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; [email protected]

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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; [email protected]