The Puerto Rico Oversight Board and Gov. Ricardo Rosselló reached a partial compromise in their policy struggle over the fiscal plan for the debt-laden territory.
The board said the proposed revisions are “a result of the commitment by the governor and legislature to approve labor reform before the end of this fiscal year, thus considerably reducing implementation risks of the fiscal plan and avoiding costly litigation.”
Gov. Rosselló said the new fiscal plan "is not perfect, but it offers concrete results in benefits for our people, and allows us to enter the next phase with more certainty and less conflict. I am convinced that this is the way forward.”
In the deal announced Sunday evening the board would agree to waive its demands for reduced mandatory vacation and sick time and the elimination of the Christmas bonus. For his part, the governor agreed to eliminate the island's regulations on dismissal of workers.
There has been no agreement about what to do with pensions. The board still says that spending on pensions should decrease by 10% starting in fiscal year 2020, according to Natalie Jaresko, board executive director. The governor has opposed any cuts in the three pension systems.
“The conversations between the government and the [Oversight Board] continue,” a spokesman for the Fiscal Agency and Financial Advisory Authority said.
Puerto Rico currently requires 27 days a year of paid vacation and sick leave for full-time workers, in the private and public sectors. In April the board approved a fiscal plan that would reduce that total to 14 days. On Sunday the board said it would retract this change.
The government currently mandates all employers pay a Christmas bonus to their workers. In the April-approved fiscal plan the board said this mandate should be eliminated. In the new agreement the board said it won’t require this change.
On the other hand, at the board’s direction the governor has agreed to shift the island to at-will employment. Since 1976 employee dismissals have been regulated.
The agreement also calls for replacing specified non-education investments totaling $827 million through fiscal year 2023 with an investment pool of up to $345 million.
Both sides agreed to introduce a Municipality Recovery Fund of $50 million per year to aid municipal governments.
The board and governor decided to take steps to reduce the costs and time involved in importing and exporting goods.
According to the board’s written statement, the agreed-to changes reduce the projected annual pre-debt payment surplus in fiscal year 2019 by $101 million from the April projected $1.4 billion. There would still be $6.05 billion surplus through fiscal year 2023, prior to the payment of debt service.
Board chairman José Carrión negotiated the changes with Gov. Rosselló.
Jaresko said the board would “soon” vote to approve the changes to the fiscal plan.
The governor said that the board will allow the adoption of a new tax code he has been promoting. He said the code will reduce tax rates on workers, establish a credit for work, reduce the sales tax on prepared foods, and eliminate the business to business tax.