Puerto Rico ‘bank movements’ generate greater interest income

Measure aims to improve yields for Treasury Single Account

SAN JUAN – The government of Puerto Rico expects to increase interest income from its bank accounts through what it called moves that the commonwealth’s chief fiscal agencies are making with the aim of generating greater interest yields for the Treasury Single Account (TSA).

The TSA, which maintains a balance of approximately $8.33 billion, earned close to $49 million in interest from July 1 to Nov. 22, Omar J. Marrero, executive director of the Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym) and the commonwealth’s chief financial officer, said in a press release Thursday.

Marrero indicated that the greater interest earnings resulted from “several bank movements the Puerto Rico Treasury Department, with [Aafaf’s] support, made aimed at generating better interest yields for the TSA.”

TSA funds that are not reserved for operating expenses and budgetary purposes are transferred to interest bearing accounts in different banks authorized to do business on the island by the Financial Institutions Commissioner’s Office.

Puerto Rico Treasury Secretary Francisco Parés Alicea said the redistribution of government-held bank accounts begun in October is projected to generate $124 million in interest income for the commonwealth during current fiscal year 2020, which began July 1. The figure, he said, represents a 39 percent increase compared with interest accrued in fiscal 2019.

The Treasury chief explained that the bank transfers made in October are part of a recently established program to maximize interest generated through the monthly redistribution of TSA unreserved balances.

According to the release, Gov. Wanda Vázquez Garced “commended the officers for reinforcing the accountability reports, which results in more transparency on government administration and benefits for the people of Puerto Rico.”

Aafaf has published the TSA report on a weekly basis since October 2017, Marrero said. The report released Thursday, corresponding to the week ended Nov. 22, 2019, includes, for the first time, the breakdown of the interest accrued by the TSA, he said.

The TSA is the commonwealth government’s main operational bank account, in which a majority of receipts from government funds are deposited and from which most expenses are disbursed, Aafaf’s report explained.

So far this fiscal year, the commonwealth’s incoming cash flow has amounted to $8.32 billion, which includes $5.03 billion in state receipts and Treasury general fund collections, and $3.07 billion in federal fund receipts, including Medicaid, the Nutritional Assistance Program, employee retention credits, and disaster related monies, according to the latest TSA report for the week ending Nov. 22. Pay-as-you-go charges collected from municipalities to cover pension payments amounted to $218 million.

During the same period, according to the TSA report, the commonwealth government disbursed $7.22 billion, including $2.14 billion in general, state and federal fund appropriations, $1.34 billion in payroll and related costs, $1.49 billion in vendor disbursements, $1.02 billion in Nutritional Assistance Program payments, and $933 million in pension benefits.

The commonwealth maintained a net operating cash flow of $1.1 billion as of Nov. 22, according to the TSA report.

General fund revenue was $4.23 billion as of Nov. 22, or 12 percent above estimates, according to the report, which attributes “collections outperformance” largely to $1.28 billion in corporate income tax that was 73 percent above estimates due to “a one-time tax payment related to [mergers and acquisitions] activity in the first quarter of the fiscal year.” The sales and use tax collections during the same period totaled $3.75 billion, or 4 percent above estimates.

“The TSA report is published every Tuesday on the [Aafaf] website at http://www.aafaf.pr.gov and it is part of our commitment to fiscal responsibility and transparency in public finance,” Marrero said in the release.

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