FINANCIAL OVERSIGHT AND MANAGEMENT BOARD

FOR PUERTO RICO

Members
Andrew G. Biggs
Carlos M. García
Arthur J. González
José R. González
Ana J. Matosantos
David A. Skeel, Jr.
José B. Carrión III
Chair Natalie A. Jaresko
Executive Director
BY ELECTRONIC MAIL

November 14, 2018

Honorable Ricardo A. Rosselló Nevares

Governor of Puerto Rico
La Fortaleza
PO Box 9020082
San Juan, PR 00902-0082

Dear Governor Rosselló Nevares:

It has been reported that the Government intends to pay a Christmas bonus to employees of the
Commonwealth. As you are aware, the certified fiscal plan for the Commonwealth calls for the
elimination of the Christmas bonus as part of cost reductions in the Payroll and Related concept
of spend. The certified budget for the Commonwealth reflects the fiscal plan’s requirements for
the Payroll and Related concept of spend inclusive of all personnel-related measures, i.e., the
Payroll and Related concept of spend was calculated assuming that the Commonwealth would not
pay a Christmas bonus. The certified budget for the Commonwealth requires that the
Commonwealth not exceed the total amount budgeted for Payroll and Related. If the
Commonwealth proceeds to pay a Christmas bonus to its employees this year, it will have to
achieve an equal amount of savings within the Payroll and Related concept of spend to offset such
an expenditure.

Public statements from officials in your administration indicate that the Government believes it
has already identified sufficient, permanent savings within the Payroll and Related concept of
spend to offset the payment of a Christmas bonus. The Oversight Board looks forward to
reviewing those specific savings initiatives. Based on the Oversight Board’s monitoring to date
of 128 distinct implementation plans across the entire Government, we see little evidence of
sufficient progress being made to achieve cash savings in the Payroll and Related concept of spend
in the certified budget this fiscal year, let alone for there to be excess funds that would enable the
Government to pay a Christmas bonus.

Moreover, it is availability within the Payroll and Related concept of spend that matters, not
whether there is liquidity in the TSA or whether there is revenue outperformance. The
Commonwealth cannot spend more on personnel-related costs, whether Christmas bonus or
payroll, than the authority within the Payroll and Related concept of spend provides for in the
certified budget. Therefore, failure to achieve the requisite savings in the Payroll and Related

PO Box 192018 San Juan, PR 00919-2018; www.oversightboard.pr.gov; comments@oversightboard.pr.gov

November 14, 2018
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concept of spend may result in the Commonwealth exhausting the Payroll and Related concept of
spend in the certified budget before the end of fiscal year 2019, imperiling the Commonwealth’s
ability to make payroll for its employees.

Sincerely,

Natalie Jaresko

CC: Christian Sobrino Vega

Raúl Maldonado Gautier
Teresita Fuentes Marimón

PO Box 192018 San Juan, PR 00919-2018; www.oversightboard.pr.gov; comments@oversightboard.pr.gov