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Gov. García-Padilla to ‘take steps’ to navigate fiscal crisis

Gov. García-Padilla delivers his State of the Commonwealth address at the Legislature Thursday.

Gov. García-Padilla delivers his State of the Commonwealth address at the Legislature Thursday.

Gov. Alejandro García-Padilla said Thursday the government will take specific steps in coming months to face Puerto Rico’s fiscal crisis, which include no new taxes and no job cutbacks.

In his State of the Commonwealth speech before lawmakers gathered at the Capitol, García-Padilla said steps will be taken to operate the government “during a transitional phase in which revenues are likely to be insufficient to meet all our obligations,” in the absense of a tax reform.

He said defaulting on the government’s record $73 billion debt is not an option.

“Talk is often about the possibility of not paying, just because. That’s nonsense,” he said, after taking a few jabs at the lawmakers who shot down the tax reform that would have effected a new 14 percent goods and services tax, among other changes. “It is with our credit, which is the future of our roads, ports, schools and hospitals infrastructure, with which we’ll raise the island.”

Among the steps ahead, García-Padilla said there will be a full overhaul of the Puerto Rico Treasury Department to improve revenue collections and uphold talks with creditors, as it has begun to do at the Puerto Rico Electric Power Authority.

“We’ve already begun restructuring PREPA, a key element to our economic development,” he said. “The transformation is underway and that effort will result in a more agile and cost-efficient corporation that can provide reliable, cheaper and constant services, thus addressing all of the groups affected, among them our consumers, employees, suppliers and creditors.”

La Fortaleza will also establish two groups to help him lay down the strategy needed to tackle the island’s dire fiscal crisis — a group comprised of external and government experts who will be responsible for straightening out public finances and another tasked with reorganizing the government to guarantee essential services, the smooth functioning of public agencies, the efficient provision of services and the promotion of economic activity.

Meanwhile, the government will move ahead with lobbying efforts in Washington D.C. to get Puerto Rico included under the U.S. Treasury Department’s Chapter 9 protection. The bill was seen during a public hearing in February, but Congress has yet to move it along the legislative track. With that extended protection, Puerto Rico’s troubled public corporations, including PREPA, the Highways Authority and others, could restructure their debt under federal oversight.

In his speech, García-Padilla also said the administration will turn to Washington to get an extension of the tax credit afforded to companies doing business on the island, sheltered by Law 154. That mandate allows participating companies to get credit for the taxes they pay locally. He will also spearhead a group to get the Jones Act overturned.

Finally, he said his administration will not pursue “new and improvised” taxes, in the wake of the House rejection of the proposed tax reform that included an unpopular proposal of a new 14% goods and services tax.

“Some of you opted to reject a system that was coherent, proven in the rest of the world and that would have generated additional income, while granting relieve to all responsible taxpayers,” he said, gunning for majority and minority lawmakers who shot down the measure early Thursday.

“It is unacceptable to me to approve incoherent taxes that only burden Puerto Rican taxpayers’ pockets,” he said, adding the administration will become stricter from now on in assigning discretional funds.

The State of the Commonwealth address lacked its usual cornerstone, the next fiscal year’s budget, which was not mentioned at all. Sources said the budget hinged on the outcome of the tax reform vote.

Flanked by NPP lawmakers, Resident Commissioner Pedro Pierluisi reacts following the State of the Commonwealth address.

Flanked by NPP lawmakers, Resident Commissioner Pedro Pierluisi reacts following the State of the Commonwealth address.

Pierluisi: Speech ‘disrespectful’ to the people
García-Padilla’s speech drew swift reaction from Resident Commissioner in Washington, Pedro Pierluisi, who described the address as “disrespectful to the people’s goodwill.”

What happened here tonight, the message the governor just offered, is a disrespect to the good faith of our people. Our people are overwhelmed, tired, anxious, unsure of what the future holds for their children. And in many cases, have even lost  hope that Puerto Rico can move forward,” said Pierluisi.

The people of Puerto Rico wanted to hear a concrete proposal, a solution to the problems they face daily. The only generic proposal the governor spoke of was adjusting the budget. That was our proposal since the first day, to work seriously on a budget in line with revenues and cutting spending to avoid having to unnecessarily put our hands in the people’s pockets,” said Pierluisi, who is president of the governing party’s opposition, the New Progressive Party.

Still, he offered to sit down with the administration to hammer out solutions to the crisis.

Author Details
Author Details
Business reporter with 30 years of experience writing for weekly and daily newspapers, as well as trade publications in Puerto Rico. My list of former employers includes Caribbean Business, The San Juan Star, and the Puerto Rico Daily Sun, among others. My areas of expertise include telecommunications, technology, retail, agriculture, tourism, banking and most other segments of Puerto Rico’s economy.

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