The Financial Oversight and Management Board for Puerto Rico said Sunday that it is amending the fiscal plan submitted by Gov. Ricardo Rossello, which the board has rejected.
In their May 11 notice of violation to the governor, board officials said the government provided only a general fund budget instead of a complete budget, and the government's proposed budget "needs to go farther in providing transparency, fiscal management and enforcement tools."
The board's changes are needed "to ensure timely implementation of critical structural reforms" that will also help restructure debt and resolve bankruptcy proceedings, a board statement said.
The oversight board was given the authority to enforce a fiscal plan if the government refuses to cooperate, under 2016's Puerto Rico Oversight, Management and Economic Stability Act.
Board Chairman Jose B. Carrion III said in the statement that the board's changes would reduce a projected annual surplus for fiscal year 2019 by only $101 million, with a six-year surplus of $6.05 billion total now projected. The plan for six fiscal years from 2018 through 2023 provides a framework for economic growth that would allow the government to fund pension payments and restructure Puerto Rico's debt.
On pension reform, the plan calls for freezing pension benefit accruals by July 1, 2019, and enrolling all employees in defined contribution plans, as well as Social Security. Benefits would be reduced progressively to an average cut of 10%, with no cuts for participants whose combined pension and Social Security benefits are below the poverty level of $1,000 per month.
The board has reached an understanding with the government on some economic development measures, including labor reforms, but not the pension changes.
"The board's policy on pension reform remains unchanged, and we expected it to be included in the plan of adjustment to be confirmed by the court. As per the new certified fiscal plan, the reform is reflected in calculation of pension expenses in FY20," said Natalie Jaresko, board executive director, in an email.
Along with recertifying the amended fiscal plan soon, the board will increase monitoring to ensure timely implementation.