Saturday, July 4, 2020

Fiscal board proposes $10 billion budget to Puerto Rico legislature

By on June 11, 2020

The fiscal board’s executive director, Natalie Jaresko; Chairman José Carrión; and members Ana Matosantos and David Skeel (CB file)

SAN JUAN – The Financial Oversight and Management Board for Puerto Rico proposed a $10 billion General Fund budget for fiscal year 2021 and submitted it to the island’s legislature for consideration. 

The panel said it will be working with the legislature until June 24, “when the Legislature submits its proposed budget to the Oversight Board for consideration,” and added that the budget “will be certified by June 30 and will also include the Special Revenue Funds and Federal Government Funds, projected to take the total spending of the central Government to $22.2 billion.”

The board said the proposed budget reflects the effect of the Covid-19 pandemic on the economy, “delays most rightsizing by one year to allow the Government to focus on implementing the reforms necessary for Puerto Rico to recover, secures pensions, includes investments in health care and infrastructure to strengthen Puerto Rico, and introduces milestone budgeting to encourage real change in Puerto Rico. Payroll freezes for the Government and public entities remain largely in place.” 

General Fund expenditures are projected to increase from $9.6 billion in fiscal year 2020 (inclusive of the $500 million additional expenditures from the March 2020 Emergency Measure Support Package) to $10 billion in fiscal 2021, “mainly because of incremental investments in technology and public hospitals, and a reclassification of special revenue expenditures as General Fund expenditures,” the fiscal panel explains in a release.

The board projects the effect of the Covid-19 crisis to reduce General Fund revenue by more than 12%, from $11.6 billion originally projected for fiscal 2020 to $10.2 billion in fiscal 2021. Fiscal 2021 revenue is projected to decline by 5% “even compared to projected post-COVID-19 revenues of $10.7 billion in fiscal year 2020. (The fiscal year 2020 revenue projections reflect the special revenue reclassification.),” the release reads.

“Puerto Rico’s focus is the recovery from the economic and health-related effects of the pandemic,” said the board’s executive director, Natalie Jaresko. “The Government and the Oversight Board were able to respond quickly and effectively during this fiscal year to support key front-line workers, self-employed, small businesses, and public hospitals because of our improved budgeting practices. This fiscal year 2021 budget represents incremental investments to support continuous delivery of critical services and economic recovery, while ensuring a balanced budget. This fiscal stimulus is intended to further minimize the damage to Puerto Rico’s economy resulting from the pandemic.” 

The proposed budget includes $675 million in investments, including $450 million for technology infrastructure “such as private sector investments to expand broadband access and faster speed in underserved areas,” the board said. “Broadband benefits communities and individuals, including by enabling remote education, improving connectivity for businesses, and providing access to telemedicine in rural areas.”

The budget also includes $225 million in healthcare investments, including for the improvement of public hospitals and their information technology, “and scholarships to encourage medical students to serve Puerto Rico’s rural areas after graduation,” the board wrote. “These investments will ensure that the health system has the capacity and equipment needed to meet both the immediate and long-term health care needs of the people of Puerto Rico.”

The proposed budget sets aside $83 million of incremental funding to be released once milestones are met. 

“New milestone budgeting is intended to drive efficient and successful implementation of key reforms,” the board explained.

The board’s version of the budget it was submitted by the government administration excludes about $170 million in spending, “including parametric insurance funding, funds to align salaries across agencies, and funding for the Puerto Rico Corporation for Public Broadcasting (WIPR) that the Certified Fiscal Plan requires to be transferred to non-profit status,” the release reads.

The following is a 2021 General Fund Budget Overview provided by the board: