The fiscal plan the Puerto Rico Oversight Board approved Thursday had less money for paying debt in the next six fiscal years, and more in the following 24 fiscal years, than the previous approved fiscal plan.
The plan anticipates a central government surplus of $13.7 billion through fiscal year 2024. It anticipates a surplus of $11.6 billion from fiscal years 2019 to 2023, down from $15.1 billion for that period found in the previous fiscal plan.
The board, formed in 2016 to oversee management of the territory's finances amid the biggest municipal debt restructuring in history, moved the anticipated surpluses to more distant years to reflect some revised assumptions, Executive Director Natalie Jaresko said Thursday,
These included: the timing of post-hurricane aid, which has been delayed amid wrangling between the Trump administration and Congress; associated revised projections of Puerto Rico's gross national product; updated population forecasts; and slower than previously anticipated roll-outs of structural reforms.
The plan includes a 10% cut in spending on the government’s primary pension system, as did earlier versions of the fiscal plan.
While the bondholder community has hoped that surplus money would be used just for paying debt, the board has said it will also be used for capital spending. It has also said that debt payments won’t be based solely on the surplus, but instead on metrics for the 50 states.
The board approved the fiscal plan 6-0. Board member Ana Matosantos didn’t participate in the meeting.
The plan anticipates a $19.7 billion surplus through fiscal year 2049, which is more than the October 2018 fiscal plan anticipated. The October 2018 fiscal plan is the last plan the board approved for Puerto Rico's central government.
Both plans calculate the surpluses with the assumption the central government would pay no debt except for that of the Puerto Rico Sales Tax Financing Corp. (COFINA). The federal court has approved a deal for the COFINA debt.
Thursday's plan projects the government would be forced to operate with deficits, even if it paid no debt except for COFINA, starting in 2038.
The plan includes greater specification to personnel costs. This will make it easier for the board to take action against the Christmas bonus or similar amounts of spending elsewhere in the budget this year if Gov. Ricardo Rosselló choses to award the bonus, Jaresko said. Rosselló disbursed the bonus in late 2018 even though the board’s approved fiscal plan and budget didn’t include it.
The board is urging the governor to cap the granting of tax credits so that no more than $250 million per year are utilized.
The board is planning to increase the pay of police officers by 30% over two years, to avoid attrition and to aid recruiting, Jaresko said Wednesday. The increase amounts to $11,500 per sworn officer.
At the meeting the board voted to make Puerto Rico’s 78 municipal governments “covered territorial instrumentalities” under the Puerto Rico Oversight, Management, and Economic Stability Act. This will give the board nominal power over them.
The board is concerned about the municipalities because it plans to end the central government’s aid for the municipal governments.
In practice, the board declared it is seeking fiscal plans from 10 of them, with their draft plans due on June 7. The 10 were chosen because they are in fiscal stress, their dependence on central government distributions, they have worked together in the past, they are located adjacent to other municipalities that will participate, and are run by mayors from both primary political parties.
The board plans to take steps to reduce municipal spending and increase property tax revenues, Jaresko said. It has a goal of increasing the property tax collection rate to 85% from 68%. It will work to increase the number of properties registered, correct property classifications, and increase the number of property appraisers.
After the meeting Board Chairman José Carrión said that the board was planning to work with the 10 local governments, not take them over. Jaresko said the work with the 10 will hopefully inspire other island municipalities.
