Fiscal board urges governor to reject key measures awaiting her signature

The Financial Oversight and Management Board warned Gov. Jenniffer González Colón that several measures awaiting her signature, spanning pensions, energy regulation and municipal revenue distribution, could undermine Puerto Rico’s post‑bankruptcy recovery.

By THE STAR STAFF

The Financial Oversight and Management Board issued a trio of sharply worded letters late last week warning Gov. Jenniffer González Colón that several measures awaiting her signature, spanning pensions, energy regulation and municipal revenue distribution, could undermine Puerto Rico’s post‑bankruptcy recovery.

In the first letter dated July 30, the oversight board urged the governor to veto Senate Bill (SB) 1021, which would classify judicial branch marshals as High-Risk Public Servants under Act 447, thereby granting them earlier retirement eligibility and enhanced pension benefits. The board argued that the bill directly violates the Commonwealth Plan of Adjustment and the federal court’s confirmation order, both of which prohibit expanding or altering existing pension rights.

“Enacting laws that are in clear violation of the Plan of Adjustment and the Confirmation Order exposes the Commonwealth to unnecessary and costly litigation risk,” the oversight board wrote, citing the Legislative Assembly Budget Office’s (OPAL by its acronym in Spanish) conclusion that the measure is “in tension with the Plan of Adjustment and its Confirmation Order.”

The board also highlighted the projected fiscal impact: OPAL estimates SB 1021 would increase Pay‑Go charges by $1.2 million in fiscal year (FY 2026), rising to $2.1 million by FY 2030 as more marshals qualify for early retirement. The letter further criticized the bill’s requirement that the Office of Management and Budget (OMB) and the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its initials in Spanish) “be proactive in identifying the funds necessary to comply,” calling the approach inconsistent with the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) and established precedent rejecting post‑enactment reprogramming to cover unfunded mandates. The board warned that allowing employees to retire early based on a single‑year certification of available funds -- while the resulting pension obligations extend for decades -- is “untenable and fiscally irresponsible.”

A second letter, addressed to outgoing AAFAF Executive Director Francisco Domenech Fernández, raised compliance questions about Joint Resolution (JR) 5‑2026, which eliminated the $300 interconnection study fee for small photovoltaic systems and requires the Puerto Rico Energy Bureau (PREB) to draft a new interconnection regulation within 180 days. The oversight board noted that JR 5 should not be implemented until the PROMESA §204(a) review is complete and requested detailed information on whether the fee is currently being charged, how interconnection requests are being processed, and how the loss of revenue and ongoing study costs are being absorbed. It also asked for clarity on the financial impact to the Puerto Rico Electric Power Authority’s budget and how the PREB plans to fund the consultants required to develop the new regulation. The board pressed AAFAF to confirm that JR 5 will not be implemented unless the board determines it complies with PROMESA.

The third letter focused on two joint resolutions -- SJR 195 and HJR 375 -- that would distribute $9.46 million in accumulated municipal revenue from road gambling machines to 20 municipalities. The oversight board criticized the measures for lacking transparent or objective criteria for selecting recipient municipalities or determining the amounts, even though all 78 municipalities are legally entitled to share in the revenues. The board noted that the allocations deviate sharply from what municipalities would receive under the Waste Fund Formula established by Act 53-2021, an existing statutory mechanism that weighs population, participation in the Supplemental Nutrition Assistance Program (known locally as PAN), taxable property value and certified budgets. Under that formula, every municipality would receive between $44,350 and $230,585; under the resolutions, 58 municipalities would receive nothing, while one municipality would receive more than $1.2 million -- “approximately 11.7 times its formula share.”

The board also noted numerical inconsistencies: while SJR 195 describes its allocation as 50% of the certified balance of $9.9 million, the combined resolutions allocate 95.3% of the funds, leaving $462,153 unaccounted for. It warned that passing the resolutions would “set a precedent of distributing shared municipal revenues by legislative discretion rather than objective criteria” and urged the governor to support SB 778, which would direct the funds to the Municipal Revenue Collections Center for distribution under the Waste Fund Formula.

Across all three letters, the oversight board reiterated that if the governor enacts the measures, she must submit PROMESA §204(a) certifications and commit not to implement the laws unless the board determines that they comply with PROMESA and the fiscal plans. The board also reserved its right to take action under PROMESA §§104(k), 108(a), and 204 to prevent implementation if necessary.