Monday in New York City, the Financial Oversight and Management Board for Puerto Rico added amendments to a fiscal plan for the U.S. territory before voting unanimously to approve it. The amendments mostly had to do with establishing a furlough program for government employees, reducing pensions by 10 percent and eliminating Christmas bonuses. According to the Associated Press, “the measures will be implemented if the government cannot find other ways to cut spending and generate revenue.”
The fiscal plan, shared with the public by the government of Puerto Rico on Monday and discussed during the Monday board meeting, called for increased revenues (“increase tobacco-related products excise tax and implement new property tax regime; revise fees including licenses, traffic fines, insurance fees and other charges for services to keep up with market trends”), as well as cuts, particularly payroll freezes from 2018–2020 a $450 million reduction in subsidies for the University of Puerto Rico. The government also told the board that it hoped to help grow the tourism industry on the island, explore energy reform and help to promote a culture where Puerto Ricans are less dependent on government services.
A three-hour streaming video of the board meeting contained many moments when board members praised the administration of Puerto Rico governor Ricardo Rosselló for the fiscal plan. Public opposition to the board meeting was minimal.
As The New York Times reported:
“A reduction of 30 percent of the work force represents 45,000 people in Puerto Rico,” he said. Reducing the work force by that much could cause a 9 percent economic contraction, [Mr. Rosselló] said.
The board agreed to avoid furloughs for six months to give Mr. Rosselló’s revenue measures a chance to start working. If the measures are not considered effective enough by October, the board will consider carrying out some type of furlough.
The governor also opposed the board’s recommendation that retired public workers’ pensions be cut by about 10 percent to make the retirement system sustainable. He had called for 3 percent cuts.
The seven-member fiscal control board originated from the PROMESA bill, which passed last June in Congress. At the time, Puerto Rico was facing a massive $70 billion debt crisis, a topic Latino USA explored last year.
The market response to the board’s decision led to Tuesday price drops for the island’s bond markets.