Legislative Review Process
The legislative review process of the Financial Oversight and Management Board for Puerto Rico is an important component of its mission to help Puerto Rico achieve and sustain fiscal responsibility.
PROMESA requires the Governor to submit each enacted law to the Oversight Board with a formal estimate of the impact, if any, that the law will have on expenditures and revenues, as well as a certification finding that the law is or is not significantly inconsistent with the applicable certified fiscal plan. PROMESA also allows the Legislature to seek a non-binding preliminary review from the Oversight Board regarding pending legislation to determine whether legislative bills are consistent with the applicable certified fiscal plan.
The Oversight Board’s review of legislation is pursuant of Section 204(a) of PROMESA. The Oversight Board also reviews rules, regulations, and executive orders pursuant to Section 204(b) of PROMESA. For the policy, click here.
Legislative Review: Acts
Section 204(a) of PROMESA requires the Governor of Puerto Rico to submit any new law to the Oversight Board for review within seven business days of the law’s enactment.
The Governor’s submission must include a formal estimate of the impact, if any, that the new law will have on expenditures and revenues. This estimate must be prepared by an appropriate entity of the Government of Puerto Rico with expertise in budgets and financial management.
The same government entity must also certify whether the law under review is or is not significantly inconsistent with the applicable certified fiscal plan. PROMESA Section 204(a)(2) outlines this process in detail.
Act 141 amends Act 107-2020, also known as the “Municipal Code of Puerto Rico,” to raise the threshold of holding a public auction or competitive bid process for any construction or public improvement project from $200,000 to $500,000.
In a letter to the Puerto Rico Government dated January 21, 2025, the Oversight Board found that Act 141 directly contravenes procurement best practices and undermines market competition. As such, Act 141 impairs or defeats the purposes of PROMESA.
The Oversight Board said it understands the importance of facilitating the procurement of construction projects and public improvements, particularly during times of emergency, and is willing to discuss alternatives to amend the Act. Regardless, Act 141 cannot be implemented unless and until the Board agrees it complies with PROMESA.
Act 99 would transfer central government funds to financial cooperatives as a result of losses due to the default of Puerto Rico Government Bonds.
In a letter dated Aug. 23, 2024, to the Puerto Rico Government, the Oversight Board outlined its position on Act 99, agreeing with the Government’s assessment that Act 99 is inconsistent with the Puerto Rico and COSSEC Fiscal Plans. The Oversight Board also determined that Act 99 violates the Commonwealth Plan of Adjustment.
Lastly, the letter notified the Government that on August 16, 2024, the Oversight Board adopted a resolution determining that Act 99 impairs or defeats PROMESA’s purposes.
Following its April 10, 2024, letter, the Oversight Board reaffirmed its concerns to the Government of Puerto Rico that Act 10 reflects a departure from the policy that the Puerto Rico Energy Bureau (PREB) be overseen by an independent regulator. Act 10 prohibits PREB from conducting a net metering and energy distribution study until January 2030, and further prohibits PREB from making any changes to the current net metering program until after it completes this delayed study. The Oversight Board again urged the Government to repeal or amend Act 10 to restore PREB’s full statutory oversight over Puerto Rico’s energy system.
Act 10 prevents the Puerto Rico Energy Bureau (PREB) from making any changes to the Commonwealth’s current net metering and energy distribution policy until at least 2031. In its April 10, 2024, letter, the Oversight Board noted that Act 10 violates PROMESA and the Fiscal Plans for Puerto Rico and the Puerto Rico Electric Power Authority. As such, the Oversight Board urged the Government to take immediate action to repeal or amend Act 10.
Act 96 grants regular status to eligible transitory employees who provide services for a fixed term to certain governmental instrumentalities. The Oversight Board, on a non-precedential basis, said it will not prevent the implementation of the Act, considering the Government’s collaboration and commitment to the Civil Service Reform.
Act 1 seeks to encourage the construction of affordable housing in Puerto Rico by, among other things, establishing a new cap system on the price of affordable or social interest single-family and multi-family properties. While the Governor did not provide the required formal estimate and certification under PROMESA, on a non-precedential basis and in light of the Act’s anticipated impact on affordable housing stock, the Oversight Board will not take action at this time to prevent the implementation of Act 1.
Other Acts
| Document | Date | Download |
|---|
Legislative Review: Bills
The Puerto Rico Legislature can also seek preliminary review from the Oversight Board regarding pending legislation and its consistency with the applicable certified fiscal plan, as outlined in PROMESA Section 204(a)(6).
