Puerto Rico Oversight Board rejects local government budget plans

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Puerto Rico’s Board of Supervisors rejected several local government initiatives, including the governor’s proposed fiscal year 2023 budget.

The board on Friday sent a letter to Gov. Pedro Pierluisi rejecting the budget presented on March 16, and two separate letters to Juan Zaragoza Gómez, president of the Senate Finance Committee, challenging three Senate bills related to compensation by firefighters and health care.

Board Chairman David Skeel said in the budget letter that the proposed fiscal 2023 budget was inconsistent with the board-approved Puerto Fiscal Plan, which was confirmed Jan. 27. He told Pierluisi that the budget would need a major overhaul before it could be presented to lawmakers.

The oversight body sent two letters to the President of the Senate Finance Committee, Juan Zaragoza Gómez, telling him that three Senate bills were inconsistent with the budget.

Pierluisi had approved a General Fund budget that was $100 million over the board’s budget of $12.473 billion.

The governor’s budget allocations vary both upwards and downwards from the board’s allocations.

The board directed the Medicaid budget to allocate $60 million more than Pierluisi’s budget. While Pierluisi would scrap the Highways and Transportation Authority subsidy, the board says $179 million of that should be withheld. It said the elimination would create significant deficits for HTA’s non-toll assets and disrupt operations.

On the other hand, the board said the budget should allocate $130 million less to municipalities for Medicaid spending and $100 million less to a Pension Reserve Trust. It said Pierluisi’s proposed $112 million increase in an “operating reserve” should be scrapped.

Pierluisi’s spokesman did not immediately respond to a request for comment.

On Friday, the board also sent a letter to Zaragoza Gómez on a Senate bill and joint Senate resolution to increase firefighter salaries. It also sent him a letter regarding another Senate health care bill. Both Board letters were signed by Board General Counsel Jaime El Koury.

Both firefighting bills would raise firefighter salaries beyond budget plan levels without identifying a funding source, El Koury said.

“That [debt] Restructuring offers no license to return to the same pattern of unprincipled spending that led to the financial crisis that triggered the passage of the [Puerto Rico Oversight, Management, and Economic Stability Act] and the start of the Title III process.”

The healthcare-related bill seeks to sidestep reforms related to the healthcare financial plan, El Koury said in the second letter. By making health care an essential service, the bill appears to mean that it can be exempted from the tax schedule. Compensation for healthcare professionals can be adjusted within the budget rather than outside it, El Koury said.

The board’s general counsel told Zaragoza Gómez that the board is glad it contacted him to review the bills, both of which have not yet been passed.

“What do we have from all this?” Puerto Rico attorney John Mudd said on Twitter on Tuesday. “That the legislature and the executive branch have been thinking that ever since [debt] adjustment plan has been approved, they can now do whatever they want, and that is not the case. But that doesn’t bode well for the future if the board is gone.”

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