Board Would Give Rosselló a Break, but Says No to New Loan
The Fiscal Control Board (FCB) informed Governor Ricardo Rosselló that it may extend the deadlines for the Fiscal Plan and of for the stay provisions of the PROMESA bill but subject to a series of conditions that include not taking out a new loan for short-term financing of government operations.
The Board's statements come a day after the Governor's representative in that body, Elías Sánchez, warned that there is a real possibility that the government would close operations for lack of money.
It also comes after after various figures in the Rosselló Administration said, in the light of information obtained by NotiCel that a loan had already been secured, that a loan was one of the alternatives being considered or, as was the case of Senate President Thomas Rivera Schatz, that a loan would be the only alternative given the state of pulic coffers.
The Board's expression is contained in a letter that outlines five areas that the Rosselló Administration must include in its Fiscal Plan in order for the Government
to generate, between now and fiscal year 2019, additional revenue and/or savings totaling $4.5 billion a year. The five 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 measures listed above make up one ambitious but viable proposal. We…also welcome the opportunity to work with your Administration to develop and implement the necessary reforms and the terms of the debt restructuring that will allow Puerto Rico to achieve fiscal balance and regain access to credit markets at reasonable interest rates. The Board is providing you with the fiscal framework, and within such framework we expect that you and your Administration will make the
public policy determinations consistent with PROMESA,' reads the letter signed by Board Chairman, José Carrión.
In the letter, Carrión acknowledges that several of the measures implemented by the new administration since its inauguration in early January, are steps in the right
direction, but much more is required.
'From your executive orders declaring a fiscal emergency, imposing salary freezes, limiting the number of non-career personnel and other labor cost reductions and requiring agencies to build zero-based budgets, it appears that your administration shares this priority [of achieving savings through government right-sizing and
efficiency improvements.] ...Yet, we must be candid and stress that, to get closer to fiscal balance [required under PROMESA], a lot more will need to be done beyond the measures already adopted by your Administration.
In the letter, the Board informs Governor Rosselló that it is favorably inclined to extend the deadline for submitting its fiscal plan to the Board until February 28, 2017 such that the Board may certify the fiscal plan by no later than March 15, 2017. This extension will be formally considered at the Board's next public meeting later this month and would be contingent upon the Government meeting and adhering to a set of conditions and timelines, including a commitment not to take more loans to provide short-term liquidity, develop a liquidity plan and provide further financial information, among others.
Similarly, the Board informed Governor Rosselló it is favorably inclined to extend the PROMESA automatic stay, in accordance with PROMESA, until May 1, 2017, subject to the same conditions. The Board had established January 15 as the deadline for the new
administration to submit its Fiscal Plan, as the plan submitted by the previous administration did not meet the requirements outlined in PROMESA and as such
could not be certified. Also, said federal legislation sets forth a stay, among other things, on any lawsuit against the Government of Puerto Rico for failing to meet its
obligations with creditors through February 15, 2017.
In a letter dated December 20, 2016 addressed to then Governor Alejandro García Padilla and then Governor-Elect Rosselló Nevares, the Board had
reiterated its willingness to collaborate with the new administration in order to meet the outlined agenda leading to the certification of a Fiscal Plan on or before
January 31, 2017. As per PROMESA, the certification of the Fiscal Plan is a priority to move forward Puerto Rico's fiscal agenda.
In response to the Board's letter, on January 4, 2017, Sánchez requested on behalf of the governor, a 45-day extension to submit this administration's Fiscal Plan, as well as a 75-day extension, through May 1, 2017, to
the legal stay against the Government of Puerto Rico outlined in PROMESA.
'We understand that the new administration shares the Board's sense of urgency to collaborate promptly and decidedly in an effort to implement the needed structural
reforms and reestablish economic growth and opportunities for the people of Puerto Rico,' concluded Carrión.