The legislative review process of the Financial Oversight and Management Board for Puerto Rico is an important component of strengthening and sustaining fiscal responsibility for Puerto Rico.
PROMESA requires the Governor to submit each new law to the Oversight Board with a formal estimate of the impact, if any, that the law will have on expenditures and revenues. PROMESA also allows the Legislature to seek preliminary review from the Oversight Board regarding pending legislation to understand how legislative bills are measured against the Certified Fiscal Plan and Certified Budget.
Why is this important? To ensure that Puerto Rico does not repeat the mistakes of the past that led to the island’s bankruptcy.
During the review process of pending legislation, lawmakers can understand how the bill in question stacks up against the certified Fiscal Plan and budget to ensure that recurring revenues or savings are identified to cover additional expenses.
For fiscal year 2022, the Oversight Board reviewed over 75 bills. Collectively, the impact of these bills exceeds $900 million annually, without offsetting savings or providing new revenues. About 85% of bills reviewed were inconsistent with the certified Fiscal Plan, highlighting that much work needs to be done to fulfill this important mandate and enact effective, long-term change in the government’s financial management.
Still, there is progress. Senator Juan Zaragoza Gómez and his staff at the Senate Finance, Federal Affairs and Oversight Board Committee deserve credit for working with the Oversight Board. One major success includes working together to develop and enact the local Earned Income Tax Credit legislation. The Oversight Board seeks to expand this collaboration with lawmakers for the benefit of Puerto Rico.
The Governor must also submit rules, regulations, administrative orders, and executive orders to the Oversight Board for review to ensure they are consistent with the certified Fiscal Plan. In fiscal year of 2022, the Oversight Board conducted 54 reviews; 45 were approved, six were approved with conditions, and three were denied.
Too many laws that the Legislature passes are fiscally irresponsible, simply adding expenses without providing the funds to pay for the new promises made to the people or any assessment of what the true costs to taxpayers would be. Puerto Rico still does not have an equivalent institution to the Congressional Budget Office in Washington, D.C.
The Fiscal Plan includes $3 million annually for the creation of a non-partisan office in the Legislature to produce fiscal analysis and scoring of legislative measures, and the Oversight Board hopes House and Senate leadership will start creating this important office soon.
Read more in the Oversight Board’s 2022 Annual Report here
