Puerto Rico oversight board warns against tax and spending bills

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The Puerto Rico Oversight Board sent a letter to the territory's governor and the heads of both houses of its legislature warning them against approving proposed bills that would increase spending or cut taxes.

The board sent the letter, signed by Executive Director Natalie Jaresko, Monday, in one of the first signs of tension between the board and Gov. Wanda Vázquez since she came to power in August.

The letter also went to Senate President Thomas Rivera Schatz and House President Carlos Méndez Núñez.

The board said H.B. 2172 would reduce tax revenue and is therefore inconsistent with the fiscal plan. It said that it would reduce individual income tax collections, reduce collections from the 4% business-to-business tax, and increase tax credits.

Other parts of the bill would reduce financial transparency, the board said.

S.B. 1099 would increase the pay of firefighters. Some parts of it would dedicate an existing revenue stream to fund the salary increases, making it inconsistent with the commonwealth fiscal plan. Another section would increase taxes to pay for the increases and so the bill’s overall fiscal and economic impact needs to be evaluated, the board said.

A third bill, S.B. 1341, would increase the number of vacation and illness days for public employees, increasing costs to the government, thereby making it inconsistent with the approved fiscal plan, the letter said.

The board noted that the government passed joint resolutions allocating funds from previous fiscal year budgets. In 2018 a board spokesperson said the past-approved budget money doesn’t exist anymore and these reallocations are simply attempts to evade fiscal plan restrictions on spending. Such reallocations require the board’s approval, the board said in its letter.

Finally, S.B. 1455 proposes that the Puerto Rico Tourism Company continue to remain separate from the Department of Economic Development and Commerce. The board-approved fiscal plan requires that the former be part of the latter. The board said that this consolidation would be in the fiscal 2021 budget, which will cover July 1, 2020 to June 30, 2021.

In the letter’s conclusion, the board told the leaders it expected the governor, the House, and Senate to comply with the fiscal plan and board-certified budget. If they don’t the board said it would take legal action authorized in the Puerto Rico Oversight, Management, and Economic Stability Act.

Since Vázquez became governor in early August, she has maintained a cooperative relationship with the board. For example, prior governor Ricardo Rosselló said he would oppose any board proposal that cut government pensions. When the board presented a plan of adjustment in September that included cuts to pensions, Vázquez said she opposed the pension cuts but that she wouldn’t oppose the plan despite the fact they were included in it.

Spokespeople for the governor and the Puerto Rico Fiscal Agency and Financial Advisory Authority didn’t respond to a request for a comment on the board’s letter.

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