The chairman of the Oversight Board José Carrión III and also member Carlos García have announced their resignations after the Supreme Court ruled appointments to the Board are constitutional, and just as PROMESA, the law that created the entity, turns four years old. In announcing their decision, they have listed successes and challenges in the efforts to move Puerto Rico toward fiscal stability and debt restructuring.
It seems appropriate to reflect, for the future, on the fiscal journey of the Board, whose members have served an additional year to the three for which they were appointed. PROMESA is the mechanism Congress created to handle Puerto Rico's default on the largest public debt in U.S. jurisdiction - more than $72 billion. Carrion has recognized the statute as a federal imposition that has, however, prevented the island from sinking into bankruptcy and helped it find a way out of suffocating debt.
The Board achieved an important step by filing the restructuring of a third of the debt before Title III Court, which has resulted in some fiscal mobility for Puerto Rico. With 34 percent of $51.18 billion in restructured debt submitted to Court, service savings of $3 billion annually over the past few years allowed the island to respond to emergencies caused by hurricanes, seismic events, and the pandemic.
Although controversial, with the agreement on pensions the Board seeks to protect them by reducing the expected impact on vulnerable retired public employees in response to the insolvency of retirement systems.
With different levels of government collaboration, sometimes amidst struggles, the Board outlined fiscal plans, balanced budgets, and adjustments to the government structure. The goal is to move forward, with will and discipline, on the road to fiscal stability.
However, the outgoing members have highlighted the lack of that willingness to tackle structural reforms that will allow Puerto Rico to progress. For example, for the third consecutive year, the Board has implemented its budget design while denouncing the reluctance of the administrations to reform the public structure to the level needed.
García described what he considers to be four main challenges for the Board, the government, and Puerto Rico. The first one to achieve the political and electoral will to implement the reforms that will allow for quality education and health services, guarantee social security, change governance, and create the environment that will generate jobs.
Other challenges include the need for the federal government to expedite aid for the island's recovery with the necessary controls; to achieve unity of all sectors in efforts to bring the manufacturing industry to the island as a source of quality jobs and that Puerto Rico regains confidence and credibility in the markets. The government should comply with filing the Comprehensive Annual Financial Reports that are up to three years overdue.
Last Wednesday, the third budget prepared by the Board was implemented and lights and shadows of governance in Puerto Rico under PROMESA became clear. The constant disconnection of the political class with the mission of public service, inclined to cronyism and electoral interests, stands out. This decades-long culture appears the practice of spending over available resources and in non-priorities. The consequence is sustained budget deficits that suffocate the people.
Those patterns pushed the island into the fiscal cliff. It is time to take the path of government transformation to get Puerto Rico back on track and to recover its fiscal strength.