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Conversation Shifts between Oversight Board and Governor Ricardo Rosselló

Two weeks after Ricardo Rosselló was sworn as governor of Puerto Rico, the tone of the conversation between the Oversight Board and the governor has started to change. When the members of the Oversight Board were appointed, many groups and political leaders questioned the ties that some members have with the New Progressive Party (NPP), the political party over which Governor Rosselló presides. Many speculated during the political campaign that Rosselló would follow whatever the Oversight Board wanted.

 On January 18, the Oversight Board gave Governor Rosselló recommendations to cut spending and increase revenues. Some of these recommendations are: 1) increase revenues by $1.5 billion; 2) government right-sizing which would generate approximately $1.5 billion, 3) reduce health care spending of $1.0 billion; 3) increase tuition and reduce spending of the UPR, which will generate $0.3 billion in savings; 4) reduce pension cost to generate $0.2 billion in savings. They recommended that all of these policies be implemented by fiscal year 2019. However, implementing these policies would mean a reduction of health care services and possible layoffs of government employees, and it could affect the most vulnerable population of Puerto Rico.

In response to these recommendations, Governor Rosselló explained his position and the measures that his administration has taken so far. He sent a clear message that his administration has a different approach and that it will not accept the recommendations that look to cut health care, pensions, and layoff government employees. He claims his primary focus will be on economic growth, as presented in his “Plan para Puerto Rico.” He has listed the Executive Orders that he has signed and legislation that his administration is working on that looks to improve the fiscal situation of the government and increase economic growth. One of this legislation is the controversial Employment Transformation and Flexibility Act, which aims to reduce employment benefits, while it creates a more competitive economy. Critics of this legislation say that it could worsen the fragile economy and increase migration.

We must wait until the governor sends his fiscal plan to be clear about his position regarding the implementation of more austerity measures and debt restructuring. Recently, and in contradiction of promises made during his campaign, Governor Rossello is supporting a restructuring of the debt and is extending the debt moratorium law, which expired on January 31, 2017. The governor asked to extend the deadline to submit the fiscal plan, which was approved by the Oversight Board and it will be now submitted on February 28, 2017. At the same time, Governor Rosselló asked to extend the stay on the debt, which was also approved by the Oversight Board, and it will be in place until May 1, 2017.

Victor R. Martinez
Thursday, April 13, 2017 - 5:00pm