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Still No Permanent Funding Source for Fiscal Board

By on November 4, 2016

SAN JUAN — The Puerto Rico government is tapping a $200 million budgetary reserve to finance the operations of Promesa’s fiscal control board, Office of Management & Budget (OMB) Director Luis Cruz Batista told Caribbean Business.

At the end of the first week of November, the board will have in its bank account $12 million coming from the commonwealth’s coffers, at a rate of $2 million monthly, as established by the Puerto Rico Oversight, Management & Economic Stability Act, or Promesa.

Meanwhile, when asked about the monthly budget report required by the fiscal board and delivered this week by the government, the official said that “we are telling the board that we will end [fiscal year 2017] within the approved budget.”

Luis Cruz Batista

OMB Director Luis Cruz Batista

Although the Alejandro García Padilla administration doesn’t expect “any agency to fall outside their budget down the road,” Cruz pointed once again to the $200 million reserve, “an advantage” that would allow the government to address any unexpected, negative change in the commonwealth’s budgetary behavior.

Similarly, “until the [Legislative] Assembly reconvenes and determines a permanent, dedicated [funding] source, [transfers to the board] are being made from this reserve,” the official said in reference to the current use of these funds to finance the board’s operations.

Promesa requires the local government to assign the board a “dedicated funding source, not subject to subsequent legislative appropriations, sufficient to support the annual expenses of the Oversight Board.” Although the federal law requires to have this dedicated funding source in place within 30 days following Promesa’s enactment, Cruz stressed this is not possible until the Legislature convenes again and approves legislation to this end.

“That has not been done for a reason: the [local] Treasury secretary has no power to create a direct, permanent [funding] source, without going through the Legislature. That would have to be legislated. The Treasury secretary cannot say ‘I will assign it X% of the [sales & use tax], or X% of the excise taxes on vehicles.’ This has yet to be determined,” the OMB director said.

No budgetary cuts anticipated

Contrary to what happened last fiscal year, the García Padilla administration doesn’t envision having to take “corrective measures” in the general fund budget approved last summer and which amounts to $8.987 billion.

“At the moment, given the [government] revenues’ behavior, we don’t anticipate having to take corrective measures because the advantage of this budget is that it has the $200 million budgetary reserve,” he noted.

However, Cruz warned of the importance of monitoring expenditures at the Department of Education, which represents the largest burden to the commonwealth’s operating budget. “The main challenge, the main agency is the Department of Education because there are situations that arise with respect to special education and other commitments,” the official said.

Although all government agencies submit monthly expenditure projections to OMB so it can  analyze it and make adjustments as deemed necessary, Cruz added that his office shows special attention to 12 agencies: Education; Police; Corrections & Rehabilitation; Health; Families & Children Administration (ADFAN); Treasury; Justice; Mental Health & Addiction Services Administration (ASSMCA); Socioeconomic Development of the Family Administration (ADSEF); Family secretariat; Administration for the Care & Development of Children (ACUDEN); and Child Support Administration (ASUME).

“These agencies represent 83% of [the government’s] operating expenses,” the OMB director said.

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