Puerto Rico Oversight Board Says Much More Austerity is NeededBY SourceMedia | MUNICIPAL | 01/18/17 07:04 PM EST
The Puerto Rico Oversight Board told Puerto Rico Gov. Ricardo Rosselló to make $4.5 billion of spending cuts and revenue increases annually as part a five-year fiscal plan.
In a letter Wednesday, the board told the governor that it was inclined to approve his request for an extension of the deadline for him to submit the fiscal plan to Feb. 28 from Jan. 15, but that this would be contingent on the governor "adhering to a set of conditions and timelines." These include "a commitment not to take more loans to provide short-term liquidity, develop a liquidity plan and provide further financial information, among others."
On the same conditions the board is also inclined to extend the Puerto Rico Oversight, Management and Economic Stability Act stay on creditor lawsuits to May 1 from the current Feb. 15.
The board told Rosselló that he must include five areas of change in the fiscal plan that would generate either additional revenue and/or savings of $4.5 billion a year between now and fiscal year 2019. The areas include "(1) revenue enhancements through adjustments to the tax system and improvements in tax administration; (2) government right-sizing, efficiency and reduction; (3) reducing health care spending; (4) reducing higher education spending; and (5) pension reform, among others."
The sum of $4.5 billion per year compares with Puerto Rico's approved general fund of $9.8 billion for the current fiscal year. It also compares with a $25.9 billion consolidated budget for Puerto Rico including $8.3 billion for its public corporations for this fiscal year.
In a press statement the board said that the measures that Rosselló has taken so far have been positive but that "a lot more will need to be done."
On Dec. 14, 2015 the El Vocero news web site quoted Rosselló's non-voting representative to the board Elías Sánchez as saying a board request to cut $2 billion a year from the budget was "unreasonable." When The Bond Buyer contacted a Rosselló spokeswoman to confirm the El Vocero story, she said Rosselló was standing behind what Sánchez said.
The board said it would vote on extending the fiscal plan and litigation stay deadlines at a public meeting to be held later this month. It said that the fiscal plan submitted by prior Gov. Alejandro García Padilla didn't meet PROMESA's requirements.
In other Puerto Rico news on Wednesday, the governor signed a measure to strengthen the Financial Advisory Authority and Fiscal Agency. According to the law, FAAFA is to serve as the governor's sole agency overseeing the government's debt and its restructuring. It will be authorized to review government agency contracts and regulations.