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Puerto Rico Gov Presents Draft $10.7 Billion Budget

By on February 3, 2021

Says proposal will provide fair wages, promote hiring and reduce social inequality

SAN JUAN – Presenting the first draft of his administration’s budget, Gov. Pedro Pierluisi assured Wednesday that the numbers sent for the Financial Oversight and Management Board’s (FOMB) consideration “reflect his commitment to meeting the needs of the people through a socially and fiscally responsible document,” as put by a release issued by his office.

The governor presented the budget virtually, via Zoom, as he is in quarantine after having been in contact with San Juan Mayor Miguel Romero, who tested positive for Covid-19 earlier this week. 

“It’s important for transparency to present the Puerto Rico government’s first budget draft,” Pierluisi said. “This is usually an internal working process, but I want to explain how we are going to structure the budget.”

He said the budget is a bit larger than the one presented by the board, which is of $10.04 billion, “because we believe that it is justified.”

His office said his proposed government budget of more than $10.7 billion is based on the budgetary objectives established by the board but also includes additional resources for strategic initiatives and to ensure the proper functioning of key agencies and departments.

“The proposal also incorporates public policy priorities aligned with our long-term goals, including eliminating more budget cuts to the University of Puerto Rico (UPR), maintaining the current level of support for municipalities to ensure direct services to citizens, complying with with the payment of pension obligations to government retirees, implementing the first phase of a true civil service reform that includes a new classification and compensation plan,” Pierluisi said in the statement, adding that the budget was prepared with a focus on “government execution, efficiency, and capacity to achieve return on public investment,” the release reads.

Among the most important initiatives for fiscal year 2022, according to his office is a $127 million allocation for the Department of Transportation and Public Works (DTOP by its Spanish initials) for financing highway maintenance programs. The document sets aside a $6 million fund to address gender violence, another of $5.5 million to combat child poverty and another $5 million for technology services and modernizing the government’s operations and services.

The budget includes $10 million for the Department of Agriculture (DA), “to encourage the use of agrotechnology,” and about $1.6 million for the Corporation of the Musical Arts “in order to ensure the continuous operation of cultural institutions” such as the Puerto Rico Symphony Orchestra.

The draft budget also includes a $15 million allocation to the Corrections Department for salary adjustments, $1.4 million to the Department of Consumer Affairs (DACO by its Spanish acronym) for hiring inspectors and $17 million to the Justice Department for hiring special prosecutors, investigators and other staff.

Some $3 million is set aside for the Human Resources Administration and Transformation Office (OATRH by its Spanish initials) so the agency can hire personnel and implement the administrative process of the central government’s Classification and Retribution Plan. The draft also assigns some $50 million for “salary justice” to be able to initiate the first phase of the Uniform Classification and Retribution Plan for public workers, whose salaries are “below salary scales.”

Pierluisi said the administration knows that under the Puerto Rico Oversight, Management and Economic Stability Act (Promesa), the board has the last word in the budget process. 

“But this petition or this budget petition project passes to the oversight board’s hands and what will happen in practice is that the board’s staff will begin conversations with Office of Management and Budget (OMB) staff, with Puerto Rico Fiscal Agency and Financial Advisory Authority’s [Aafaf by its Spanish acronym] staff and Treasury Department staff to then look to see whether these additional items are duly justified,” the governor said when asked by Caribbean Business if he thought the board would certify the proposed budget plan or implement its own as the panel has previously done.

“At the same time, discuss why the amount exceeds the amount provided by the board… The board submitted a level of spending that is close to $700 million less than the one we are proposing,” he added.

He said his administration determined that about $125 million should have been included by the board when calculating the PayGo costs.

“We believe that the $125 million has to be recalculated, which are the costs of the pensions of the government of Puerto Rico,” Pierluisi assured.

The governor noted that the amount the government is proposing is 5 percent higher than the board-recommended budget. 

“Some may ask how we justify that 5 percent increase; well, there are different ways we can justify it,” he assured. “First, the Treasury collections, and the numbers are public, the Treasury collections to this day exceed the estimates made by the board by more than $600 million. And at the pace Treasury is going, it could possibly reach $800 million in excess” revenue.

“And to answer the question, we are going to put up the fight,” he said. “The board does have the last word, but we are willing to justify every dollar of additional spending that we are including in the budget.”

In the press release, the director of the Office of Management and Budget, Juan Carlos Blanco, acknowledged “the important challenges that still lie ahead to modernize the government and to promote projects that strengthen the local economy. Therefore, he anticipated that he will invest strategically available resources in specific initiatives that strengthen local capacity and create economic activity.”

The new budget, after being certified by the board, will take effect July 1. It can be accessed at presupuesto.pr.gov.