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The Fiscal Oversight Board is optimistic about the new operational budget of Puerto Rico

Although the operational budget approved by the Fiscal Oversight Board (JSF) is less than that endorsed at the last minute by the Legislature, the funds allocated for the fiscal year that is just beginning will not leave the municipalities in a precarious situation, they place emphasis on key agency projects, such as the Education deparmentand allow to resume permanent workit transpired yesterday in a brief public meeting of the organism.

In the conclave, the officials of the Board, who now lead the budget processes and implementation of fiscal plans in the absence of a permanent executive director, highlighted that, after the restructuring of the central government’s debt, it can invest in capital improvements and in improving wages and services to the population.

While Ginorly MaldonadoDirector of the Budget for the central government in the Board, assured that the municipalities will receive more money from the General Fund than what was assigned a year ago, his counterpart in Infrastructure, Alexander Figueroahighlighted that, for the first time, the Board was able to approve the budget of the Water and sewage Authority (AAA) as filed.

That progress, Figueroa acknowledged, rests on the “modest” annual increases that the public corporation has applied and that, between the years 2018 and 2022, have represented some $252 million in additional income that have come out of the pockets of consumers.

That was also the case with the Cooperative Insurance and Supervision Corporation (Cossec), highlighted, for his part, Maria LopezDirector of Pensions, Cossec and the University of Puerto Rico (UPR) in the JSF.

there was too much time

At the conclusion of the public meeting, the president of the Board, David Skellindicated that the body approved the budget after granting several extensions of time to the Legislature.

Skeel regretted that the consensus process that took place a year ago between the government of Peter Pierluisithe Legislature and the Board.

The same regret was transmitted by the director Antonio Medinawho did not participate in the meeting, but in a written message -which Skeel read- stated that the behavior of the political class around the budget during the past week was similar to the decisions that led Puerto Rico to bankruptcy.

Skeel denied that the absence of a permanent executive director affected the work to get the budget approved.

“We extended the time (for budget presentation) four times, it was not that we were not flexible,” said the Bankruptcy Law expert.

According to the letters from the Board, the Legislature should have approved the budget on June 14 and the date was repeatedly postponed until June 25.

“The schedule was not met,” said the general legal advisor of the Board, Jaime El Khoury.

The latter referred to section 202 of the federal law Promisethe paragraph that modified the approval of budgets since the arrival of the Board.

Skeel was optimistic that the revenue and expenditure program that went into effect yesterday could become the second balanced budget, as required by section 209 of PROMESA.

The consolidated budget for the fiscal year that has just begun is around $28,000 million, including in that figure a budget charged to the General Fund amounting to $12,426 million.

The 1367 project

The Board approved the budget last Thursday at around 5:00 pm Some two hours later, the House of Representatives approved the one negotiated with the Senate. This allocated an additional $49 million to the General Fund budget.

In parallel, Pierluisi signed bill 1367, which created an alternative regime to the so-called 4% excise tax, a key piece in public finances. Although the signing of the project -now converted into Law 22- allowed the approval of the budget, German Ojeda, also an official of the Board, indicated that the measure is evaluated by the agency.

For now, Ojeda said, the budget that was approved rests on less comfortable projections when it comes to the tax paid by the Controlled Foreign Corporations (CFCs in English).

As of next January, the CFCs will not be able to claim said payment in their federal returns, which now depends on the US Treasury endorsing the changes made to the regime with project 1367.

The budget balance

Regardless of who approved it, Skeel said, the current budget would be the second to include public debt payments.

Last February, the Board amended the last budget to incorporate the results of the financial restructuring of the central government and the confirmation of that Adjustment Plan (PDA).

Skeel explained that it will not be until the financial statements for fiscal year 2022 and the cycle that is just beginning are completed that it can be confirmed whether both fiscal years would be the first two balanced budgets in light of Promesa.

“We won’t know until the financial statements are audited,” he said.

At present, the government has published the audited financial statements up to 2019.

During the thirty-sixth public meeting, the directors and officials of the Board offered a summary of the budgets of the central government, the PRASA, the Electric Power Authority (ESA), the Industrial Development Company (Pridco, in English), Cossec and the Sales Tax Fund Corporation (Cofina).

The saga with the Legislature

In summary, each year, the Board must offer the government a projection of revenues and present a work schedule so that the Executive branch presents the budget for the agency’s consideration and a period of time to identify and correct possible violations of the fiscal plans. . In this process, the time that the Legislature will have for its analysis and corresponding approval is also established.

El Khoury explained that the approval date established in the calendar for the approval of the budget considers that the Board has one last turn to verify that what is approved by the Legislature is consistent with the current fiscal plan.

According to the letters from the Board, the Legislature should have approved the budget on June 14, a date that was postponed for a week at the request of the president of the Senate, Joseph Louis Dalmau. Given the non-compliance with the new approval date, set for June 22, the Board granted two more days without any success. Last Monday, the Board gave a new chance and before the inaction of the Legislature, yesterday, the body adopted the budget and certified it.

Skeel maintained that what was approved by the body reflects a large part of the budget spending by the government.

During his intervention in the conclave, Governor Pierluisi agreed with Skeel, but objected to the position of the Board regarding the financing of the municipalities and also that the organism did not approve funds for specific programs. These are very small allocations in a budget of around $28 billion, he acknowledged.

The president anticipated that he hopes to achieve savings throughout the fiscal year so that those projects that were left without funds can be carried out and asked the Board to get its act together every time it receives a request from him to reallocate budget funds from one item to the other. .

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