual revenues meet budgeted estimates,” the board said in a press statement. “Puerto Rico has a history of overestimating revenue, which led to overspending.”
The 5% reserve was to prevent that from continuing.
The board-approved General Fund budget for the fiscal year was for $8.758 billion. A 5% portion of this would be $438 million.
“Allowing the government and its agencies to access these funds is a positive indicator, because it means that the government is in compliance with the certified fiscal plan,” said board Executive Director Natalie Jaresko.
Even as the board praised Governor Ricardo Rosselló’s government for its current fiscal year finances, it was preparing to criticize it on its proposals for future years spending.
On March 15 Jaresko sent a letter on behalf of the board saying that the government’s proposed fiscal plans needed “significant revisions and additional supporting information” before the board would approve it.
In response on March 27 Puerto Rico’s Fiscal Agency and Financial Advisory Authority submitted a new version of the plan. On the same date FAFAA Executive Director Christian Sobrino Vega sent a letter to Jaresko responding to her letter and explaining Puerto Rico’s latest fiscal plan proposal.
Sobrino Vega disagreed with most of the demands for changes made in the March 15 letter. While the board had called for a 10% cut in average pension benefits in the coming fiscal year, this wasn’t in the government’s fiscal plan. “Implementing any pension reform in the proposed plan would require both legislative and executive support, and the board can be assured it would receive neither,” Sobrino Vega said in his letter.
The board had asked the Rosselló administration to remove $1 billion in assumed Medicaid funding starting in fiscal year 2021 because it “does not match current law.”
Sobrino Vega responded that the local government was assuming the federal government would give it $1.6 billion each fiscal year starting in fiscal year 2020 because the local government has requested it.
A source close to the board said that the board’s staff was still reviewing the proposed fiscal plan and budget but that neither seems to be delivering on key areas of savings. The board plans to spend about another week on reviewing the documents before it provides a formal response to the government.
