Government Asks Fiscal Board to Seek Amendment on PROMESA Law (document)
The Fiscal Plan submitted by the Government of Puerto Rico las night to the Fiscal Control Board (FCB) asks that body to submit to the President and Congress an emergency report in which they request an amendment of the PROMESA law so that the stoppage of claims of creditors is postponed from the current date of May 1 to the proposal of December 31, 2017.
The request responds to the government's decision to base its debt management on consensual negotiation with creditors through Title VI of PROMESA. The process of restructuring by Title III, which the government is ruling out, involves the intervention of the court and theFCB in a process very similar to bankruptcy, while in Title VI the parties sit down to negotiate on a voluntary basis without judicial supervision. It is assumed that in 2017 no payments will be made pending debt of the Government Development Bank or General Obligations.
This request is made at the same time that the government admitsit has not yet defined what are 'essentials services' and that the Fiscal Plan,submitted last night,could change when the audited government financial statements of 2015 and 2016 arrive.
The Plan does not meet the requirements of the Board in terms of the number of cuts, particularly in the area of health, and does not meet the two-year term of implementation that the Board wanted, but extends the implementation for at least three years and sees economic growth again nominally in 2020. It also depends mainly on the continuation of foreign tax until 2027, a reality that the Federal Treasury Department can alter. It also depends on reducing General Fund payments to the UPR for 300 million dollars, eliminating municipal subsidies for 350 million and eliminating incentives for 100 million dollars.
Some highlights of the Plan:
Would modify pensions of more than $ 2,000 a month to reduce between six and 24% and would implement the 'pay as you go'.
It brings increases in payment for tags (10%), fines (10%) and ACAA insurance (10%)
It would reduce the benefits of public corporation employees to equal the benefits of central government employees.
Impulse concessions or privatizations in fines processing, licensing, boats, public buses, parking lots, airports and maintenance of public buildings.
The property tax would increase from 0.38% to 0.65% at the effective rate and from 1.18 to 2% at the nominal rate.
Spending control measures in the public health plan include identifying those who have public insurance as well as a private one, mandating the use of generic drugs, more discounts on pharmacy costs and that the government only pays basic services so that others services must be borne by the insured.
Create an office of informants at the Department of treasury to report tax evasion and receive rewards based on what the government can charge.
It contemplates, through Public Private Partnerships or through processing as 'critical project' under PROMESA, a new Medical Center, new natural gas plant, development of aguirre Gasport, and a project in the UPR on 'student life'.
Centralization of purchasing system and government hiring.