On opposite sides, the members of the Supervisory Board due to the end of their mandate Tags: Businesses Sign up to receive the free newsletter More in Featured Businesses Ups

The Fiscal Oversight Board (JSF) confirmed this Thursday the fiscal plan that the government must adopt in the next five years to consolidate its financial governance amid discrepancies between the directors of the agency regarding how and when they should end their functions.

As reported yesterday by El Nuevo Día, the 2022 Fiscal Plan contemplates salary increases for educators, correctional officers and firefighters, will maintain the Christmas bonus for public employees and provides for the central government to inject some $10.3 billion into the pension trust, funds that they will be used to pay pensions, when there is not enough money in the General Fund.

But although the members unanimously confirmed the plan, the directors of the organization exposed their differences regarding the mandate they received from Congress, once the director Justin Peterson used one of his shifts at the meeting of the organization to ask the federal legislature to end the agency sooner than provided for in the federal PROMESA law.

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"Let's use this turning point as an opportunity to talk about the role of the board," said Peterson during the press conference called by the Board at the end of the conclave that served to reiterate the importance of confirming the Plan of Adjustment (PDA) of the central government in the process of patching up the island's finances.

Peterson noted that just as Puerto Rican Congresswoman Nydia Velázquez (D-New York) and other political figures played a key role in passing the federal Promesa law, Congress must now review the statute and terminate the body that it possesses powers above the elected government of the island.

"Who decides what access to the market at reasonable rates is," Peterson told this newspaper, referring to another of the criteria in PROMESA for the Board to complete its mandate.

10 years is too long, says Peterson

In particular, Peterson believes that the requirement of four years of balanced budgets could be reduced to two by shortening the existence of the Board.

Otherwise, in practical terms, the Board will have operated on the island for 10 years, a time that he considers "too long."

Peterson maintained that, for four to five years, the Board used Promesa as "a shield" against creditors, but at that time, due to the restrictions that the Board has, very little was done to adopt the structural reforms that would be necessary to straighten out public finances.

Immediately after, Peterson classified as "a scandal" that the Electric Power Authority (PREPA) has been failing to comply with its bondholders for about seven years, so that restructuring must be completed as soon as possible.

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Above all, the Communications strategist and lobbyist - who previously advised groups of bondholders on the island and organized a smear campaign against Puerto Rico in the midst of the fiscal crisis - maintained that now that the central government's PDA has been confirmed, they must be the elected officials of the island, and not the Board, who decide the fiscal measures that are necessary to maintain a balanced budget.

El Nuevo Día asked Peterson if his stance so that the Board ends its mandate earlier than expected could not be interpreted as a way to disassociate itself from Puerto Rico now that the bondholders have secured their part with the PDA.

Peterson replied in the negative. He indicated that although the cuts obtained in the PDA will not affect all bondholders equally, as this depends on the moment and how much they paid for the Puerto Rico bonds, the vast majority of the island's bondholders saw a decrease in the value of their bonds and lost billions of dollars in the restructuring.

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"I think we've righted the ship and got a deal... Three and a half million people living in Puerto Rico are American citizens and Americans shouldn't be governed in perpetuity by a seven-person board," Peterson said. "We can't be here forever."

There is work to do

Executives Andrew Biggs and John Nixon immediately challenged Peterson, pointing out that the government needs to take steps that would prevent a second bankruptcy.

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“A person who is not concerned about having a board with people appointed by the president (of the United States), mostly from outside the island, who are not elected and who have significant influence over what happens in Puerto Rico, would be a fool” Biggs said.

“The idea of ​​returning more control to the leaders who were elected by Puerto Ricans is obvious, but at the same time, you cannot end a board like this without correcting the serious mistakes that have been made over time, mistakes that have affected the quality of life and economic prosperity of Puerto Rico in almost all aspects,” continued the expert in pension plans and who has been part of the organization since its creation five years ago.

"I would like us to dissolve today, but there is too much on the line, there is too much at stake for the people of Puerto Rico for us to give up now," Biggs insisted.

For his part, Nixon stated that he would have no problem dissolving the Board, but only if there is evidence that the Puerto Rican government has adopted sufficient fiscal measures to avoid returning to a second bankruptcy, and that is not the case.

"This is not the end of the game," Nixon said, referring to the central government's PDA confirmation, which he described as "a herculean task."

Nixon, who has been on the Board for a year, maintained that in that short period of time, the fiscal agency has stopped several state laws that are incompatible with the fiscal reality of Puerto Rico. This dynamic, in his opinion, is indicative that there is still a long way to go before the government adopts the best practices for managing its resources.

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The director with over 25 years of experience in government budgets recalled that in the first years of the recently confirmed fiscal plan, a period of economic growth associated with federal funds for reconstruction and to combat the economic effects of the pandemic is projected. He indicated, however, that maintaining a growth trend and economic activity beyond the first five years requires using such federal funds strategically, an exercise in which the Board can participate.

"In the absence of these fiscal measures, Puerto Rico will go straight to a second bankruptcy," Nixon stressed.

Antonio Medina, the director of the Board resident on the island, agreed with his peers when stating that there are still several "big issues" to be addressed, such as the restructuring of PREPA and the Highway and Transportation Authority (ACT).

Medina said that the Board must focus on Title V of PROMESA, aimed at speeding up critical projects for the island, and the agency must also ensure the good management of the government before terminating its function.

For his part, the president of the Board, David Skeel echoed the expressions of Biggs and Nixon and highlighted the progress made with Puerto Rico both with the PDA and with the certification of the 2022 Fiscal Plan.

While the executive director of the Board, Natalie Jaresko, indicated that the guidelines for the Board to finish its functions are established in Promesa.