Overview of 2019 Fiscal Plan for Puerto Rico Oversight Board Public Meeting May 9, 2019 Pre-Decisional | Privileged & Confidential Draft | Analysis Subject to Material Change
Goals of the 2019 Fiscal Plan • Improve long-term growth , through structural reforms that provide a foundation for economic growth • Improve the business environment for firms and entrepreneurs in Puerto Rico by improving Puerto Rico’s place in the World Bank’s Ease of Doing Business Index in critical factors such as getting electricity, construction permitting and property registration, improving the ease of paying taxes, and digitization • Promote public safety in Puerto Rico by investing in the compensation of police officers and firefighters as well as safety equipment and vehicles for the Police and Fire Bureaus and chemicals for the Institute of Forensics • Improve educational outcomes for Puerto Rican children, equipping them with key skills and improving academic proficiency across the board, resulting in an annual 12% reduction of the achievement gap on standardized exams • Improve quality of healthcare while investing in preventive and tailored care by increasing the efficacy of the Puerto Rican healthcare sector • Enhance transparency through a focus on fiscal controls and reporting • Modernize and increase the resiliency of critical Puerto Rican infrastructure by maximizing the impact of federal disaster funding and long-term Commonwealth investments in capital expenditures
The 2019 Fiscal Plan includes a number of changes from the October Certified Fiscal Plan Revised macroeconomic forecast in light of slower disaster recovery funding ■ rollout, faster unwinding of the associated stimulus, and new data on Puerto Rico and U.S. GNP and inflation Updated population forecast for new data related to out-migration and fertility ■ rates Updated scoring of labor/welfare, ease of doing business reform , and updated ■ Updates due power reform to reflect implementation progress to new Updates to baseline revenues and expenditures based on new data received ■ information during the FY2020 budget process and from revenue actuals Revised pensions baseline expenditures reflecting latest pension system census ■ data, and revised timeline of measures and associated social security investment Updated Medicaid enrollment data coupled with additional funding to support ■ stability within the public healthcare system, while still driving meaningful reform Perspective on surplus potentially inaccessible to the Commonwealth ■ Providing funding for police and public safety, healthcare, and education, ■ while enhancing measures required by other agencies (e.g., WIPR, Legislature, State Elections Commission, the State Insurance Fund Corporation, and the Updates due Automobile Accident Compensation Administration), and further reducing low to fiscal visibility and ineffective spend priorities Including funding for Special Revenue Fund capital expenditures and local ■ cost share in case CDBG funding is inadequate
The 2019 Fiscal Plan will build on the progress already made in enhancing transparency and controls ▪ The 2019 Fiscal Plan includes a forecast of gross revenues inclusive of Tax credits the value of tax credits , along with their associated expenditures ▪ The Oversight Board requires all reporting going forward to include monthly and quarterly reports to include gross revenues, tax credits claimed, and the net revenues received for the period of the report ▪ The Government should also continuously monitor and reduce expenses Reduction in low in historically low-visibility areas (e.g., “unclassified professional services” visibility spend and “ englobadas ”) ▪ The FY2019 Fiscal Plan includes a 10% incremental cut to professional services expenditures ▪ The Government must provide monthly reporting on cash balances and Reporting blue expenditures across several entities within the Commonwealth print ▪ The Government will provide additional actuals reporting such as budget-to- actuals, headcount, payroll, accounts payable, and tax expenditures ▪ The Government will provide reporting on structural reforms, fiscal measures and agency efficiencies to drive transparency on reform progress ▪ The Government will provide additional reporting on macroeconomic indicators, recovery funding, PayGo receivables and contributions, and certifications ▪ To promote public transparency of fiscal reform progress, the Oversight Board Public hearings will hold additional public hearings on focused areas across the Government
