As of 12:01 in the morning of today, Monday, Ricardo Rosselló was sworn in as the eleventh Governor of Puerto Rico alongside his entire cabinet, before Supreme Court Justice Maite Oronoz.
It was done this way to save time and to “hit the ground running” from day one with his work plan, which seeks to address taxation complexity, slowness in granting permits, the lack of competitiveness, and high energy costs on the Island. To achieve his mission, Rosselló—for starters—has legislation and executive orders to, among other things, give way to a governmental transformation by shutting down and merging agencies, introduce a tax reform, delegate functions to the private sector, capitalize the Retirement Systems, present a status referendum between independence and statehood, relax labor laws, and privatize energy generation, which now falls on the shoulders of the Puerto Rico Electric Power Authority (PREPA).
“During these next few years, the government is going to work tirelessly and relentlessly to address these challenges,” he assured.
Since last night, his entire cabinet has been immersed in a workshop to outline how each agency will start working quickly. Therefore, the inauguration taking place today at 10 am on the north stairway of the Capitol is a symbolic ceremony which, according to him, will initiate four years of “high intensity and challenges.” “There are some things I will do from the first day. As long as I have more time to do them, since instead of this just being a celebration, the inauguration is a workday,” he said, and mentioned that his brothers, Juan Oscar and Luis, will be in the Island to share in this historic moment.
In an interview with El Nuevo Día, Rosselló detailed each of the measures he will direct, and guaranteed he will simultaneously work on the fiscal crisis, the Oversight Board, federal initiatives, and the capitalization of the government and the Retirement Systems. “There’s no other way because that’s how complex the issue is. They’re all separate, but they’re all linked,” said Rosselló, who will live in La Fortaleza for now, even though moving out during his term is possible so the building can be turned into a museum or a ceremonial center for receiving dignitaries.
In light of the urgency of the topic, he will ask the Oversight Board (OB), which is in charge of the Island’s finances, to extend the Moratorium Act under the federal statute PROMESA. He is willing to draft a fiscal plan, but the available time frame is “unrealistic.” The OB is expecting a fiscal plan by January 15. “If we get that extension, there’s no need to have the fiscal plan by the 15 (of January). I think it’s in their best interests. It’s in the interests of the Board, of Congress, and it gives me time to renegotiate the debt and have a larger field towork in, and even negotiate with creditors,” he indicated.
In order to deal with the fiscal insolvency predicted for February, Rosselló will seek access to liquidity. “We could go to the markets, look for areas of quick capitalization on services or properties in Puerto Rico, existing tax areas that haven’t been monetized,” he stated.
“There are no assets in Retirement. We have to capitalize the Retirement System. There are several alternatives. One is understanding that in every access to liquidity—be it through interim funding or the sale and rental of assets,— part of that capital has to go to the Retirement System. I’d like to create some kind of trust for government buildings that could be rented, some sold. There are 16 million square feet,” he added.
In addition, the tax reform he will propose intends to lower rates and increase collections of the Sales and Use Tax. “We want to take that collection to 85%. That would mean an additional $630 million,” the Governor stated.
Status at the Forefront
The executive orders and the first bills to file are ready and will be in the Legislature as soon as it convenes on January 9. One of these measures is a referendum on status, which will include two options: statehood and independence. “The Commonwealth is dead. Puerto Rico has to choose between independence and statehood. The mechanism will be designed and put in place,” he declared. This referendum will be tied—although one may progress ahead of the other—to the petition of admission made to the United States Congress to allow Puerto Rico to become a state, which will be handled by the Resident Commissioner in Washington, Jenniffer González.
It is precisely in Washington where they will advocate for the Island’s inclusion in the anticipated healthcare reform, which would signify less money for the states. But Rosselló is confident that, if Puerto Rico achieves parity, it would mean more money for the Puerto Rico Government Health Plan, which loses its federal funds in 2018. This would be complemented with a reduction in the Department of Health’s administrative expenses. “It's the same Republican Congress that imposed the Oversight Board on us, and if we take some steps and make changes in the government, it’s also their responsibility to act,” affirmed the Governor, when asked if he is confident the Republican Congress will take positive action.
Another measure to be filed immediately is the amendment to the Public-Private Partnership Act. They will be called Participative Public-Private Partnerships, and part of the money generated by this initiative will also be allotted to pumping money into the Retirement Systems. The Partnerships will be formed by companies from the United States and Puerto Rico. “Right now, the way it’s set up (in the law) is that the companies can’t request a partnership. We’re leaving both options open: either the government or a company can request it,” he explained.
