Natalie Jaresko (semisquare-x3)
Natalie Jaresko. (Juan Luis Martínez)

The Oversight Board announced that the budget submitted to the Legislative Assembly last night would be of $ 9,1 billion, which represents a $ 570 million cut on Governor Ricardo Rosselló Nevares proposal.

Some of the cuts are in allocations to the Department of Education, the State Elections Commission (CEE, Spanish acronym) and the transfer of funds to municipalities, said the Board´s Executive Director Natalie Jaresko during a press conference at the entity´s headquarters in Hato Rey.

Jaresko indicated that these differences, compared to the budget proposal made by the Governor, could be rectified if the efficiencies projected in the current fiscal plan are achieved.

For example, she mentioned that the use of technology can significantly help to reduce expenses in the primary elections process handled by the CEE. In total, the budget submitted by the governor added an extra of $25 million for that entity to operate during the pre-election year.

On the other hand, Jaresko explained that the reductions to municipalities respond to the fact that the Governor absorbed in the budget the payments that the municipalities are supposed to make to the "PayGo" program, which provides funds for retirees' pensions, and for the contributions that municipal governments make to Vital, the government´s health plan.

The additional package for municipalities was of $ 286 million and was justified under the new Administrative Burden Reduction for the Municipalities Act, a statute the Board objected.

As for the Department of Education, Jaresko explained that they adjusted the item to the spending projected in the certified fiscal plan. She alleged that the government could not justify a $ 262 million increase for public schools, as Rosselló Nevares wanted.

"It's not like they cut other expenses in the budget in order to increase these allocations," Jaresko said.

Objections

The Board´s executive said that they rejected the Governor's budget, as it was submitted because it did not contain the draft of resolutions to be approved in the Legislature and did not comply with the provisions of the current fiscal plan, especially on public spending caps.

Jaresko added that probably in fiscal year 2021 they will start with debt payment again and added that it is true that there are surpluses now but they should be used to address deficiencies in the future.

Projections in the fiscal plan anticipate that the economic boost Puerto Rico following reconstruction initiatives after Hurricane María will have vanished by 2024.

The Board’s expectation is that this will eventually imply new budget imbalances, and anticipates that this would happen sometime between 2031 and 2037, depending on the number of governmental and economic reforms implemented.

"This would place our retirees back at risk, and God forbid that happens again," Jaresko said.

The Board is currently pushing for a nearly 10 percent reduction in pension expenses. This would be done through a system of cuts in pensions over $ 1,000. According to Jaresko, this would begin in the summer of 2020.

Jaresko is confident that PROMESA enables them to impose these changes even if the Governor resists, as he anticipated.

"We are sticking to the law," Jaresko stressed.

The budget submitted, like the current one, doesn't include the Christmas bonus for public employees. In order to provide this benefit to government employees, there had to be cuts in other expenses of agencies.

Jaresko said that, for example, to cover the Christmas bonus, the Aqueducts and Sewers Authority (PRASA) froze the hiring of personnel in critical operation areas, which could have medium and long term consequences.

The missing process

Once the Legislature receives the budget document, lawmakers begin the analysis. The Legislature must submit its version of the document to the Board on June 10, the fiscal entity will accept or reject it by June 14.

If necessary, the Legislature must submit a new version of the document to the Board seven days later. And, on June 28, the process must be completed through the approval of the budget that will govern the revenues and expenses of the General Fund for the fiscal year beginning July 1.


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