Puerto Rico Board sends governor back to drawing board — again

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The Puerto Rico Oversight Board escalated its battle with Gov. Ricardo Rosselló, issuing an eight-page list of shortcomings in the governor's latest proposal for a revised fiscal plan.

“The Oversight Board has determined that the proposed plan requires significant revisions and additional supporting information before the Oversight Board can certify it as compliant with the requirements of [the Puerto Rico Oversight, Management, and Economic Stability Act],” Board Executive Director Natalie Jaresko wrote Friday.

The board was created in 2016 as part of the U.S. law known as PROMESA to help stabilize the island's economy as Puerto Rico restructures its debts. A provision of the law that gave the board the authority to certify fiscal plans has become a flashpoint in a continuing battle with the local government.

In her letter to the governor, Jaresko broke up her calls for changes and additions to the governor’s fiscal plan into six categories: macroeconomic projections, baseline revenue projections, baseline expenditure projections, structural reforms, fiscal measures, and other miscellaneous measures.

In the macroeconomic projections category she said the governor’s fiscal plan is overly pessimistic in that it includes $60 billion rather than $65 billion in total disaster assistance funding. The federal government provided the higher number in October, she said.

On the other hand, she noted? that total Federal Emergency Management Agency funding for the current and previous fiscal year has been $2.5 billion higher than the plan states.

On baseline revenue projections Jaresko noted that the local government had passed a tax reform in December that changes projections for corporate, personal, and sales and use taxes. The governor’s fiscal plan fails to include those new projections.

Concerning baseline revenue projections Jaresko told the governor to eliminate $1 billion in annual funding starting in fiscal year 2021, because the funding isn’t in current approved federal law. She also said baseline pension expenses in the governor’s plan are $1.4 billion lower than in the current fiscal plan without sufficient explanation.

On structural reforms, the board’s administrator wrote that the governor’s estimate of the impact of labor reforms is too optimistic. Since this is being rolled out more slowly than the board wanted, the benefits should be pushed back to fiscal year 2025 from fiscal year 2021.

On fiscal measures, Jaresko said that the board’s measures to reduce total personnel spending (freezing payroll, introducing uniform healthcare benefits, and ending the Christmas Bonus) must be reinserted in the plan. The same is true of steps to reduce certain agencies’ headcount.

Further, Jaresko noted that the plan doesn’t include the board’s plans for pension reforms, which the board expects to start in the coming fiscal year. “A freeze on benefit accruals and a net reduction to applicable pension benefits must be incorporated.” The plan includes Social Security benefits for some it shouldn’t and fails to include it for others that it should, she said.

In the other category, Jaresko said that implementation plan exhibits and details about budget enforcement must be added.

In response a member of the governor’s team on Tuesday shot back an email:

“From the outset, we categorically reject the characterization that our proposal does not comply with the law,” wrote Christian Sobrino Vega, executive director of the Fiscal Agency and Financial Advisory Authority. “The public policy of the government of Puerto Rico continues to and will continue to be established by the elected government of the Puerto Rican people.”

Jaresko asked the governor to submit a revised plan by noon on Friday, March 22.

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PROMESA Commonwealth of Puerto Rico Puerto Rico Infrastructure Financial Authority Puerto Rico Industrial Development Co Puerto Rico Public Finance Corporation Puerto Rico Sales Tax Financing Corp (COFINA) Puerto Rico
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