Governor, FOB Reach Budget Agreement; Legislature Still Not On Board

The Governor and the Fiscal Oversight Board reached an agreement to resolve an impasse that threatened to further delay the budget process. The Governor agreed to repeal Law 80, which protects private sector employees from arbitrary dismissal and provides compensation for unjustified firings. In exchange for the repeal, the Governor’s office, the Resident Commissioner, the Legislature, municipalities and other agencies will receive funding increases. In addition, contested components of the proposed labor reform will not be included in the fiscal plan (i.e. reductions in sick leave, vacation and Christmas bonuses for private sector employees).

Once the Legislature approves the deal, the FOB will amend the fiscal plan accordingly, but approval will not be easy. After the agreement was announced, Senate President Thomas Rivera Schatz said that he had not agreed to the parameters of the accord. Though FOB Executive Director Natalie Jaresko told the press that they were told by the Governor that the Legislature was on board with the agreement, Rivera Schatz said that no one had presented evidence showing that a repeal of Law 80 would produce economic activity and additional revenues. He also said that he was not asking for a funding increase for the Legislative branch, but rather that any austerity should be evenly distributed among the branches of government.

A preliminary analysis of the budget proposal released by the Office of Management and Budget (OMB) shows that the consolidated budget for fiscal year 2018-19 would total $25.323 billion,—0.82% lower than the current consolidated budget. Although Rosselló says that he has achieved $2 billion in savings and that the government’s operating expenses are 22% lower than in the previous administration, the consolidated budget presented last night in the State of the Commonwealth speech in the Capitol represents an increase of 8.4% compared to fiscal year 2016-17.

PREPA Puts The Breaks on Aguirre Offshore Gas Port 

The Energy Commission (PREC) shelved the Aguirre Offshore Gas Port’s evaluation due to a lack of updated information by the Electric Power Authority (PREPA). The determination, which was reached via a resolution signed by both acting Energy Commissioners, does not prevent the project from being included in the new Integrated Resources Plan prepared by PREPA. “The Commission has determined that it is in the best interest of the public to close this procedure without prejudice. Therefore, at this moment, the Commission is not going to make a determination as to whether the Aguirre Offshore Gas Port project should proceed, since there is no updated information,” said the order signed by commissioner Ángel Rivera de la Cruz and the Commission’s interim Chairman José H. Román Morales.

The Commission allowed PREPA to use up to $15 million in the design, planning and permitting process of the initiative. PREPA responded yesterday, in written communication, that it complied with all of the information requirements related to the gas port assessment process. Even so, the public corporation indicated that it welcomes the Commission’s determination. The conversion of the generation units to natural gas seeks to stabilize the price of electricity produced on the Island, where currently more than 50% of energy is generated from petroleum derivatives.

Government Requests Extension of Army Corps’ Work on Grid

At the last minute, the Government of Puerto Rico requested that the Federal Emergency Management Agency (FEMA) extend the mission of the United States Army Corps of Engineers (USACE) to restore the Island’s electric grid. The federal agency warned in a letter delivered to Ricardo Rosselló’s administration yesterday that it will delay a previous request by the government for FEMA to extend its mission until the energy grid was 100% completed.

“In [the latest] letter (May 18), [Rosselló] expresses concern about the departure of the Army Corps of Engineers and asked FEMA to extend its mission to repair the energy grid until it has been completed 100%. This petition contradicts the decision of the Unified Energy Command, which indicated that the Army Corps of Engineers would no longer work on the restoration. This decision was confirmed with PREPA Executive Director (Walter Higgins),” says the letter signed by FEMA’s operations coordinator for Puerto Rico, Michael Byrne.

The Governor’s authorized representative before FEMA, Omar Marrero, commented that the Fiscal Oversight Board’s (FOB) policy is to address those issues in seven days or less. “They confirmed receipt and that they will be working with the haste that is understood,” he said. In addition, FEMA instructed the Corps of Engineers to keep the equipment and materials available in the port of San Juan for “a limited time.” The agency will also reimburse restoration costs related to the contract between Cobra and PREPA.