Governor Ricardo Rosselló will unveil his long-term fiscal plan to the Fiscal Oversight Board (FOB) today. He plans to announce the major components of his plan in his first address to the Legislature tonight. Rosselló has clashed with the FOB at times, but has also acquiesced to their recommendations. For example, the Governor initially balked after the Board suggested $300 million in cuts and revenue raisers at the University of Puerto Rico (UPR), but later said that he was willing to make the painful adjustments. The Governor is still insisting, however, that the FOB’s imperative to achieve a balanced budget in two years—by making $4.5 billion in spending cuts and tax increases—is unrealistic and would create social and economic dislocation. Rosselló says that his plan will balance the budget in 3-5 years. The Board must approve the fiscal plan by March 15. Having an approved fiscal plan is a pre-requisite to conducting debt-restructuring negotiations with creditors; the stay on debt collection litigation expires on May 1.
Reports indicate that Rosselló plans to include $800 million to $1.3 billion in debt service payments as part of his fiscal plan. This would represent a 75-80% cut in debt service payments to creditors.
In DC, Governor warns Fiscal Oversight Board
Rosselló attended several meetings in Washington, DC recently, where he highlighted to the FOB that the PROMESA law does not require Puerto Rico to achieve a balanced budget in two years. Some observers have speculated that the FOB is pushing a two-year calendar because Board members’ terms expire between 2018 and 2019. Rosselló’s meetings included the US Secretaries of Treasury, Health and Human Services. He attended the National Governors Association (NGA) events in Washington, DC. and the NGA dinner at the White House.
UPR finalizing fiscal plan, amidst protests
The University of Puerto Rico (UPR) is still finalizing its fiscal plan for the Governor’s submission to the FOB, and the anticipated $300 million in budget adjustments have caused serious concern among the student body. After initially stating that cutting $300 million from the UPR’s budget would leave the university system “inoperable,” interim President, Nivia Fernández, now says that she can achieve those adjustments. Her proposed plan includes a means-based increase in tuition, as well as $112 million in spending cuts. The cuts include reductions in contributions to employees’ pensions, eliminating classes, and reducing other expenses. Fernández’s blueprint also includes revenue raisers that include positioning the University as a primary consultant for the government.