(Adds details, quotes from governor's speech, background on
By Nick Brown
Feb 28 Puerto Rico Governor Ricardo Rossello on
Tuesday said his fiscal turnaround plan for the U.S. territory
will create $3.8 billion a year in savings, but healthcare
spending cuts will fall short of those recommended by the board
overseeing the U.S. territory's finances.
The turnaround plan, a requirement of the federal Puerto
Rico rescue law known as PROMESA, will serve as a 10-year
blueprint for the island's ascent out of fiscal crisis. Rossello
is scheduled to present it to the board later on Tuesday, and it
will likely be made public on Wednesday.
The plan will serve as a baseline for debt restructuring
talks between Puerto Rico and creditors holding nearly $70
billion in bonds. They are expected to be asked to take steep
cuts to repayment as Puerto Rico battles a 45 percent poverty
rate, near-insolvent public pensions and rampant emigration.
In a speech to Puerto Rico's legislature on Tuesday,
Rossello said the plan would save $1.6 billion in government
spending - but without laying off public workers - by
eliminating some tax incentives and cutting subsidies to
municipalities. It would also create $1.5 billion in additional
revenues, he said.
"We will have to make big changes," the governor said.
"Puerto Rico can’t wait any longer."
Other cuts to pension benefits and University of Puerto Rico
funding, as well as a $550 million reduction in healthcare
spending, would bring the total estimated savings under the plan
to $3.8 billion.
The board, however, had recommended that annual healthcare
cuts total $1 billion - a figure the governor has resisted. Such
a drastic cut "would destroy our health industry and limit
access to services for hundreds of thousands of Puerto Ricans,"
he said in Tuesday's speech.
The local Medicare system is already on the brink of
collapse, due in part to the island's territory status, which
entitles it to proportionately less reimbursement of Medicare
expenses than U.S. states.
Rossello has promised to lobby Congress to increase that
funding, but the board has warned that his fiscal plan should
not assume any help from Washington that has yet to be granted.
The $3.8 billion in total savings also falls short of the
$4.5 billion figure the board had recommended, which would have
balanced the budget and left roughly $800 million available for
annual debt-servicing costs.
Rossello did not specify how much money would be available
for debt service under his plan. He said he could find another
$800 million, but only by lowering the board's 17 percent
economic contraction projection.
The federally appointed board is under no obligation to
rubber-stamp Rossello's plan. If it does not meet its criteria,
the board can construct its own plan.
The board expects to approve a turnaround plan for the
island by March 15.
(Reporting by Nick Brown and a contributor in San Juan, writing
by Nick Brown; editing by G Crosse)