New Puerto Rico fiscal plan OK’d; governor says too austere
SAN JUAN, Puerto Rico (AP) — A federal control board that oversees Puerto Rico’s finances approved a five-year fiscal plan on Tuesday, but the government immediately said it would challenge the decision and the board itself.
The economic blueprint aims to help pull the U.S. territory out of an economic crisis following a 12-year slump and the devastation caused by last year’s Hurricane Maria. But hours after it was approved, Public Affairs Secretary Ramon Rosario said the administration has obtained permission from a judge to go to court to fight the plan and try to limit the board’s powers.
The plan in part estimates that $82 billion in federal hurricane recovery funds will help briefly boost Puerto Rico’s economy — which appeared to prompt a tweet from President Donald Trump saying the U.S. will not bail out the island to pay its debts.
“The people of Puerto Rico are wonderful but the inept politicians are trying to use the massive and ridiculously high amounts of hurricane/disaster funding to pay off other obligations,” he wrote.
Board executive director Natalie Jaresko said the funds are not budgeted for debt payments nor used to determine budget surpluses or deficits, but that they will help stimulate the island’s economy.
During Tuesday’s public hearing, board members warned that Puerto Rico’s economy will weaken in the long term if the government doesn’t implement tax and labor reforms such as reducing employee benefits and tax rates and embracing at-will employment. That would let private employers dismiss workers at any time without having to prove just cause.
“It’s an acknowledgement of failure,” said board member Andrew Biggs of the plan. “Puerto Rico will remain poor in the future. ...When I go back to Washington, the story I bring back is not of great successes by the board, but that the government is not able or willing to do what is necessary.”
Those comments sparked a testy exchange between board members and Christian Sobrino, the government’s representative.
“We have accomplished a lot, but labor reform is not the end all, be all of this effort,” he said, adding that cuts would only hurt the government’s capacity to perform to the board’s expectations.
Sobrino said the government also will be submitting proposals to revise the plan, saying the projections it contains are too high: “We will not be jammed into failure.”
The fiscal plan anticipates a 6 percent increase in revenues and a 7 percent decrease in expenditures for this fiscal year. It also estimates a $17 billion surplus after the board finalized an agreement last week with those who hold sales tax bonds issued by Puerto Rico’s government, a deal that represents 24 percent of the island’s debt.
The plan also calls for a 30 percent cut to funding for public services and a 10 percent cut to the island’s public pension system, which has nearly $50 billion in liabilities.
Some in the audience slammed the board for approving the plan, including Jesus Soto, a student at the University of Puerto Rico.
“They’re imposing certain realities that are choking us,” he said, adding that he worries about his father’s future pension payments. “I’ve known what it is not to be able to pay rent, not to have money to pay for gas.”
Gov. Ricardo Rossello said his administration has made numerous changes, including making it easier to do business in Puerto Rico, overhauling the island’s education system and moving to privatize the generation of electricity. He also noted his administration has reached agreements with several creditor groups and said the austerity measures within the fiscal plan are unwarranted.
“The board has completely changes its focus and philosophy,” he said. “This is simply not fair.”