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Puerto Rico Governor Rejects Measures Requested by Fiscal Board

Tuesday, Apr 03, 2018

By Caribbean Business on April 2, 2018

SAN JUAN – Puerto Rico Gov. Ricardo Rosselló announced late Sunday evening that he will submit a revised fiscal plan to the island’s Financial Oversight and Management Board on Thursday but that it will not include “layoffs,” the labor reforms requested nor the pension cuts the panel has been recommending since last year.

In a seven-page letter to the fiscal oversight board, Rosselló stressed that, although the Promesa law gives the board the authority to determine whether to certify the government’s fiscal plan, the “suggested revisions (by the Board) would significantly depress macroeconomic growth” and that the federal statute recognizes the government’s lawmaking faculties.

“The Government will not allow the takeover of these powers, and therefore cannot be compelled to implement many of the suggested revisions,” the governor wrote.

Rosselló also rejected the elimination of the Christmas bonus, mandatory vacations and sick leave, saying the fiscal board’s request would be unfair in that compensation and “training for labor force,” are not considered as a means to mitigate the effects of implementing those measures.

Under Promesa, when the island government does not accept the board’s recommendations, it must inform the panel why and has 90 days to submit said explanatory statement to the U.S. president and Congress. “Should the Board decide to certify a fiscal plan that exhibits an overreach of its powers, know that the elected Government will exercise its discretion when implementing those measures it considers proper and in the public well-being. We suggest the Board refrain from taking actions that will cause more detriment to the task the Board was mandated to execute,” the governor said.

Rosselló wrote that the “Board continues to insist on an average reduction of 10% of pension benefits in all government retirement systems. However, any change in pension benefits requires legislative action. The Government opposes these additional measures to reduce pensions because they impose a disproportionate burden on the workers and retirees of Puerto Rico.”

He then said the revised plan “will not contain a labor reform proposal and will only include the Earned Income Tax Credit (EITC) and the work participation requirement to be eligible to the Nutritional Assistance Program.” The governor also listed several board proposals he disagrees with and that “would also require legislative action such as the revision of the so-called ‘Crudita petroleum tax,’ and the change of fiscal policy to demand that all State income flows through the General Fund instead of Special Revenue Funds,” adding, “The Board can not compel the Legislative Assembly to make such a change in tax policy. Under the Constitution of Puerto Rico, that policy is only within the power of the Legislature.”

In addition, the governor rejected proposals that in his opinion interfere with government powers such as limiting the use of vehicles based on license plate numbers, arguing it would jeopardize people’s ability to commute to their workplace.

However, Rosselló insisted he would develop “county” regionalization plans and establish the “voluntary mobilization of incarcerated prisoners to institutions in other jurisdictions of the United States, because these proposals will produce significant savings in the daily operation of the Government.” Rosselló concluded that despite there being “many areas of agreement in the discussions” with the fiscal board, “as Governor, I will not allow the Board to again seek [to] exercise [of] powers it does not have.”

If you have any questions or desire updated information contact your GMS Account Executive. Information taken from sources deemed reliable. This update does not purport to include all available information

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