As the fiscal year approached its end on July 1, the Puerto Rico Oversight Board canceled a Friday public meeting where it had been planning to approve budgets for the island’s central government and several of its authorities.
The board said the cancellation would give it “more time to complete required technical and macroeconomic changes to the Commonwealth Fiscal Plan with updated information.” The board still expects to approve a budget by the end of the fiscal year -- or by the end of Saturday.
The delay came with the board poised to impose its own budget on Puerto Rico in line with its April-approved six fiscal year fiscal plan. That plan includes the repeal of Law 80 and establishment of at-will employment on the island, something that the board had demanded in an agreement with Gov. Ricardo Rosselló on May 20. The Puerto Rico Senate declined to revoke the law.
The board is using local government information to update the plan. After updating the plan, the fiscal year 2019 budget will also have to be adjusted. The process is taking longer than expected.
The cancellation of the Friday meeting “will also provide additional time for the Puerto Rico Legislature to submit the FY19 Commonwealth General Fund budget to the Oversight Board before the Saturday deadline,” the board stated in a written statement.
On Tuesday the board released notices of violation concerning the government-proposed budgets for the Puerto Rico Highways and Transportation Authority and University of Puerto Rico.
In both cases the board told the Puerto Rico Fiscal Agency and Financial Advisory Authority that the board “requires substantial revisions and additional information” before it can approve the budgets.
The board sent the letter concerning HTA to FAFAA on June 23 and sent the letter concerning UPR to FAFAA on June 25. It gave FAFAA until Tuesday to submit a revised HTA budget and until Wednesday to submit a revised UPR budget.
The board’s rejection of the HTA and UPR budgets may foreshadow a rejection of the central government’s budget as well as other authority budgets on Saturday.
In the last month board’s chairman and executive director said if the central government didn’t repeal the Law 80, the board would approve a budget consistent with its April 2018 fiscal plan. Among other things, Executive Director Natalie Jaresko said that if the local government didn’t repeal Law 80, the board would eliminate several accommodations it made to the governor.
These include appropriations for Christmas bonuses for government employees and a multiyear $345 million economic development and reform implementation initiatives fund.
“The contours of the jurisdictions of the Government of Puerto Rico (GPR) and the Financial Oversight and Managerial Board (FOMB) are shaping up,” said Vicente Feliciano, president of Puerto Rico-based Advantage Business Consulting. “The GPR controls legislation. Thus, the FOMB cannot change the Christmas Bonus or labor laws. On the other hand, the FOMB controls the budget.
“Therefore, while the FOMB cannot eliminate the Christmas bonus for all workers, it could fail to include an appropriation for the Christmas bonus of public sector employees. The FOMB cannot impose a new law on government retirement pensions, but it could fail to assign all the money required to pay the pensions in full.
“The mutual benefit of proper negotiations is evident. Therefore, Governor Rosselló and the FOMB reached an agreement on changes to labor laws in exchange for budget allocations.”
Feliciano continued. “Regrettably, the Puerto Rico Senate refused to play ball. Since the agreement fell through, the FOMB has the power to impose its own budget. As a show of strength, it probably will use this power.”