Governor Ricardo Rosselló’s letter to the Fiscal Control Board (FCB) last Friday garnered attention for its combative tone and the many lines in the sand that he drew, but it also included specific measures that the executive promised to perform, including the labor reform that he will soon sign into law.

In addition to the labor reform, the letter touches on matters related to taxation and the University of Puerto Rico (UPR).

Regarding labor reform, the Governor points out that changes in compensation for laid-off employees, flexi-time, in probation periods and in accrual of vacation time are aligned with requests made by the Board. The public sector single employer project e is also one of the measures that, according to Rossello, is aligned with Board requests.

The First Executive then went on to detail what he would be doing soon to address the outline put forth by the Board in a letter last week.

To raise $1.5 billion a year in new revenue, he will tax internet sales made from the island, ensure a 10-year extension on foreign corporation taxes under Law 154, address the tax evasion implicit in the fact that only 2.5% of taxpayers report income greater than $60,000, ‘modernize’ property taxes and create a new Incentives Code.

To reduce $1.5 billion in spending, he promised that in 45 days he could submit a plan to ‘reduce government structures’ and bring the number of agencies from 118 to between 35 and 40, as well as increase electronic payment methods to consolidate the number of Treasury collection agencies while expanding ‘the number of payment terminals.’ Along these lines, Rosselló reminded the Board of the cost-cutting measures contained in his first executive orders.

To generate savings of $1 billion in health services, Rosselló has as his main argument that ‘there is not a single political leader in the world’ who wants to be responsible for endangering 3.5 million citizens. This, in a thinly veiled reference to President Donald Trump and his plan to repeal Obamacare. More specifically, he revealed that government health plan Mi Salud is undergoing changes such as: distinguishing between basic and complementary care, giving patients free choice on providers and services, opening the whole island for competition between insurers rather than dividing it by regions, and reducing drug costs with a bulk purchaser.

For the UPR he accepts the Board’s suggestion to move to a means-testing of tuition rates for students that do not qualify for Pell grants and to split the system into ‘primary research campuses’ and campuses that will have to specialize in order for them to ‘remain productive and viable.’

In the matter of pensions, where the Board seeks a 10% reduction in benefits, Rosselló offers to privatize defined contribution plans and to tax some higher pension benefits, also known as ‘Cadillacs.’ Also, he plans to produce new revenues for the pension system through Public Private Partnerships and revenues from a government property trust.

And, on the debt, it alludes to the fact that it will be the Government, not the Board, that will lead negotiations with creditors and that he’s looking for mechanisms to mitigate the losses of local bondholders.

In a closure that could be interpreted by some members of the JCF as a slap in the face, the Governor reminds them that they need to be a tool for economic development, like the board that was put in place in Washington DC. The problematic reference comes from the fact that the DC board had one of the most tumultuous tenures in the history of these types of governng bodies, marked by popular protests and opposition because, like Puerto Rico, the federal capital is not a state but a territory.

Letter from Governor Rosselló to the Fiscal Control Board – NotiCel_22861