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Budget Will Focus on Funding Essential Services, Increasing Debt Payments

By on June 7, 2016

SAN JUAN – House Treasury Committee Chairman Rafael “Tatito” Hernández said Tuesday he would significantly alter the $9.1 billion budget to fund essential areas such as healthcare, security, education and social welfare programs, and try to mitigate the estimated $750 million owed in account receivables.

Despite what the Puerto Rico Treasury Department has said, Hernández believes the commonwealth government will not receive the $750 million to pay contractors and suppliers within the month left before the end of the fiscal year. He said he does not want to carry the debt over to the next fiscal year.  

“We are not going to drag the $750 million to the next year because then it would be an unrealistic budget,” he said. “This is where everyone will have to go to court.”

On the other hand, as he has said before, he also plans to increase the amount earmarked to pay the interest on general obligation bonds, which is around $365 million. He said he will rely on clawbacks, or taking money from certain funds, to pay debt, adding the current budget is at least $300 million larger because of the clawbacks.

“We are going to approve a budget that is balanced and with adjustments,” he said.

Hernández made his remarks following the House Treasury Committee hearing Tuesday to evaluate the budgets of the Education Department and the University of Puerto Rico (UPR).

House Treasury Committee Chairman Rafael “Tatito” Hernández

House Treasury Committee Chairman Rafael “Tatito” Hernández

The hearing takes place as the U.S. Congress gets ready to vote on legislation that would establish a fiscal oversight board for Puerto Rico, which would determine how agencies spend money and set aside a portion of their budgets.

However, neither UPR President Urayoán Walker nor Education Secretary Rafael Román could say how they plan to carry on their jobs under a fiscal board, as they have to wait to see how the legislation is approved. Walker said he opposes the appointment of a board.

The Education Department presented its budget for fiscal 2017. The agency’s consolidated budget is $2.84 billion, of which $1.6 billion would come from the General Fund but $1 billion, or about half, comes from federal funds. Some $72 million was earmarked for the payment of utilities, a cut from the current $327 million.

Next fiscal year’s budget was cut by $245.7 million, reduced by not earmarked funds to pay Public Buildings Authority rent. Hernández said the money for the past three years was being paid from the General Fund.

On the other hand, there was a reduction in special allocations to the Fund for Special Education Therapies. Hernández said he plans to find money for this by cutting other areas of the budget.

Secretary Román said that while the agency is going to end the fiscal year with a balanced budget, there is about $410 million owed to suppliers. Of that amount, the agency already prepared $200 million in checks and is waiting for the funds to be released so they can be paid out.

The agency also expects to give permanence to about 217 lunchroom workers once it gets the money.

Walker, on the other hand, said the UPR has a consolidated budget of $1.47 billion for the next fiscal year. The university expects to have 60,500 students enrolled next year, or about 2,000 more students. He said he does not foresee hiking enrollment fees or having to close campuses such as Utuado or Cayey. The budget is $13 million higher than the current one.

He did say the Treasury Department has been making certain monthly payments and the agency has accumulated about $45 million owed to the UPR of the $833 million it gets from the General Fund. “We are still working with the Treasury Department and the Government Development Bank to get the funds,” he said.

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