In a letter overflowing with praise for the ‘alignment’ between the vision of the Fiscal Control Board (FCB) and the public policy platform of the Rosselló Administration, the governing body of public finances in Puerto Rico ordered the Governor to impose $7,600 million in cuts and savings for fiscal year 2019, which also is the year before the next General Election.

The FCB endorsed the labor reform proposed by the Rosselló Administration and emphasized ‘the degree of alignment between your Administration’s public policy platform and the policy guidelines’ that the Board has stated in its correspondence.

They also praised Rosselló’s ‘sense of urgency,’ that ‘we are aligned on placing high priority on infrastructure’, and for the measures contained in his executive orders, although they said that ‘we must be candid and stress that, to get closer to fiscal balance, a lot more will need to be done beyond the measures already adopted by your Administration.’

‘The Board is providing you with fiscal framework, and within such framework we expect that you and your Administration will make the public policy determinations consistent with PROMESA,’ said FCB President José Carrión III in the letter.

By their own calculations, and even if the savings and cuts were achieved, by 2019 there would be money to pay only 21% of the total debt of $3.9 billion that must be serviced that year, which also highlights the scope that should have the negotiating and reestructuring efforts with creditors.

In its calculations the Board assumes that there is no federal money to replace the funds received under the besieged Obamacare program and assumes also that the Law 154 tax for foreign corporations is maintained and that tax treatment of those companies will be reviewed.

In its ‘ambitious but feasible proposal’, the Board proposes a redesign of the tax scheme to improve compliance, reduce exemptions, increase property taxes, reduce subsidies to municipalities and the private sector, and reduce amnesties.

In the government structure, they mandate a 10% reduction in non-payroll expenses and a 30% reduction in payroll expenses, reduction of ‘non-essential government services,’ and reduction of education spending to fit the decrease in enrollment. At the University of Puerto Rico (UPR), they point to an increase in cost per credit and a means-based system for tuition payment.

Cuts or savings of $1 billion in health expenditures would be achieved by optimizing state-provided services, reducing service utilization, increasing fraud detection, and ‘significant’ coverage and benefits cuts in the Mi Salud program.

In pensions, they seek a reduction of 10% in costs and expenses, and tha police and teachers get enrolled in Social Security. For capital improvements, they want to focus on Public Private Partnerships, accelerate permits, better coordination with the federal government and in bringing down energy generation cost to adjust or real levels of service demand.

The Board expressed its willingness to extend until February 28 the deadline for submitting a Fiscal Plan, which they would approve by March 15, and to extend the litigation stay to May 1, 2017. But by January 20 they want to have a plan or joint discussions with creditors, by January 23 they want an information exchange protocol and an a milestones’ schedule, for January 25 they want documents to assist them in their ‘forensic audit’ and by January 30 they want a liquidity plan that outlines how the government plans to manage cash flow in its coffers.

Letter and Attachments for the Governor of Puerto Rico, Ricardo Rosselló – NoitCel_22782