BY ELECTRONIC MAIL

June 22, 2023

Honorable Rafael Hernández Montañez

Speaker of the House of Representatives of Puerto Rico

Honorable Marially González Huertas

President Pro Tempore of the Senate of Puerto Rico

Dear Speaker Hernández Montañez and Senate President Pro Tempore González Huertas:

The Oversight Board is in receipt of your June 21, 2023 letter about the Commonwealth budget
process, which arrived at the Oversight Board after the Speaker and the Oversight Board had
already scheduled a meeting with the members of the House of Representatives to discuss the
fiscal year 2024 budget today.

In your letter, you are requesting that the Oversight Board “certify if the approved versions of both
the House and the Senate of HJR-454 are consistent with the Fiscal Plan approved by the FOMB.”
Your letter acknowledges, however, that the Legislature as a whole has not yet agreed on the House
version or the Senate version of HJR 454. In essence, therefore, the Legislature is seeking guidance
from the Oversight Board as to whether either or both versions of HJR-454 are compliant with the
Commonwealth Fiscal Plan before the Legislature finalizes its proposed budget for the
Commonwealth for fiscal year 2024. Your request is not contemplated in PROMESA.

PROMESA Section 202 establishes a collaborative process for developing and certifying a budget
that complies with the Commonwealth’s certified Fiscal Plan. That collaborative process requires
the Governor, the Legislature, and the Oversight Board to work together. Here, the Oversight
Board has submitted a compliant budget to the Legislature pursuant to PROMESA Section 202(c).
Now, the Legislature must submit a budget adopted by the Legislature to the Oversight Board
pursuant to Section 202(d). If the Legislature submits a budget to the Oversight Board, the
Oversight Board must determine whether such proposed budget is compliant with the certified
Fiscal Plan. If the Oversight Board determines that the Legislature’s proposed budget is not
Hon. Hernández Montañez
Hon. González Huertas
Page: 2

compliant with the certified Fiscal Plan, the Oversight Board must send a notice of violation to the
Legislature and describe any necessary changes, and the Legislature may submit a revised adopted
budget for subsequent Oversight Board review.

If, however, the Legislature fails to submit a budget to the Oversight Board that the Oversight
Board determines is a compliant budget by the applicable deadline, then the Oversight Board shall
develop and certify its own compliant budget and such budget shall be deemed approved by the
Legislature and the Governor under PROMESA Section 202(e).

As of today, the Oversight Board has not received a fiscal year 2024 budget as adopted by the
Legislature, because the Legislature has not passed such a budget, nor submitted it to the Oversight
Board. The Oversight Board cannot review a joint legislative budget proposal that the Legislature
has neither passed nor submitted. Contrary to what your letter suggests, HJR 454, as approved first
by the House and later amended by the Senate, is not a budget adopted by the Legislature. This is
because, as your letter correctly states, HJR 454 is currently at a procedural stage that specifically
exists to allow for both legislative chambers to agree on a proposal that will ultimately be
considered as a joint legislative proposal. This necessarily requires that both chambers reach an
agreement and later vote on such agreement. These steps have not been completed by the
Legislative Assembly and as such the Legislature has not adopted a budget for consideration by
the Oversight Board.

In your letter, you imply that the Legislative Assembly submitted compliant budgets for the last
three years. I am sure this was an oversight in your letter. As you know, the Legislature most
recently failed to submit an amended budget for fiscal year 2023 to the Oversight Board. This was
the third consecutive time that the two chambers of the Puerto Rico Legislative Assembly failed
to submit a budget for the government within the schedules set forth by the Oversight Board in
accordance with PROMESA. Such schedules are notified and discussed with legislative leadership
prior to the submission deadlines.

Congress created the Oversight Board, with its fiscal authority, for a reason. The reason was the
bankruptcy of Puerto Rico and the fiscal situation that led to such state of affairs. PROMESA,
however, did not take away the Legislature’s responsibility to approve and submit a budget. The
budget is a key element of fiscal responsibility owed to the people of Puerto Rico. It is the very
core of stability.

The Governor and the Oversight Board developed the fiscal year 2024 budget as PROMESA
defines and the Oversight Board submitted a compliant budget to the Legislature on May 24. The
deadline for the Legislature to adopt a budget and submit it to the Oversight Board for its review
was June 14. The Legislature did not meet this deadline. In absence of a submission, the Oversight
Board is unable to issue any notice of violation, let alone, certify consistency or inconsistency with
the Fiscal Plan.

The Oversight Board, and I as Executive Director, look forward to continuing to work with both
chambers of the Puerto Rico Legislative Assembly and the Governor, as we have done in the past,
to finalize the process to develop and certify a budget that complies with the certified Fiscal Plan.
The Legislature must submit a compliant budget proposal to the Oversight Board by June 27. The
Oversight Board will certify a compliant budget on or before June 30, so that the people of Puerto
Hon. Hernández Montañez
Hon. González Huertas
Page: 3

Rico can enter the new fiscal year 2024 with a compliant, fiscally responsible budget on July 1,
2023.

Thank you for your continued efforts to fulfill PROMESA’s objectives by engaging with the
Oversight Board in developing and proposing a compliant budget for the people and the
Commonwealth of Puerto Rico.

Sincerely,

Robert F. Mujica Jr.

Executive Director