With a little over a month before the start of the next fiscal year, the Executive seemed hopeful it will get the savings imposed by the Oversight Board (OB) and thus avert a reduction in the number of working hours for public employees and the elimination of the Christmas bonus.
July 1 marks the date in which the 20% reduction in working hours for the public sector could, automatically, become effective along with the elimination of the Christmas bonus for these employees if the government fails —by June 30— to achieve savings of $200 million in the operating account of the Department of the Treasury. This was one of the conditions imposed by the OB when certifying the fiscal plan last March 13, in anticipation of budget shortages for next fiscal year.
“The secretary (of the Treasury, Raúl Maldonado), has already said we need $120 million (in savings). We are working on it. The Board asked us for an update a few days ago,” replied yesterday governor Ricardo Rosselló when this daily asked about the money’s safekeeping.
Along with the secretary of the Treasury, Rosselló said that last April 30, as demanded by the OB, he delivered to the federal entity in charge of the Island’s finances a report on the services required from the government, its liquidity, and the draft budget. “We have complied in submitting those three components,” he said in the press room at La Fortaleza, when responding to questions regarding Puerto Rico’s fiscal situation after the government petitioned for protection under Tittle III of PROMESA.
For his part, the governor’s main adviser, Alfonso Orona, said the government is “well on its way” to complying with the demands by the OB.
“We are talking about having close to 60% of the $200 million,” he said.
He stressed that the goal is to prevent any further austerity measures such as the reduction of government working hours, which would include teachers.
“That is why we are working, to prevent it, and now we are well on our way to preventing it,” Orona said.
Should it comply with the OB’s demands, the government would have to repeat the litmus test on September 1. Come that date, it will again have to demonstrate its capacity to avoid a reduction in working hours and the suspension of the Christmas bonus if it manages to keep savings of $293 million in the Treasury.
La Fortaleza announced that, for the moment, following submittal of the reports, the OB is in no obligation to respond.
Yesterday, Rosselló gave no details on the budget he submitted to the OB, but he was emphatic to say that the fiscal plan cannot be amended following Puerto Rico’s petition for Tittle III under PROMESA.
Now then, he admitted that scenario could come as a result of talks between the government and the creditors, though he’ll oppose it.
“The fiscal plan will not be amended. That is not going to happen. That iswhy we didn’t get the agreements because the creditors wanted to destroy the fiscal plan and because they wanted more money from the people of Puerto Rico. That is not going to happen. The fiscal plan will not be amended,” he stressed.
Rosselló warned that the fiscal plan cannot be altered. He explained that, if a negotiation with a creditor, calls for exceeding the money available, that would require endorsement by the OB or identifying sources from where to draw funds. “So, I —as the government— have to go into the budget and work out those adjustments,” he added.
The fiscal plan establishes that, during the next 10 years, the government will pay an average of 20% in service of the debt each fiscal year, which comes to $800 million annually.
“But, the narrative coming from the creditors will be to attack that fiscal plan and one would have to ask why. The answer is that they want more money than we have accounted for the people of Puerto Rico and we as the government are not going to allow that. That is why we have petitioned for protection under Tittle III and why we are going to continue working on an already certified plan, under the 14 points of PROMESA which is unwavering, according to what PROMESA itself establishes,” he said.
To questions from reporters, the governor said to be unaware as to whether one or several of the creditors against whom the government is now pitted in court donated to his electoral campaign.
“I have been very clear: any person who may have donated anything to me did so understanding that it was the best decision to have a work team to take Puerto Rico in the right direction, not to expect anything in return,” he asserted.
“I can assure it will in no way affect my opinion as to what is best for Puerto Rico,” the governor added.
He rejected Tittle III being the (culprit) for the Country’s bankruptcy. “Bankruptcy had come to Puerto Rico a long time ago. The deficit had arrived a long time ago. What Tittle III does is to protect us just like we were before (through PROMESA until May 1). Essentially, now its under the court’s supervision,” he said.
This way, the government put a break on 22 suits from creditors with the intention of renegotiating a $49 billion public debt.
Rosselló highlighted that they are still evaluating other government entities that will also seek protection under Tittle III and, which under Tittle VI of PROMESA, and said that, now, a step will be taken in court to audit the debt.
“Once they go to court and start looking into these loans, they are going to be challenging the strength of the structure of other loans and that’s when, the court will determine: loan X is constitutional, unconstitutional or comes before this other and, therefore, that capital is allocated (thus),” he said.
He also said that, while negotiations are ongoing with creditors under Tittle III, the government will continue providing services, paying its vendors and disbursing refunds. In fact, he announced that the Department of the Treasury will send $11.2 million in refunds to 35,350 taxpayers mentioning that the fiscal plan included those outlays.
The governor said there won’t be such a thing as the freezing the accounts at the Treasury. “The protection (under Tittle III) doesn’t allow for that. It allows us to guaranty that the government continues operating. That is what this move is about,” he said.
So far this year, the Treasury has made outlays in excess of $24.3 million in refunds from previous years and over $28.3 million in credit payments for people 65 or older.
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