Puerto Rico governor launches six lawsuits against oversight board

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Puerto Rico Gov. Wanda Vázquez filed six lawsuits against the oversight board concerning its rejection of six laws the local government passed since November.

Vázquez and the Fiscal Agency and Financial Advisory Authority filed the suits Friday as adversary proceedings in the commonwealth’s Title III bankruptcy. Title III bankruptcy is authorized as part of the Puerto Rico Oversight, Management, and Economic Stability Act.

FAFAA Executive Director Omar Marrero
FAFAA Executive Director Omar Marrero said the board's attempts to invalidate the laws overstep PROMESA's authority.

FAFAA Executive Director Omar Marrero Díaz said, “The reasons given by the [oversight board] to challenge and attempt to unilaterally invalidate these six laws are varied, but they all represent an interference with the government’s public policy and therefore, are a violation of the PROMESA law.”

On Tuesday Oversight Board Executive Director Natalie Jaresko said, "The government has repeatedly tried to redefine and limit the oversight board’s authority and narrow its mandate under PROMESA. These challenges are based on a false construct. We have litigated this issue four times already; in all four of those cases since 2018 the [U.S. District] Court agreed on the clarity and authority that has been provided by PROMESA to the board. So, I am hopeful we get through this, and put this issue to rest once and for all."

Jaresko said the board’s lawyers were reviewing the local government’s latest filings. With one exception, she declined to comment on their specifics.

Vázquez challenged the board’s rejection of a salary increase for fire fighters. On Tuesday, Jaresko said the board shifted money for the increase from the general fund to a different local budget.

The lawsuits revolve around laws the board has rejected. In November 2019, the board struck down three laws regulating pharmacies, drug pricing and medical practice, which it argued were inconsistent with the certified fiscal plan because there may be federal laws that cover the topics. If that were the case, the board speculated, federal funds might be lost.

The local government said PROMESA doesn’t allow the board to speculate on whether local laws conflict with federal laws. Accordingly, the board has no right to reject these laws.

The board also revoked a law that attempted to push back public employees’ vacation and sick time accumulation to pre-2017 levels.

The board’s challenge was based on the local government's failure to provide a productivity analysis to determine if the new rate of accumulation would affect services and collections. Because of this, the board said the new law was inconsistent with its fiscal plan and thus invalid.

The board also rejected a law which increased fire fighters' salaries and provided a source to pay for the raises. The board said the law’s expense and income estimates were “speculative.” The local government responded that all budget estimates are somewhat speculative because they are predictions. PROMESA only requires income and expenditure estimates, it said.

Finally, the board struck down a law which provides incentives and tax credits to keep healthcare professionals on the island. The board said the law was invalid because the local government’s estimates of income and expenditures were incorrect and because it disagreed with the underlying goal of the policy, according to the local government. The local government said neither reason is valid, but the latter reason, in particular, is an illegitimate basis for striking down the law.

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Puerto Rico Commonwealth of Puerto Rico Puerto Rico Public Buildings Authority Puerto Rico Infrastructure Financial Authority PROMESA