How can conflicts of interest be avoided, like pay-by-play or giving favor to companies close to you such as Ana G. Méndez? we asked. “Transparency and clarity. I would never do that (favor a company). If a company wants it, it has to earn it and the elements will be clear before the people of Puerto Rico,” he responded.
The project for instituting the single-employer plan is another measure that will be presented immediately. It will allow government employees to be moved between agencies and areas where they are needed. “I’ve arrived at this solution, because it’s an alternative I see to protect the jobs of public servants,” he stated, while guaranteeing there will be no layoffs.
He explained there are some government employees who will be exempt from this practice due to the nature of the work they do. These are teachers, police officers, and specialized personnel. “Teachers won’t be required to be anything other than teachers. If a teacher decides to do something else, great,” he said.
Around 70% of government jobs are centered around administrative, secretarial, and clerical work. These are the ones that could be subjected to the single-employer concept, but taking the employee’s preference into consideration, said Rosselló. Nevertheless, the government has “the final word.”
“Sometimes people think this goes against collective bargaining agreements. It doesn’t. The rights that are already established can stay,” he stated, while explaining that an employee could transfer into a private company if the service they offer passes into the third sector. These employees could come from the Retirement System, he admitted.
He also does not rule out reducing benefits as part of the revision of labor laws. Everything depends on the country’s fiscal situation. “Nothing is ruled out, because we’re about to evaluate the fund and how much impact these measures could have on economic development,” he said.
Another measure affecting human resources is the one establishing equal pay among government employees. Rosselló seeks equality in the salaries of female and male employees. Despite the fiscal crisis, he promised that “we won’t have to reduce anybody’s salary. The work is already being done, and it’s about making sure that everything is categorized.”
The Distribution Marketing Organization (DMO) is also being created immediately, which will give way to the Puerto Rico brand, regarding Tourism’s use of that agency’s portfolio. “The money will be placed in the hands of a nonprofit institution, which will be managed by the principal figures of that industry,” he said.
He will also give rise to Enterprise Puerto Rico, a DMO counterpart. “To be able to work with industries, bring them to Puerto Rico, and allow them to develop,” declared the Governor.
He rejected the idea that he is increasing the size of the governmental body. “Many of these offices will be assigned to Fortaleza. Forexample, the Puerto Rico Innovation Technology Service, the Federal Opportunities Center,” he said.
He also noted that, while these new faces are emerging in the government, others will disappear or merge. For example, the Department of Public Safety will house the State Agency for Emergency and Disaster Management, the 911 Emergency System, the Firefighters Corps, the Driver Services Center, the Institute of Forensic Science, and the Police Department. “This project will take a little more time, due to its size. We will see changes in the government within the first year, but for the (total) restructuring I’ve estimated that, in four to five years, we’ll have that framework,” he noted.
The map for the steps needed to reduce the size of the government has already been drawn up, but it hasn’t been decided which agencies will disappear, he said. This, the Governor continued, will be made clearer once they identify which services will be delegated. To that end, the Office for the Third Sector will be created in the upcoming days and it will take charge of some of the services currently offered, with little efficiency, by the government. Previously, 340 services that could be transferred to nonprofit organizations were identified.
As an example, Rosselló said the federal Welfare-to-Work Program, which allows for the transition of low-income people into the country’s workforce, is a good candidate for management by nonprofit organizations. Currently, this program is in the hands of the government in six regions, while one region is administered by a nonprofit organization. “Not only is it the most effective, but it also complies with federal requirements. One of them is that of 30% of people that find jobs, 20% keep it,” he noted.
With the aim of being more efficient, Rosselló will also keep electricity generation in the private sector, although it is currently in the hands of PREPA. “We would create some kind of Public-Private Partnership, a concession, a power purchasing agreement... there are different mechanisms. The important thing is keeping it in the hands of a sector that can do it at a lower cost and with more efficiency,” he stated.
The extinct Office of the Inspector General will remerge in the upcoming days—also through a law—but with a considerable body of auditors who must detect corruption “immediately.”
The massive emigration of doctors will be contained with another project called the Tax Incentive for Physicians Act.
The government would give contracts to health professionals “in high-demand” and, in exchange, they must serve 180 hours of community service. “We would give them a low preferential rate, very low. It would make Puerto Rico the most competitive jurisdiction,” he declared.
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