It has been months since Hurricane Maria struck the island of Puerto Rico, leaving a path of devastation around all corners of the island. As Puerto Rico recovers, it has to face up to a continued fiscal and debt crisis still engulfing its government.
To this end, the fiscal control board established under the Puerto Rico Oversight, Management, and Economic Stability Act, quite rightly requested from the commonwealth a new revised fiscal plan. However, the recently disclosed revised fiscal plan paints a business-as-usual picture, and this is very troubling.
The last few months have seen Puerto Rico move from the emergency phase to the recovery phase of the disaster. The efforts to rebuild the power grid, damaged infrastructure, and seriously damaged economy, among a host of other things, have been center of governmental efforts. But the Ricardo Rossello administration has also focused seeking billions from the federal government to keep the government open and power the recovery.
Yet there is a credibility gap engulfing the island, thanks to controversies such as the Whitefish contract. Along with such misadventures, remaining questions surrounding the liquidity of government are giving pause to lawmakers in Congress on anything related to Puerto Rico. In this context, the newly published five-year fiscal plan from the government of Puerto Rico is supposed to provide the basis for the public policy actions to fix the continuing debt and fiscal crisis.
The plan assumes that several measures will be undertaken to restore Puerto Rico's fiscal health, and these assumptions are far too optimistic. Take first the premise that the federal government will jump in with $35.3 billion in federal funds for reconstruction. Given the credibility gap facing the island's government, it is highly doubtful that policymakers in D.C. will sign off on a bailout of that size without safeguards.
The second assumption in this plan is a continued rise in revenues for the territorial government. This is a highly dubious assumption, as the plan also projects over the next five years a population decline of 19.4 percent, a reduction of $725 million in Act 154 revenues, and proposed tax reforms that are projected to reduce revenue by $500 million (One might even ask why tax cuts are being considered, given that the government is unable to cover its expenses and debt service).
The third premise of this plan is that long-needed structural reforms to Puerto Rico's government operations will produce $3.5 billion in savings by fiscal 2022. Although the reduction of executive agencies from 115 to 35 is welcome, the recent troubles with the newly established Department of Public Safety raise questions about the viability of consolidating so many agencies. Even so, the plan contemplates increasing payroll and operating expenses by 1.1 percent through the length of the plan.
And the fourth assumption is probably the most worrying and shakiest of them all: That Puerto Rico's government won't have to make any debt service payments at all after its quasi-bankruptcy proceedings are resolved.
This proposed fiscal plan is the classic, failed business-as-usual approach that brought Puerto Rico to its current state. If shady numbers, dubious estimates and over-optimistic projections could restore Puerto Rico to fiscal health, the island would already be a shining example for the rest of the U.S.
Ojel L. Rodriguez Burgos is a freelance writer and a graduate of Kings College in London.
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