FOMB – Media Release – 2024 Commonwealth Fiscal Plan

San Juan, PR – June 5, 2024 – The members of the Financial Oversight and Management Board for Puerto Rico certified today during their public meeting the revised Fiscal Plan for Puerto Rico, updated with the most recent data and projections for revenue and expenses, and a renewed roadmap for Puerto Rico to achieve fiscal responsibility.

The Fiscal Plan, as mandated under PROMESA, defines the path to complete the journey from bankruptcy to prosperity and to reverse decades of fiscal mismanagement. This Fiscal Plan outlines Puerto Rico’s progress in stabilizing government finances and the Commonwealth’s current financial conditions and risks; it defines the actions needed to achieve fiscal responsibility and access to the capital markets and describes the actions the Oversight Board and the Government must take to complete PROMESA’s mandate.

“Puerto Rico made a lot of progress,” said the Oversight Board’s Executive Director Robert F. Mujica Jr. “Together with the Government, the Oversight Board stabilized Puerto Rico’s finances, and substantially reduced its debt. Fiscal responsibility, however, is more than completing the debt restructuring and stabilizing Puerto Rico’s finances.

“The Oversight Board has taken a fresh look at what the Fiscal Plan means for Puerto Rico, and how we best complete our work to fulfill all of PROMESA’s mandates,” Mujica said. “The Fiscal Plan defines the fiscal priorities for Puerto Rico so we can complete the path that will lead to sustainable economic growth and opportunity for the people of Puerto Rico.”

Achieve Fiscal Responsibility

The Oversight Board, in partnership with the Government, has achieved critical milestones to end Puerto Rico’s fiscal crisis, yielding billions in savings and ensured that the Government and covered entities’ expenditures are in line with revenues. However, the Government must undertake significant work to put in place the practices needed to ensure that this progress is permanent. The Fiscal Plan identified eight areas critical for Puerto Rico to fully recover from bankruptcy and to fulfil the mandate of PROMESA to achieve fiscal responsibility.

• Improved economic and revenue forecasting. The Government should establish a process to produce a consensus multi-year revenue forecast.
• Budget management best practices. The Government must establish a comprehensive framework budget that includes procurement, budgeting, revenue administration, and performance management,
• Comprehensive capital delivery program. Without a long-term plan, Puerto Rico does not know how to maximize funding sources or whether it has sufficient funds for its capital projects,
• Improved government service delivery & labor relations. The Government must undertake significant reforms to improve public services in Puerto Rico by building a more efficient civil service and addressing challenges regarding labor relations.
• Outcome-based, data-driven, and controlled healthcare spending. The Government must take an active role to support the improvement of public health outcomes and ensure the financial sustainability of Puerto Rico’s healthcare system.
• Improved, transparent financial reporting. The Government must address the fiscal management deficiencies and track and report key information about Puerto Rico’s financial condition, such as the performance of revenues and expenditures.
• Optimized municipal fiscal management. The Oversight Board will continue to work with the Government and the municipalities to improve performance and accountability via a restructured grant and transfer system that incentivizes municipalities to perform well in key municipal service areas, including permitting.

Promote Economic Growth

Economic growth is the key to unlocking Puerto Rico’s future. The Government will need to make targeted investments and implement profound structural reforms to produce sustainable growth, and support Government revenues. The Fiscal Plan will serve as a roadmap for such investments and reforms.

A high-quality education is the cornerstone for creating economic opportunities for the residents of Puerto Rico. The Government will need to set high aspirations and commit to immediate, concrete, and measurable results for education and work with the Oversight Board to ensure all initiatives, actions and projects are properly planned and funded through various sources, including federal funds.

Any successful economy relies on reliable electricity. The Government must continue to implement a more comprehensive action plan that clearly articulates capital investments to improve the generation fleet and the electric grid, establishes clear priorities, details the assigned funding sources and timelines for major works and improvements, and specifies purported benefits for each of those. The absence of such a publicly available plan limits transparency and accountability towards ratepayers on the actions being taken to improve their electric service.

Economic Overview

The Fiscal Plan includes an updated macroeconomic forecast reflecting the impact of fiscal and structural measures, natural disasters, COVID-19, and federal funding in response to natural disasters and the pandemic on the baseline economic trajectory.

The Fiscal Plan projects a positive financial balance between fiscal years 2024 and 2027. As federal disaster recovery and stimulus funds are projected to decline, nominal GNP growth is projected to decline from a cyclical high in fiscal year 2022. To maintain fiscal balance and prevent returning to structural deficits, the Government must maintain spending restraint and prioritize spending initiatives that can be funded through long-term recurring funding sources.

PRIDCO and COFINA

The members also certified the updated Fiscal Plans for the Puerto Rico Industrial Development Company (PRIDCO) and the Puerto Rico Sales Tax Financing Corporation (COFINA).