Overview of 2019 Fiscal Plan for Puerto Rico Oversight Board Public - - PowerPoint PPT Presentation

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Overview of 2019 Fiscal Plan for Puerto Rico

Oversight Board Public Meeting May 9, 2019

Goals of the 2019 Fiscal Plan

• Improve long-term growth, through structural reforms that provide a foundation for

economic growth

• Improve the business environment for firms and entrepreneurs in Puerto Rico by

improving Puerto Rico’s place in the World Bank’s Ease of Doing Business Index in critical factors such as getting electricity, construction permitting and property registration, improving the ease of paying taxes, and digitization

• Promote public safety in Puerto Rico by investing in the compensation of police officers

and firefighters as well as safety equipment and vehicles for the Police and Fire Bureaus and chemicals for the Institute of Forensics

• Improve educational outcomes for Puerto Rican children, equipping them with key

skills and improving academic proficiency across the board, resulting in an annual 12% reduction of the achievement gap on standardized exams

• Improve quality of healthcare while investing in preventive and tailored care by

increasing the efficacy of the Puerto Rican healthcare sector

• Enhance transparency through a focus on fiscal controls and reporting
• Modernize and increase the resiliency of critical Puerto Rican infrastructure by

maximizing the impact of federal disaster funding and long-term Commonwealth investments in capital expenditures

The 2019 Fiscal Plan includes a number of changes from the October Certified Fiscal Plan

Updates due to new information Updates due to fiscal priorities

■

Revised macroeconomic forecast in light of slower disaster recovery funding rollout, faster unwinding of the associated stimulus, and new data on Puerto Rico and U.S. GNP and inflation

■

Updated population forecast for new data related to out-migration and fertility rates

■

Updated scoring of labor/welfare, ease of doing business reform, and updated power reform to reflect implementation progress

■

Updates to baseline revenues and expenditures based on new data received during the FY2020 budget process and from revenue actuals

■

Revised pensions baseline expenditures reflecting latest pension system census data, and revised timeline of measures and associated social security investment

■

Updated Medicaid enrollment data coupled with additional funding to support stability within the public healthcare system, while still driving meaningful reform

■

Perspective on surplus potentially inaccessible to the Commonwealth

■

Providing funding for police and public safety, healthcare, and education, while enhancing measures required by other agencies (e.g., WIPR, Legislature, State Elections Commission, the State Insurance Fund Corporation, and the Automobile Accident Compensation Administration), and further reducing low visibility and ineffective spend

■

Including funding for Special Revenue Fund capital expenditures and local cost share in case CDBG funding is inadequate

The 2019 Fiscal Plan will build on the progress already made in enhancing transparency and controls

Tax credits Reduction in low visibility spend Reporting blue print Public hearings

▪ The 2019 Fiscal Plan includes a forecast of gross revenues inclusive of

the value of tax credits, along with their associated expenditures

▪ The Oversight Board requires all reporting going forward to include monthly

and quarterly reports to include gross revenues, tax credits claimed, and the net revenues received for the period of the report

▪ The Government should also continuously monitor and reduce expenses

in historically low-visibility areas (e.g., “unclassified professional services” and “englobadas”)

▪ The FY2019 Fiscal Plan includes a 10% incremental cut to professional

services expenditures

▪ The Government must provide monthly reporting on cash balances and

expenditures across several entities within the Commonwealth

▪ The Government will provide additional actuals reporting such as budget-to-

actuals, headcount, payroll, accounts payable, and tax expenditures

▪ The Government will provide reporting on structural reforms, fiscal

measures and agency efficiencies to drive transparency on reform progress

▪ The Government will provide additional reporting on macroeconomic

indicators, recovery funding, PayGo receivables and contributions, and certifications

▪ To promote public transparency of fiscal reform progress, the Oversight Board

will hold additional public hearings on focused areas across the Government

9 53 81 170 53 90 161 100 200 50 150 350 250 300 FY18 FY19 FY20 FY21 171 18 FY23 27 FY22 FY19-24 FY24 44 107 332

Human Capital and Labor Energy Ease of doing business Education

Structural reforms will add 0.85% in growth uptick, representing ~$34 billion in additional revenues by FY2049

11,725 15,224 4,639 921 ~34,000 Impact of structural reforms, $M FY19-49

Changes since Oct. Certified Fiscal Plan

▪ Delay of human capital and labor reform uptick of 0.15% from FY2021 to FY2025 due to

delays in the NAP work requirement implementation

▪ Delay and reduction of the EODB reform uptick from 0.5% uptick iby FY2021 0.4%

growth by FY2023 due to inadequate implementation of process and legal changes

▪ Delay in energy reform uptick of 0.3% from FY21 to FY23 due to updated timelines

