In order to ensure that the government does not spend more money than it receives and complies with the cuts it committed to make in the certified fiscal plan, the budget modified by the Oversight Board restricts in a reserve fund the money that would be used to increase the salaries of teachers and the Police, while establishing that the government will have to submit quarterly reports beyond those required by the federal PROMESA law before it can spend any additional dollar.
Such conditions are described in the joint resolutions that the Board sent to the Legislature last Tuesday as part of the budget certification process. In these documents, it is also established that the Office of Management and Budget (OMB) can not disburse money to fulfill the promise made by Governor Ricardo Rosselló Nevares to increase the salary of teachers and the Police, pay police social security and, let alone , authorize the use of the entire budget allocated to the agencies, unless the federal agency gives its approval or ensures that the administration complies with the income and expenditure program.
These restrictions established by the Board to ensure the fiscal balance starting next July join the repeal of the Unjust Dismissal Law (Law 80-1976). Eliminating the statute that provides certain legal remedies to private sector employees is part of a structural reforms package to put the island´s economy back on track and is the key element of the agreement between the Board and Rosselló Nevares to avoid litigation in Court.
For the representative of the governor before the federal entity, Christian Sobrino, it makes sense that the Board has established conditions for granting the monthly increase of $ 125 to Police and teachers -starting next fiscal year-and that these are also subject to the repeal of Law 80, because this move may impact the revenue projection required by the Board.
However, because of the Board´s new demands, Sobrino described as "complicated" the interaction between the government and the entity in charge of the island´s public finances.
"But there is a reality: you can provide the benefits (if) you have the income to budgetary support. If you do not have them, you do not have them," said the lawyer. "The revenue projection is the key part that makes all these agreements and these other programmatic commitments possible".
Yesterday, Sobrino stressed the importance of the Legislature proceeding with the repeal of Law 80. "The effect of not carrying out this repeal would imply a reduction in the budgetary revenues available to the government and make it very difficult to maintain a series of benefits , including that (salary) increase and also the Christmas bonus to public employees," said Sobrino.
"If the agreement can be complied with, there should be no problem moving that allocation (the money for salary increase) to the Public Security umbrella. If that agreement is not maintained, then additional cuts have to be made," he explained.
Constraints on the Government
Yesterday was a busy day at La Fortaleza, where they began to analyze the changes that the Board made to the budget. This led to a meeting between the governor and legislative presidents Thomas Rivera Schatz and Carlos "Johnny" Méndez.
Upon leaving the meeting, the legislative leaders said that Rosselló Nevares promised to provide them with a list of the inconsistencies between the budget he presented and the one submitted by the Board, however it was not indicated when it will be ready.
"We are analysing them (the changes) and we are comparing both budgets. And we precisely ask the governor for the inconsistencies so we can look at them specifically, "said Méndez.
Last Tuesday, and despite the fact that the parties had reached an agreement that allowed certain items to be increased in the budget in exchange for repealing Law 80, the Board concluded, for the second time, that the Rosselló Nevares budget did not comply with PROMESA and proceeded to make the adjustments they considered pertinent.
If the resolutions are approved as they are, it would be the first time that the government would have constraints to use its funds.
"The Secretary of Treasury, the treasurer and Executive Directors of each agency or Public Corporation covered by the New Fiscal Plan for Puerto Rico certified by the Oversight Board, and the Director of the OMB (or their respective successors) shall be responsible for not spending or encumbering during fiscal year 2019 any amount that exceeds the appropriations authorized for such year. This prohibition applies to every appropriation set forth in this Joint Resolution, including appropriations for payroll and related costs. Any violation of this prohibition shall constitute a violation of this Joint Resolution and Act 230-1974, "reads the Board´s version of the budget.
In another section of the document, the Board establishes that quarterly reports must be submitted no later than 15 days after the closing of each quarter and that the Fiscal Agency and Financial Advisory Authority (FAFAA) and the OMB will certify that "no amount" of the Social Security Reserve funds in La Uniformada (Puerto Rico Police Department) and the promised increases have been used to cover any expenses. This, unless "the conditions" to grant the increases "have been satisfied".
Teachers react
After learning about the new conditions established by the Board, Grichelle Toledo, Secretary-General of the Puerto Rico Teachers Association-Local Union, exclusive representative of public education teachers, said that Rosselló Nevares promised a salary increase of $ 125 per month "beginning the 2018-2019 school year".
"It has been 10 years without a salary increase and the cost of living has risen, benefits have been reduced and some have even been eliminated," Toledo said, noting that the proposed increase does not do justice to educators.
Cuts everywhere
While the government and the Legislature are still seeking to understand the changes made by the Board, El Nuevo Día analyzed the text of the budgetary resolutions in dispute.
Given the fact that the government did not disclose the revised budget submitted to the Board on June 1, the analysis conducted by El Nuevo Día focuses on the budget Rosselló Nevares announced to the Legislature on May 22 (after the agreement with the federal entity) and the modified version that the Board published last Tuesday. These documents focus on the budget linked to the General Fund.
The analysis shows that the Board made sure to increase its budget by 7.8 percent and by another 3.7 percent the one to pay lawyers working in Title III cases, while cutting the FAFAA's by almost 10 percent.
The Board fulfilled its part of the pact with the governor by not touching the Legislature budget, authorizing $ 50 million to municipalities and $ 25 million for the University of Puerto Rico (UPR) scholarship fund.
But on the opposite side, the Board cut the Budget of the Health Insurance Administration (ASES, Spanish acronym) 41 percent, that agency will see relief from federal Medicaid funds during the next two fiscal years. The Board also reduced by 26 percent the Budget of the Office of Community Planning and Development (formerly known as the Special Communities program) and 21 percent to that of the Ombudsman.
Similarly, according to the comparison between measures, the federal agency did not hesitate to reduce by almost 12 percent the budget of the State Commission on Elections, 11 percent to the Public Broadcasting Corporation, as well as 4 percent to the Police, almost 11 percent to the Fire Department and 14 percent to the State Agency for Emergency and Disaster Management, respectively.
The Board also made cuts to entities such as the Office of the Comptroller, the Office of Government Ethics and the Civil Rights Commission.
"These agencies, apart from being independent by law, are going to have an important role in the management of the federal funds," said Ramón Rosario Cortés, Secretary of Public Affairs at La Fortaleza.
"The Comptroller of Puerto Rico, Electoral Comptroller, Special Independent Prosecutor’s Panel and Government Ethics are agencies that, we understand, must have the resources they have today," he added.
Journalist Keila López Alicea collaborated with this story.
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