Español Puerto Rico Governor Alejandro García Padilla is trying to put a Band-Aid over a gaping fiscal wound.
Credit Where Credit Is Due
García Padilla wants to review the island’s labor laws and reduce benefits. That is an outstanding idea. The governor has focused on paid leave as a big problem, costing the government millions of dollars each year. However, it’s also costing thousands of jobs and millions each year in the private sector.
For example, the governor has pointed out that Puerto Ricans enjoy 30 days of paid vacation every year, 18 sick days, and 14 paid holidays. That amounts to more than two months of annual paid leave for every employee. That is great for employees, but bad for business, which in turn, is bad for jobs.
This is clearly a step in the right direction. However, the governor continues to avoid the real problem: the size of the local government.
How big is it?
The Elephant in the Room
For starters, of the 900,000 people who have jobs in Puerto Rico, roughly 300,000 work for government. The latest budget drives home the fact that the island’s fiscal problems are far from over.
According to Caribbean Business, the just-closed 2015 fiscal year resulted in a US$700 million deficit. By the way, that estimate does not include nearly $300 million in yet-to-be-paid tax returns. In other words, the shortfall could top US$1 billion.
What happened to those billions that Puerto Rico borrowed last year?
Last year was supposed to be a balanced budget. So is this year’s budget. It’s not balanced either. Is it worth even mentioning the projected deficit, since estimates are so consistently wrong and “revised”?
At the heart of Puerto Rico’s financial mess is government spending, plain and simple. To fix the problem, the government must cut no less than 30 percent from the government workforce — about 100,000 individuals.
Low-Hanging Fruit for Puerto Rico
While the governor attempts to address long overdue reforms on paid leave, there is still much to be done.
Women, for example, receive two months of fully paid maternity leave at taxpayer and or business expense. This is a double hit for business owners who must continue paying the woman and either pay for a replacement or overburden other employees. Efficiency drops, and costs go up.
That is not to say taking leave to have a baby for a man or a woman is a bad thing. It’s one of those “nice” things to have. But why should government, taxpayers, or business owners be mandated to pay for a personal choice that you make?
Another issue is tort reform. It is far too easy to file a legal complaint against an employer in Puerto Rico (and the rest of the United States for that matter). Even while many cases eventually get dropped or dismissed, the cost of combating these cases is enormous. It puts fear into the hearts of many business owners who shun business efficiency and tough decisions to avoid lawsuits.
Instead, business owners should have greater leeway and less fear in hiring and firing decisions.
Given some the will, there are so many issues that could be addressed in Puerto Rico right now; it is difficult to focus on just a few areas. Nothing, however, will be more effective than addressing the core issue — the bloated, corrupt government — that has destroyed the island’s economy.