David Skeel, Chair of the Financial Oversight and Management Board
Fiscal year 2022 was a turning point for Puerto Rico, particularly in stabilizing Puerto Rico’s finances and restructuring significant parts of the debt. Further, the Government and the Oversight Board worked together to begin changing the way government works for generations, showcasing that close cooperation can accomplish many initiatives to improve public services and make government agencies more effective.
Important milestones have been achieved to pave the way to renewed economic growth.
First, the Title III court confirmed the Plan of Adjustment to reduce the Commonwealth’s debt by 80%, resolving the largest part of Puerto Rico’s enormous debt. This was the largest and most complex public-sector debt restructuring in U.S. history.
Second, the budget the Oversight Board certified could prove to be the first truly balanced budget for the central government since Puerto Rico’s fiscal crisis began more than a decade ago. We will know for certain when the audited financials are completed.
Third, the Government and the Oversight Board worked together to develop a Financial Management Agenda and implement a comprehensive reform of Puerto Rico’s civil service. The agenda will support stability, restored access to debt markets, and the termination of the Oversight Board under PROMESA as soon as reasonably possible. The Civil Service Reform will align the Government’s workforce capabilities and better recruit and retain the right talent.
However, many challenges remain. The Government must stay on this new course of fiscal responsibility and effective change to prevent Puerto Rico from falling back into the patterns of the past.
Too many laws that the Legislature passes are fiscally irresponsible, simply adding expenses without providing the necessary funds to pay for these promises or any assessment of the true costs to taxpayers. Fiscal responsibility dictates that recurring expenses must be covered by recurring revenue, not one-time federal stimulus funds.
Puerto Rico still does not have an equivalent institution to the Congressional Budget Office in Washington, D.C., that scores legislation and conduct fiscal analyses. For now, the Oversight Board is the only institution that scores local legislation.
We need to make sure the discipline of the last six years is institutionalized and becomes Puerto Rico’s new tradition. While many issues still divide the Oversight Board and the Government, my sincere hope is that we will expand our cooperation to further bridge more of our differences.
The Oversight Board will continue to work on fulfilling its mandate to help Puerto Rico achieve fiscal responsibility and economic growth for the island’s residents and businesses.
Read more in the Oversight Board’s 2022 Annual Report here.