Last night, the Ricardo Rosselló Nevares administration was preparing to send the recommended budget for FY 2020 to the Oversight Board, without including cuts in items such as pensions, Christmas bonus and operational expenses that the federal entity requested less than a month ago, El Nuevo Día found out.
By press time, this newspaper learned that staff from the Office of Management and Budget (OMB) and the Department of the Treasury were making adjustments to the document.
The Secretary of the Treasury and government's Chief Financial Officer Raúl Maldonado and the Executive Director of the Fiscal Agency and Financial Advisory Authority (FAFAA) Christian Sobrino Vega are in Washington, D.C. right now.
After requesting a five-day extension that was granted, the government had to submit the new version of the budget to the Board yesterday.
However, in the letter granting the extension on Monday, the Board´s Executive Director Natalie Jaresko told Maldonado that she expected to receive a budget document that is consistent with the fiscal plan certified on May 9.
Among other things, this would involve adjusting payroll expenses to exclude the Christmas bonus from the budget and limiting the contribution to public employees health plan to $ 125 per month, except in the case of employees in public corporations with previous health coverage agreements.
Before that letter, Jaresko wrote to Rosselló Nevares on May 11 to warn him that she would not give way to a budget that contemplates $ 1,5 billion in expenses above the projection for the General Fund.
Rosselló Nevares has been saying for more than a month in several forums, including the U.S. Congress, that he will not apply unnecessary cuts to the government´s budget, especially after having identified about $ 1,3 billion in savings through different options.
Last week, the governor´s rejection was reflected in a special message stating that he would even sue the fiscal entity to avoid implementing the pension reform, which would affect about 167,000 public sector retirees.
This way, if Rosselló Nevares' proposal does not meet the Board´s expectations, the federal entity – which operates under an extension granted by the First Circuit Court of Appeals after ruling that the appointments of the Board members was unconstitutional–, would submit the first week of June its own budget to the Legislature for the third consecutive year.
Yesterday, after an event in Arecibo, Rosselló Nevares said that the Board – and affirmed by the Chairman of the Board himself – set the cap of what the budget´s expense should be and that the Legislative Assembly and the Governor then define how those resources are used. And he added that “lately, the practice has not been like that, and I call the attention to that practice because they are trying to impose public policy by carrying out their initiatives based on the budget.”
Rosselló also added that he invites the Board to evaluate the budget “we have already submitted to the Legislative Assembly, which they have said is above what should be spent, because the government, at a global level, will be looking for ways to mitigate that part. But, in terms of what and how the priorities will be, they are not the Board´s priorities, they are our priorities, and we are going to take them to the last consequences.”
The Governor's route
Just over a week ago, the OMB and the FAFAA released the recommended budget for FY 2020 but identifying from the outset whether that proposal meets the demands made by the Board does not seem feasible. This is because budget items are not consistent with the guidelines stated in the Board´s letters.
The document released by the FAFAA indicates that starting next July, the consolidated budget will total $ 26,124 billion. The figure represents an increase of 3.6 percent in relation to the current budget.
Out of that total, about $ 19,269 billion would be for the entities and funds covered by PROMESA included in the fiscal plan.
In the case of the General Fund budget, Rosselló Nevares conceived a budget close to $ 9,527 billion, or almost $ 500 million more than the spending cap set by the Board for the General Fund.
In the case of the consolidated budget, the fiscal plan includes expenses of about $ 18.2 billion for FY 2020.
Most of that impact seems to be associated with the Health Reform because starting next July the local government would have to cover a third of the Vital program again. In this budget, the entire program was financed with federal funds.
In March, Rosselló Nevares told El Nuevo Día that he would push for a reform to the budget process, applying a budget practice based on performance and public policy.
However, the OMB document states that the expense and revenue program was prepared under the "zero-based" budget method, while at the same time they would have started identifying the budget with the reforms of public policy structures and approaches, called "policy-based budget."