During the review process, the Oversight Board determines whether the legislation, as proposed, is or is not consistent with the applicable certified fiscal plan. If it finds the proposed law is not consistent with the applicable certified fiscal plan, or determines the law would violate other provisions of PROMESA, the Oversight Board will explain its determination to the requesting legislator and, where appropriate, offer to collaborate with the legislator on reforming the measure to make it consistent with the certified fiscal plan.
Recognizing the review of pending legislation is preliminary, and bills may change prior to passage, PROMESA provides that preliminary review determinations are not binding and, if bills eventually are enacted into law, the Governor is still required to comply with the process for submitting newly enacted laws for review discussed above and in PROMESA Section 204(a)(1)-(5).
Senate Bill (SB) 132 would amend Act 107-2020, also known as the “Municipal Code of Puerto Rico,” to establish a base salary of $3,000 a month for municipal police officers.
In a letter dated March 18, 2025, to Senate Majority Leader Gregorio Matías Rosario, the Oversight Board concluded that SB 132 as currently drafted, could adversely affect municipal finances, as a recurring source of funds is not identified to cover its costs.
The Oversight Board also asked the Senate Majority Leader to submit a draft of SB 132 to the Legislative Assembly’s Budget Office (OPAL) for an assessment of its fiscal impact.
HJR 231 seeks to mandate the Puerto Rico Electric Power Authority (PREPA), LUMA Energy LLC, and Genera PR to provide credits to customers who claim their appliances or equipment were damaged by power outages or brownouts. However, the Legislative Assembly did not identify how PREPA would pay for this customer credit without an increase in electricity rates. It also mandates a credit program that would impair the Puerto Rico Energy Bureau’s oversight of PREPA. The Oversight Board determined that HJR 231 is inconsistent with the Fiscal Plans for Puerto Rico and the PREPA Fiscal Plan, and the urged the Legislative Assembly not to send the Bill to the Governor and the Governor not to sign the Bill into law.
The Oversight Board gave a preliminary review of recently enacted legislation with major fiscal impacts in Fiscal Year 2025, including Senate Bill 644 (on Commonwealth funds to cooperatives) and House Bill 2038 (on increasing pensions payments). The potential aggregate cost of these bills is up to $852 million for fiscal year 2025, and at least $6 billion over the next 20 years. Such costs could unbalance the Government’s budgets and compromise the Commonwealth’s fiscal stability. As such, the Oversight Board looks forward to discussing alternatives to address the fiscal impact of these bills and agreeing on permanent reforms to the budget process to ensure fiscal responsibility.
Senate Bill 1298 (SB 1298), among other things, seeks to implement a tax reform for individual taxpayers and corporations. A January 16, 2024, letter from the Oversight Board noted that the Bill is pending in the Legislative Assembly and has not yet become law.
The Board’s preliminary review has found the Bill, as drafted, is inconsistent with the Commonwealth Fiscal Plan. SB 1298’s total fiscal impact is $819 million in fiscal year 2024 and $3 billion over five years. The Bill would threaten the Government’s fiscal stability and push the budget back into deficit. Hence, SB 1298 is significantly inconsistent with the Fiscal Plan, current fiscal year budget, and PROMESA.
The Legislature passed the Substitute Bill to House Bill 1839 (HB 1839), which seeks to implement one of the largest tax cuts in Puerto Rico’s recent history by adjusting individual income-tax brackets and reducing the corporate income-tax rate.
In a November 16, 2023 letter, the Oversight Board states that HB 1839 is not revenue neutral and will cause losses of $750 million for fiscal year 2024, and almost $3 billion over the next five years. As such, the Oversight Board states that HB 1839 is inconsistent with the Commonwealth Fiscal Plan, the fiscal year 2024 Budget and PROMESA, and urges the Governor not to sign it into law. The Oversight Board is working with the Government and the Legislature to provide potential one-time, non-recurring relief to individual income tax filers.
House Bill 1651 (HB 1651) seeks to repeal certain portions of Act 4-2017 and to reestablish many of the labor restrictions that had previously existed, as well as create new labor restrictions. These include eliminating reforms on vacation and sick days accrual and changing the probationary period and Christmas bonus eligibility for employees.
In a November 8, 2023 letter, the Oversight Board notes that HB 1651 is virtually identical to Act 41-2022, which was recently nullified under PROMESA by the United States District Court for the District of Puerto Rico. The Oversight Board also notes that HB 1651 is inconsistent with the Commonwealth Government’s Fiscal Plan because it would negatively impact Puerto Rico’s labor market. As such, the Oversight Board urged the Legislature to pause the legislative process until the economic analysis commissioned by the Governor and AAFAF is finalized, and all parties are able to have a full dialogue about the Bill’s impact.
Other Bills
| Document | Date | Download |
|---|