Significant investments in the Puerto Rico Police Bureau aim to improve public safety

Police

Investment to increase life and disability insurance coverage by $250 per sworn officer starting in FY2020 Salary increase over two years per sworn officer to make salaries more competitive, which represents an annual investment of $70+ million starting in FY2020, which ramps up to ~$140+ million in later years Investment to provide Social Security for all sworn

• fficers each year

To provide payment for past services to sworn

• fficers, amounting to $122 million in FY2019,

FY2020 and FY2021 For capital expenditures to purchase bullet proof vests, radios, and vehicles

$11.5 K $1.2 M $33+ M $366+ M $42 M Significant investments in Police compensation and equipment to promote public safety on Island

Other investments in prioritized areas will improve health, safety and education outcomes in Puerto Rico

Highlights of investments in other high priority spending areas

Education

$14 M $39 M

Healthcare

$15+ M $4 M $25+ M $1.4 B

Firefighters Forensics Institute

$1 M $14 M $4.5 M $750 K $2 M $2 M $12 M

For salary increases of $500 for teachers and directors annually starting in FY2020 (in addition to FY2019 salary increases across teachers and directors) Investment in FY2020 to enable the Comprehensive Cancer Center to become fully operational Investment annually to maintain nurse staffing levels For capital expenditures for medical, office and air conditioning equipment Increase in funding across FY2020-2024 to improve stability within the healthcare system For salary increases of $500 per firefighter annually starting in FY2020 In capital expenditures for fire pumps, vans and trucks Personnel investment annually to allow for 95 new employees to decrease backlog of cases Investment in laboratory equipment and materials annually Investment in the UPR scholarship, amounting to $214 million in scholarship funding between FY2019-2024 Investment for safety equipment and materials in FY2020 Investment in the Cardiovascular Center of Puerto Rico for purchases

• f medical products and materials

Over FY2020 and FY2021 to enable the Psychiatric Hospital to increase standards of care for Medicare certification

The 2019 Fiscal Plan includes fiscal measures similar to previous Fiscal Plans to drive a step change in revenues and expenditures

Own expen- ditures2

12,000 10,000 18,000 14,000 16,000 FY18 FY19 FY20 FY21 FY22 FY23 FY24 16,000 15,500 16,500

Own revenues1

35 234 361 423 491 499

Impact of measures on Government revenues and expenditures, $M

Fiscal Measures,3 $M Pre-measures and structural reforms Post-measures and structural reforms

1 Own revenues includes all Commonwealth-collected revenues excluding gross up items included in the 2019 Fiscal Plan and excludes all federal transfers; includes impact of COFINA settlement 2 Own expenditures includes all Commonwealth expenditures, including CW-funded portion of Medicaid and social programs; own expenditures increase between FY20 and FY21 due to Medicaid Supplemental Funding phase out 3 Comprised only of fiscal measures attributable to the Commonwealth

49 498 1,024 1,829 2,214 2,502 2,646 509

The 2019 Fiscal Plan has a 30-year surplus of $19.7 billion, with ~$5.4B potentially at risk

Gap/surplus after measures and structural reforms, $M

2018 38 36 40 20 46 24 42 22

• 1,500

26

• 500

2050

• 1,000

2,500 28 30 1,500 32 3,000 500 1,000 48 2,000 34 44 3,500 4,000

Gap/surplus post-measures/structural reforms Gap/surplus excluding surplus potentially not available1

12.6 FY19-24 cumulative surplus, $B 13.7 14.3 FY19-49 cumulative surplus, $B 19.7

1 These surplus amounts are generated by Commonwealth corporations and the Commonwealth’s ability to access such surplus amounts could be at risk without further legislative action

Post-measures and structural reforms real GNP growth rate

2019 Fiscal Plan projected surplus before and after measures and structural reforms

4,000

• 10,000

2,000

• 8,000
• 6,000
• 4,000
• 2,000

FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY29 FY39 FY49

Contractual debt service 2 2019 Fiscal Plan gap/surplus pre-measures/structural reforms1 2019 Fiscal Plan gap/surplus post-measures/structural reforms1

Gap/surplus before and after measures and structural reforms, $M

5 years 10 years 10 years

1 Includes payments under COFINA settlement 2 Excludes COFINA

(4.7%) 4.0% 1.5% (0.9%) 0.2% 0.1% (0.9%) (0.6%) (0.1%) 0.5%