By John McPhaul
jpmcphaul@gmail.com
Financial Oversight and Management Board Executive Director Robert Mujica said late last week that $300 million will be available to add to the 2023-2024 fiscal year budget if needed.
“So there is $300 million more for any issue that is understood to be added to the budget,” Mujica said in response to questions from the press.
Mujica said the funds can be used to mitigate a $500 million decrease in tax collections reflected in the tax proposal of Gov. Pedro Pierluisi Urrutia, which is under discussion in the Legislative Assembly.
Regarding the amendments to income tax laws, Mujica noted that he agrees that tax changes are warranted, but they must occur in a broader context.
“And I hope we can have that conversation with the governor and the Legislature,” he said.
As for the budget, Mujica said “they are fundamentally aligned” with the governor on the budget for the fiscal year 2023-2024.
“There may be differences about what the economic assumptions are and what the revenues might be,” he said. “We agree with them today. What I’m saying is that while we sometimes move forward, it’s likely that most of the things we disagree on are income assumptions and economic outlook.”
“On the budget side we are quite aligned. The only thing I would leave out is Medicaid, although we are quite aligned on the assumptions,” Mujica added. “So we do not have major differences except in the funds to the municipalities, because although we understand that the funds must be given, conditions must be imposed.”
The chairman of the oversight board, David Skeel, insisted meanwhile that the board is aware of the economic impact that the Puerto Rico Electric Power Authority (PREPA) debt adjustment plan could generate, which is why they have not made a final determination on the amount of a charge on the bill to pay the debt to creditors.
“We are extraordinarily aware of the burden of any additional charges on Puerto Rico’s residential [power] customers and businesses that we have,” Skeel said during a meeting of the oversight board last Friday. “Our advisers have engaged in an extraordinarily complicated, long-term extensive analysis of how much is affordable for the people of Puerto Rico, before the cost becomes unbearable. Six percent is a part of that analysis. It’s comparable to other parts of the United States that suggest paying more than 6% of household income for electricity becomes a problem. But that’s only part of a very complicated analysis.”
“This analysis continues and will continue to be refined, and I insist that we are very aware of the burden and limits that the people of Puerto Rico can assume,” he added. “The judge [in PREPA’s Title III bankruptcy proceeding, Laura Taylor Swain] has been clear that this debt restructuring must end in or before July. So unless she changes the date, we expect to have court hearings on the restructuring plan in July.”
The plan proposed by the oversight board envisages the payment of a hybrid charge to guarantee payment to creditors. The charge has been objected to by the governor, who has stated that the debt to creditors must be paid with the budget assigned to PREPA.