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Fiscal board: PROMESA prohibits Legislature from approving gasoline tax moratorium


Senate Treasury Committee Chairman Juan Zaragoza Gómez

By The Star Staff


As expected, the Financial Oversight and Management Board on Wednesday said the island Legislature is prohibited from approving the proposed suspension of the so-called La Crudita or the temporary suspension of the excise tax on gasoline and diesel oil for 45 days because such action goes against the fiscal plan.


In a letter to Senate Treasury Committee Chairman Juan Zaragoza Gómez, the oversight board said the bill, among other things, is still pending at the Legislature.


“We have completed our preliminary review of the Bill pursuant to PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act] Section 204(a)(6).


The oversight board finds the bill, as proposed, to be inconsistent with the fiscal plan and the certified budget because the bill “would reduce commonwealth tax revenues without providing offsetting savings or alternative revenues,” the letter from the board said.


While the oversight board said it supports the commonwealth’s efforts to minimize the economic impact on the people of Puerto Rico generated by recent increases in gas and diesel prices, the bill would have a negative fiscal impact of $25 million without specifying offsetting savings or alternative revenues.


“Putting aside the merits of the Bill’s purposes, any bill that has a negative fiscal impact without corresponding savings or new revenues is not revenue neutral and, therefore, inconsistent with the Fiscal Plan and in violation of PROMESA,” the board said.


Further, the bill violates PROMESA § 204(c), which prohibits reprogramming without prior oversight board analysis and approval. The Title III Court has recognized that laws that create “a revenue deficiency in the budget that the Government would likely have to remedy through reprogramming” fall under Section 204(c).


Because the bill will decrease commonwealth revenues by $25 million and provides no mechanism to offset the revenue shortfall, the legislation’s economic impact will have to be resolved through reprogramming.


“The Legislature has not requested and the oversight board has not approved any reprogramming associated with the bill. Passing such a law and waiting to deal with the fiscal consequences is contrary to PROMESA,” the oversight board said. “The Title III Court has held that ‘[t]he Government may not avoid the bar on implementation of statutes calling for unauthorized reprogramming by holding onto its cards and waiting until a post-implementation date to request reprogramming if the law as written is likely to require reprogramming due to insufficiency of budgeted funds,’” the board said.


Accordingly, “the Legislature is prohibited by PROMESA § 204(c) from passing the bill,” the board added.


Notwithstanding the concerns raised, the oversight board said it is available “to meet with the Legislature to discuss how the bill could be amended to achieve its objectives in a manner consistent with the Fiscal Plan and PROMESA,” the letter said.

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