Puerto Rico board may go its own way on fiscal plan

Register now

The Puerto Rico Oversight Board appears prepared to approve a fiscal plan diverging from that of the governor at a meeting scheduled for Tuesday.

According to people familiar with the situation, six weeks of talks between the board and Gov. Ricardo Rosselló's government have failed to resolve differences over labor and pension protections sought by island leaders. The board is prepared to act independently to the local government's suggested revisions to a five-year fiscal plan the board approved in June, the people said.

Under the Puerto Rico Oversight, Management, and Economic Stability Act, the board is mandated to produce a binding guide on revenues and expenditures through fiscal year 2023, as well as a listing of required government reforms. By setting figures for government revenues and expenditures, the plan specifies how much surplus is to be available for debt service.

The board on Wednesday announced the public meeting on the Commonwealth of Puerto Rico and University of Puerto Rico fiscal plans.

The board on June 29 approved a commonwealth fiscal plan that included a $6.47 billion surplus from fiscal year 2019 to fiscal year 2023.

In early August, however, it announced that this fiscal plan and those for some of Puerto Rico’s public entities would have to be revised. The board said new estimates of tax revenue and migration necessitated the rewrite.

Gov. Rosselló submitted a proposed version of the plan that was rejected on Aug. 30 by board executive director Natalie Jaresko, who sent a letter specifying ways it needed to be changed.

Since then there have been discussions between the board and members of the Rosselló administration, according to one source close to the board.

However, the administration hasn’t posted an acceptable fiscal plan to the Fiscal Agency and Financial Advisory Authority web site and has thus failed to submit a comprehensive response to the board’s Aug. 30 letter, the source said.

The board, governor, and legislature are struggling with each other, with the latter two trying to claim they are standing for “the people,” said University of Puerto Rico Sociology Professor Emilio Pantojas.

“Rather than planned reform, the government operates in crisis mode, looking for bailouts and postponing change until the reality of cuts sets in,” Pantojas said. “There seems to be an expectation that federal reconstruction funds will rescue municipalities, agencies and public corporations at the last minute.”

The board plans to approve a fiscal plan on Tuesday based on both policy changes and technical changes, the board source said. An example of the latter is recent tax receipt information.

A different board source said that the board and representatives of Rosselló are continuing to talk. Among the topics are pension cuts and labor reform.

“It would help matters immensely if the junta [the Oversight Board] were to audit the debt, assign responsibility and prosecute a few of those that acted illegally in peddling bad debt,” Pantojas said. “This would at least provide explanations to the public and ameliorate the widespread sentiment that the bad guys are getting away with theft while the working people and the retired are suffering the burden of the incompetence and malice of the Puerto Rican political class and plutocracy.”

The board commissioned an outside firm to do a report on the debt. That firm released the report in August. The report said that in the issuing of the debt many illegalities and questionable actions had probably occurred. However, the report also said that the statute of limitations had passed for nearly all possible prosecutions.

One exception was for the 2014 general obligation bond sale. However, the U.S. Securities and Exchange Commission has said it will not be filing charges related to this bond sale.

The Puerto Rico Oversight Board has not had decision-making public meetings since April 20. The board has continued to make decisions – for example, certifying a fiscal plan on June 29, rejecting the governor’s fiscal plan in late August and demanding changes to it, and certifying fiscal plans for Puerto Rico’s electric and water and sewer authorities on Aug. 1.

The board has authorized itself to make decisions outside of public meetings under certain conditions – for example, by unanimous written consent.

In other Puerto Rico news on Wednesday, the Puerto Rico Treasury announced that as of Oct. 4 it had a total of $3.43 billion in the central government working account. This compares to this year’s Puerto Rico General Fund budget of $8.76 billion.

For reprint and licensing requests for this article, click here.
PROMESA Commonwealth of Puerto Rico University of Puerto Rico Puerto Rico Sales Tax Financing Corp (COFINA) Puerto Rico Infrastructure Financial Authority Puerto Rico Industrial Development Co Puerto Rico Employees Retirement System Puerto Rico
MORE FROM BOND BUYER