The fiscal route announced by the Oversight Board to strengthen Puerto Rico's finances should contribute to enhancing the dialogue toward sustainable implementation agreements.
We hope this new map will become the way to channel the responsibility, shared between the oversight entity and the local government, to direct the financial balance while reasonably addressing the island's essential needs.
This plan provides new aspects that require space. One of them is the bridge that the Board draws for municipalities to look for alternatives that make them financially solid. It is important to give this pilot project the opportunity to enrich with mutual learning.
The Board's involvement in municipal finances also leads to accountability beneficial for municipalities and citizens. Municipalities are public entities and, as such, are vulnerable to the same maladies that led to the island´s bankrupt.
Ten municipalities were requested to submit reports on their operations within a month. According to the Board, these municipalities, most in the central region, are part of a pilot plan that seeks to identify alternatives and best practices to ensure the viability of these government structures.
The government and the federal entity have already agreed on the elimination of subsidies as a measure to prioritize the revenues of the General Fund.
Before designating the 78 municipalities as covered by PROMESA, the chairman of the Board José Carrión, mayors, private organizations and representatives of the Municipal Revenue Collection Center (CRIM, Spanish acronym) held several meetings for months. They discussed opportunities to improve municipal revenues through property taxes as a potential source of income for mayors.
Gov. Ricardo Rosselló himself admitted that at least 64 municipalities could become inoperative due to budget problems, so permanent solutions are urgently needed.
The Board also proposes that municipalities move to self-sufficiency through aggressive service consortia initiatives or through the consolidation of processes and operations, as required by the Autonomous Municipalities Act. Municipal governments can demonstrate their capacity to generate resources that will allow them to reach real autonomy and joint work. According to the Board, this has been identified in the ten municipalities selected.
On the other hand, the Board has shown that they are willing to reshape the fiscal plan by establishing those critical areas such as education, safety and health are the priorities in the redistribution of resources resulting from cuts in other areas, including the hiring of professional services. In that direction, they propose to do salary justice to public employees in those areas such as teachers and police officers. At the same time, the plan reduces the proposed cut for pensioners.
It also confirms a “slower disaster recovery funding rollout” that may delay the potential benefits of the structural reforms Puerto Rico needs. Among them, improving conditions for doing business on the island.
The adjustment of projections should serve to make decisions based on better-documented data. Within a broad framework, Puerto Rico needs to embrace the coherent path to long-term financial consolidation, supported by a commitment to transformation and government transparency.
Now that the Board's fiscal plan has been presented, it is up to this federal entity, the government and municipalities to strengthen communication channels to effectively meet the goals set to steer the government finances to put Puerto Rico on the road to development.