fiscal oversight board

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Puerto Rico Day of Reckoning Is Here

A crumbling building in historic Old San Juan, a symbol of Puerto Rico’s collapsed finances and reduced public employment. /Maria Padilla

SAN JUAN – People still applaud when their flight lands in San Juan, Puerto Rico. As one plane arrived, a passenger added, “Yo soy boricua” and the remaining passengers picked up the chant, “pa’ que tú lo sepas!”, an age-old chorus Puerto Ricans often sing in praise of themselves.

It’s all good considering the turbulence the island is enduring due to its enormous debt – over $70 billion – and the humiliation of an unelected, congressionally imposed fiscal oversight board whose purpose is to steer the island through its fiscal storm.

Which is to say, down on the ground the going is very rough.

Day of Reckoning

The fiscal year that began in July brought a new reckoning: more proposed cuts in public employment and reforms of government pension plans effective September 1. This on an island  reeling from a decade-old economic recession that has sent hundreds of thousands of Puerto Ricans packing to Florida and elsewhere since 2006, a historic migration.

Newly elected Gov. Ricardo Rosselló is going mano a mano with the Financial Oversight and Management Board over control of government, insisting the personnel cuts are “unnecessary” because the administration has made plenty of adjustments. Some mayors are even talking about civil disobedience.

The fiscal board, meanwhile, filed suit in federal court to force the governor’s hand. The outcome may determine who really is in charge. Huge hint: It’s the fiscal board.

Let’s be clear: Rosselló is attempting to put political distance between his administration and the inevitable shrinking of the government’s size and services. The fiscal board states 135,000 government workers are likely to be affected by a shorter work week, a number so high as to wither the political aspirations of the governor and his political party. In comparison, Florida had fewer than 100,000 full-time state workers, as of 2016.

Employer of Last Resort

For decades Puerto Ricans of all political stripes looked to the central government as employer of last resort – and the politicos gleefully complied. Voters will punish any governor who reverses course, as they have in the past.

Political posturing aside, people know deep inside there is no safe landing. This visitor couldn’t buy a treasury stamp (comprobante) in Dorado because the employee didn’t work Fridays. Plus, many municipal workers – another 55,000 employees – clock fewer hours as budget shortfalls have forced mayors to act.

But, in an absurd move that postpones the inevitable, the legislature declared “dead” a much-talked about consolidation of the island’s 78 municipalities that govern a shrinking population of 3.4 million people. That is more than Florida’s 67 counties and 20-plus million residents. Some mayors are forced to join hands. Several municipalities pitched in to collect the garbage of the town of Toa Baja (pop. 5,685), west of San Juan, one of the island’s most financially pinched. And the forecast is, some municipalities may disappear with or without reform for lack of funds.

In the southwest town of Cabo Rojo, residents must buy the town’s orange garbage bags to help pay for waste collection, a first. No orange bag, no pick up, according to the policy, which also encourages recycling. Certain residents reported that people are throwing garbage to the roadside to avoid buying bags, but this visitor didn’t detect anything out of the ordinary.

Stiff Upper Lip

The average Juan and Juana appears stiff-lipped, even graceful, under pressure as they plug away remembering others whose jobs have already vanished.

Workers, from a public school cafeteria worker and auto rental agent to a restaurant owner, seemed jittery but determined – nervous because they don’t know what’s coming but also determined to see things through.

The cafeteria worker dismissed any worries about losing her job, even though initial student registrations appeared to be down by 30,000. “We’ll see,” she commented. The auto rental agent was cautiously optimistic, glad that more travelers were arriving and renting cars. (Hotel occupancy was up 4 percent and hotel room taxes jumped 12 percent in July.)

Even collection of the dreaded 10.5 percent sales and use tax rose nearly 2 percent to $213 million in July over the same period a year ago. General tax collections were up 8 percent. Yes, picking the pockets of the puny 40 percent of the labor force that works is quite popular. Any layoffs, however, would shrink it further.

The bar-restaurant owner, whose parents opened the business located steps from the governor’s mansion decades ago, was all action behind the bar. “We have to work,” he said. “We have to work to push the country forward.”

Applause, please.

˜˜Maria Padilla, Editor

This article was published September 1, 2017, in the Orlando Sentinel. See the story here.

Four Puerto Ricans Named to Island Fiscal Oversight Board

promesa board
The four Puerto Rican members of Puerto Rico’s fiscal oversight board (from left) Ana Matosantos, Carlos M. García, José Ramón González and José Carrión.

The seven members of the fiscal oversight board that will run Puerto Rico’s affairs were announced this week, and four are  Puerto Rican.

The board – officially known as the Financial Oversight and Management Board for Puerto Rico – comprises four Republicans and three Democrats. They are the unelected people who will run Puerto Rico’s affairs for the next five years or so as they attempt to untangle the island’s $72 billion debt problem.

“These officials have the breadth and depth of knowledge that is needed to tackle this complex challenge and put the future of the Puerto Rican people first,” Obama said in a press release.

Rep. Luis Gutiérrez of Chicago.
Rep. Luis Gutiérrez of Chicago 

In a letter to board members, Chicago Congressman Luis Gutiérrez, who is Puerto Rican and an opponent of the fiscal board, asked each “to make a public commitment to the Puerto Rican people that you will conduct your work on the control board transparently and in the mother tongue of the people who will be deeply impacted for years to come by your decisions.”

In a surprise to many people – and a nod to island political sensibilities – four of the  board members are Puerto Rican, all with banking, finance, equity fund or bankruptcy experience. But Gutiérrez declared no faith in the move.

“Just because many of the members of the Junta de Control are Puerto Rican does not inspire trust in Puerto Rico, because some of the worst injustices committed against the Puerto Rican people in recent years have come from officials who are Puerto Ricans themselves,” he wrote.

Here are the board members:

  • Andrew G. Biggs – A resident scholar at the American Enterprise Institute and an expert on Social Security. (Republican)
  • Jose B. Carrión III – President and principal partner of HUB International CLC, LLC, insurance brokers.  Carrión also has experience in workers’ compensation. (Republican and Puerto Rican)
  • Carlos M. García – Former president of the Government Development Bank of Puerto Rico, the “bank” that helps government agencies, municipalities and public corporations obtain financing and which itself is now broke. He also was affiliated with Santander Holdings, the Spanish banking giant. (Republican and Puerto Rican)
  • Arthur J. González – Senior fellow at New York University School of Law,  formerly a judge on the U.S. Bankruptcy Court for the Southern District of New York and New York school teacher. (Democrat)
  • José Ramón González – CEO and president of the Federal Home Loan Bank of New York with previous ties to Santander and First Boston. (Democrat and Puerto Rican)
  • Ana J. Matosantos – President of Matosantos Consulting and previous budget director of California. She also has health and veteran affairs experience. (Democrat and Puerto Rican)
  • David A. Skeel Jr. –Professor of corporate law at the University of Pennsylvania Law School with experience in reorganization and finance. (Republican)

The fiscal control board not only is expected to establish payment plans to whittle down Puerto Rico’s bond debt but also essentially restructure the economy, which is in the 10th year of an economic recession that has boosted migration levels to the states to historic proportions, particularly Florida.

Big tasks that lie ahead are jumpstarting the private economy, now choked with overregulation; dealing with public underfunded pensions, representing over $40 billion that’s not included in the $72 billion debt tally; a public health crisis that is apart from the Zika virus contamination; and a public education system that has significantly fewer students, prompting school closings.

˜˜Maria Padilla, Editor