FOMB submit to the Legislature a proposed amended budget for the current FY 2023
By The Star Staff
The Financial Oversight and Management Board (FOMB) for Puerto Rico on Monday announced it has submitted to the Legislature a proposed amended budget for the current fiscal year 2023 to appropriate about $475 million in budget surplus bonus for specific government employees and contingent payments to bondholders that are requirements of the Commonwealth Plan of Adjustment.
The plan, confirmed by the U.S. District Court for the District of Puerto Rico on January 18, 2022, reduced the government’s debt by about 80% and saved Puerto Rico more than $50 billion in debt payments. The Plan of Adjustment also provides payments to certain government employees and bondholders in fiscal years when government revenue exceeds the projections in the certified Fiscal Plan for Puerto Rico. Projections are based on the most current data at the time of certification of the Fiscal Plan, the FOMB said in a statement.
“The Oversight Board made sure that the Plan of Adjustment is in the best interest of all people who have a stake in Puerto Rico’s debt restructuring,” Oversight Board’s Chairman David Skeel said. “Public employees, whose salaries had been frozen even before the bankruptcy process under Title III of PROMESA began, were deeply affected by Puerto Rico’s fiscal crisis, just as bondholders were. That is why the Plan of Adjustment promised that both share a part of the upside of Puerto Rico’s stronger than projected recovery.”
“Today, the Oversight Board is making sure that promise is kept,” Skeel said.
The budget resolution submitted to the Legislature appropriates up to $475 million of the government’s budget surplus from the previous fiscal year 2022. The appropriation includes bonuses
to be distributed on December 1, 2022, to employees of central government agencies and public corporations covered under the Fiscal Plan, as well as the employer contribution to social security
and Medicare. The exact bonus pool will be determined by an independent agent.
The Oversight Board’s agreement with the American Federation of State, County and Municipal Employees (AFSCME) and its local affiliate Servidores Públicos Unidos (SPU) to support the Plan of
Adjustment provides that if government surplus exceeds the Certified Fiscal Plan’s projections by $100 million or more in any given year, 25% of the excess surplus would be allocated to eligible Commonwealth employees, incentivizing employees to help the government work more efficiently.
The bonus pool will be divided between employees represented by AFSCME and its local affiliates, and other Commonwealth employees.
In October 2022, $1.4 billion of the fiscal year 2022 surplus was paid to the Pension Reserve Trust created by the Plan of Adjustment that will strengthen Puerto Rico’s public pension system by ensuring pensions can be paid even in the event of a future economic downturn.
The Plan of Adjustment also included contingent value instruments (CVIs) for bondholders, sharing Sales and Use Tax (SUT) and Rum Tax revenue, respectively, between the Commonwealth and bondholders if those taxes exceed the projections in Certified Fiscal Plan. Bondholders received $362 million in payments from higher than projected SUT and Rum Tax revenue in the previous fiscal year 2022. The budget resolution submitted to the Legislature includes an $81 million appropriation towards those CVIs.