Structural reforms will add 0.85% in growth uptick, representing ~$34 billion in additional revenues by FY2049 Impact of structural reforms, $M Human Capital and Labor Energy ~34,000 Ease of doing business Education 4,639 332 350 0 300 15,224 250 161 200 171 150 107 90 100 11,725 170 53 44 50 81 18 9 53 27 921 0 0 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY19-24 FY19-49 Changes since Oct. Certified Fiscal Plan ▪ Delay of human capital and labor reform uptick of 0.15% from FY2021 to FY2025 due to delays in the NAP work requirement implementation ▪ Delay and reduction of the EODB reform uptick from 0.5% uptick iby FY2021 0.4% growth by FY2023 due to inadequate implementation of process and legal changes ▪ Delay in energy reform uptick of 0.3% from FY21 to FY23 due to updated timelines
Significant investments in the Puerto Rico Police Bureau aim to improve public safety Significant investments in Police compensation and equipment to promote public safety on Island Salary increase over two years per sworn officer to Police $11.5 K make salaries more competitive, which represents an annual investment of $70+ million starting in FY2020, which ramps up to ~$140+ million in later years Investment to provide Social Security for all sworn $33+ M officers each year Investment to increase life and disability insurance $1.2 M coverage by $250 per sworn officer starting in FY2020 For capital expenditures to purchase bullet proof $42 M vests, radios, and vehicles To provide payment for past services to sworn $366+ M officers, amounting to $122 million in FY2019, FY2020 and FY2021
Other investments in prioritized areas will improve health, safety and education outcomes in Puerto Rico Highlights of investments in other high priority spending areas Increase in funding across FY2020-2024 to improve stability within $1.4 B the healthcare system $25+ M Investment in FY2020 to enable the Comprehensive Cancer Center to become fully operational Investment annually to maintain nurse staffing levels $15+ M Healthcare Over FY2020 and FY2021 to enable the Psychiatric Hospital to $12 M increase standards of care for Medicare certification For capital expenditures for medical, office and air conditioning $4 M equipment Investment in the Cardiovascular Center of Puerto Rico for purchases $2 M of medical products and materials $14 M For salary increases of $500 for teachers and directors annually starting in FY2020 (in addition to FY2019 salary increases across teachers and directors) Education Investment in the UPR scholarship, amounting to $214 million in $39 M scholarship funding between FY2019-2024 $1 M For salary increases of $500 per firefighter annually starting in FY2020 Firefighters $14 M In capital expenditures for fire pumps, vans and trucks Investment for safety equipment and materials in FY2020 $2 M Personnel investment annually to allow for 95 new employees to $4.5 M Forensics decrease backlog of cases Institute Investment in laboratory equipment and materials annually $750 K
The 2019 Fiscal Plan includes fiscal measures similar to previous Fiscal Plans to drive a step change in revenues and expenditures Fiscal Measures, 3 $M Pre-measures and structural reforms Post-measures and structural reforms Impact of measures on Government revenues and expenditures, $M 35 234 361 423 491 499 509 16,500 16,000 Own revenues 1 15,500 0 49 498 1,024 1,829 2,214 2,502 2,646 18,000 Own 16,000 expen- 14,000 ditures 2 12,000 10,000 FY18 FY19 FY20 FY21 FY22 FY23 FY24 1 Own revenues includes all Commonwealth-collected revenues excluding gross up items included in the 2019 Fiscal Plan and excludes all federal transfers; includes impact of COFINA settlement 2 Own expenditures includes all Commonwealth expenditures, including CW-funded portion of Medicaid and social programs; own expenditures increase between FY20 and FY21 due to Medicaid Supplemental Funding phase out 3 Comprised only of fiscal measures attributable to the Commonwealth
The 2019 Fiscal Plan has a 30-year surplus of $19.7 billion, with ~$5.4B potentially at risk Gap/surplus after measures and structural reforms, $M Gap/surplus post-measures/structural reforms FY19-24 cumulative surplus, $B Gap/surplus excluding surplus potentially not available 1 4,000 13.7 3,500 12.6 3,000 2,500 FY19-49 cumulative surplus, $B 2,000 19.7 14.3 1,500 1,000 500 0 2018 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 2050 -500 -1,000 -1,500 1 These surplus amounts are generated by Commonwealth corporations and the Commonwealth’s ability to access such surplus amou nts could be at risk without further legislative action
Recommend
More recommend
