The Puerto Rico Oversight Board's demands for government employee furloughs and the suspension of their Christmas bonuses ran into resistance from the governor as tensions over board oversight of fiscal policy escalated.

The standoff over employee compensation came as the board and local officials worked to approve a budget before what one legislator said was a Sunday night deadline. According to a spokesman for the president of the Puerto Rico House of Representatives, as of early Friday there was also a disagreement between the board and the governor’s ruling party on whether to shift money from school and municipal improvements to a budget reserve fund.

Puerto Rico Sen. Minority Leader Eduardo Bhatia Gautier denounced the secrecy around the budget's preparation.
Puerto Rico Sen. Minority Leader Eduardo Bhatia Gautier denounced the Oversight Board's handling of the budget.

In a letter from Gov. Ricardo Rosselló to the board released late Thursday, the governor claimed that the board's executive director, Natalie Jaresko, had informed him that the panel will demand the furloughs and bonus suspension.

Rosselló argued that section 205(a) of the Puerto Rico Oversight, Management and Economic Stability Act gives him authority to decide about staffing levels and personnel spending. The act, passed last year, created the Oversight Board to oversee the local government's budget while addressing the island's $70 billion debt crisis. The board has also come under criticism from bond holders in the past week for failing to provide enough money for debt service.

In March, when the board approved a fiscal plan governing Puerto Rico’s finances through fiscal year 2026, the board said there would have to be furloughs and an end to the bonus, unless two conditions were met. First, Puerto Rico would have to gain a $200 million cash reserve by June 30 and second, the government would have to submit an implementation plan for reducing spending on government programs.

On June 16 the board sent a letter indicating that it believed the reserve would be met, but the implementation plan was inadequate. The board apparently is now operating on this belief by demanding the furloughs and end of bonus. The board’s spokesman didn’t respond to a request for clarification.

Unless they were in excepted classes of workers, government employees would be furloughed four days each month. Teachers and frontline personnel who worked for 24-hour staffed institutions would be furloughed two days a month. Law enforcement personnel wouldn’t be furloughed.

In March the board expected the furlough program to save the government $35 million to $40 million per month. The bonus cost the government $120 million in 2015.

“In contravention of PROMESA section 205, the Oversight Board is now trying to strong-arm the government into accepting the expenditure controls,” Rosselló wrote. He says he was open to discussing the matter with the board.

According to El Vocero, the board was also demanding $80 million be shifted from use for improvements for schools and municipalities to a budgetary reserve.

The Puerto Rico House was expected to debate this and other aspects of the budget Friday afternoon and vote on it Friday evening. It would then go to the Puerto Rico Senate and then to the governor. The board would finally have the option to approve it.

However, under PROMESA the board also has the option to create a budget and declare it to be approved.

In other budget news, Senate minority leader Eduardo Bhatia Gautier sent a letter Thursday complaining of a lack of transparency by the board. “If ‘transparency’ is indeed ‘a guiding principle specifically mandated by PROMESA’ as your June 16, 2017 letter to Governor Rosselló states, then the board has utterly failed to perform its duties thereunder,” Bhatia wrote.

In an email to the press on Thursday evening, Bhatia Gautier said: “There remain three calendar days so that, first, the House of Representatives, and then the Senate can approve the Fiscal Year 2017-18 budget and nobody knows the budgetary amounts.”

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