Analysis: Fiscal board projects deficit in 2027, 17 years sooner than previous projection
By The Star Staff
Contrary to its original projections, the Financial Oversight and Management Board has projected a deficit by 2027 instead of 2044 despite the supposed benefits of fiscal and structural reforms, an Espacios Abiertos (Open Spaces) analysis revealed.
“In its fiscal plan last year (2022), the Board projected that the deficit would occur by the year 2044, that is, in two decades. Now, one year later and after approving the agreement with the bondholders, the Board in its new plan anticipates the deficit for 2027,” commented Daniel Santamaría Ots, research director and senior public policy analyst at Espacios Abiertos.
“Where are the data that support that projection? What did the Board discover that it is not telling us? What are the models used for this new deficit projection?” the economist asked.
The oversight board has been adjusting its projections downwards in each certified fiscal plan since 2018, Santamaría Ots said, increasingly reducing the prospects for economic recovery for Puerto Rico despite austerity measures.
“Clear accounts should be the norm for something as transcendent as what the Board is projecting in its 2023 fiscal plan,” the economist said when presenting an analysis and his findings during a roundtable held Thursday by Espacios Abiertos at the headquarters of the Luis Muñoz Marín Foundation.
Meanwhile, the austerity economy that the oversight board has imposed on Puerto Rico is not yielding the promised results, according to Martín Guzmán, a co-author of the Puerto Rico debt sustainability analysis (2018) who was instrumental in the bankruptcy process.
According to the Espacios Abiertos analysis, the ninth certified fiscal plan published on April 3, in the context of the eight previous plans, reveals some contradictions in the practices and results observed:
• Government payroll spending has decreased by more than 50%, while spending on outside consultants over the past 15 years has increased by more than 125%.
• The institutional deterioration to provide public services to citizens without depending on expensive resources is observed with concern.
• For the first time, the oversight board does not explicitly mention in its projections the potential savings that the fiscal measures would have in the next 30 years, something that it had disclosed in the eight previous fiscal plans.
• The government should have released the 2021 financial statements last March and it is still pending.
The entity also found that for the first time since the first fiscal plan of 2017, the oversight board does not explicitly mention the potential savings that it previously projected for the next 30 years. This is where the consolidation of government agencies comes in, the elimination of appropriations from the General Fund to the municipalities, the cut to the UPR of almost half the appropriations of the General Fund (from $934 million in 2017 to $500 million currently), or the freezing of teacher pensions in the public education system.
The analysts exposed the changes of the different fiscal plans in terms of projected savings. They stressed that they have not found an answer in the latest plan on whether such savings are taking place or not, nor did they find a trace of data on which implemented measures are yielding, and what effects the variations and structural reforms are having on future government surpluses/deficits.
Regarding variations in the projected savings for the next 30 years of tax reforms, the board revised its projections downward in each subsequent fiscal plan as follows: in 2018 it projected savings for the economy of Puerto Rico for the next 30 years of $193.9 trillion; in 2019, projected savings dropped to $119.4 billion; in 2020 the board again cut its expectations to $85.4 billion; in 2021 they decreased slightly to $84.1 billion; and in 2022 projected savings were cut almost in half, limiting their impact to $49.7 billion. An explanation of the savings projections was missing from the 2023 fiscal plan and is absent from the entire plan.