Puerto Rico’s federally created fiscal oversight board yesterday imposed a fiscal 2020 budget on the bankrupt U.S. commonwealth that for the first time limits spending choices by its government, according to the board’s executive director, Reuters reported. Natalie Jaresko said that the $20.2 billion budget for the central government that includes $9.1 billion of general fund spending complies with the fiscal plan for the island, which filed a form of bankruptcy in 2017 to restructure about $120 billion of debt and pension obligations. “It reflects the priorities of that fiscal plan — public safety, healthcare, education and the continued right-sizing of the government,” Jaresko said. She added that the budget for the fiscal year that began yesterday contains new “detailed” spending levels that will prohibit the government from moving money around to pay for things not in the fiscal plan like employees’ Christmas bonuses. Governor Ricardo Rosselló told reporters the board did not include the bonus payment in last year’s budget but “we found a way to pay for it.” Puerto Rico lawmakers on Sunday approved an approximately $9.6 billion general fund budget that includes roughly $500 million in pension and healthcare payments previously paid by cash-strapped municipalities and public corporations, as well as money for bonuses. Read more.
In related news, Puerto Rico’s oversight board has sued several companies it alleges took fraudulent payments and compensation from the state power utility, Bloomberg News reported. The Financial Oversight and Management Board for Puerto Rico charged on Sunday that, between 2012 and 2015, the commodities trading and logistics company Trafigura and the energy and commodities company Vitol supplied the Puerto Rico Electric Power Authority “with oil that did not meet the applicable contractual or regulatory specifications, but nonetheless received payment” at the price of the higher quality fuel oil. The board is also suing three laboratories — Carlos R. Mendez & Associates, Inspectorate America Corp. and Altol — alleging they received payments for falsifying tests of the quality of the oil supplied to PREPA. The cases were filed in the U.S. District Court for Puerto Rico. “These payments contributed to PREPA’s insolvency by increasing the cost of its operations and causing PREPA to slide deeper into debt," according to the statement. Read more.
