SAN JUAN, PUERTO RICO: Puerto Rico's governor announced a budget Wednesday that promises tax breaks, sets aside more than $400 million for debt service and guarantees $2 billion in pension payments amid a deep economic crisis.
The proposed $9.56 billion budget is more than a half million dollars larger than last year's, and Gov. Ricardo Rossello said that for the first time in recent history the budget would be truly balanced.
"In the past, money was taken from areas, increasing budgeted spending and hiding debt," he said. "That's over."
The U.S. territory is struggling to emerge from a 10-year recession that has prompted more than a half million Puerto Ricans to flee to the U.S. mainland. Rossello's administration is now in the midst of restructuring a portion of a $73 billion public debt load through a bankruptcy-like process in federal court after previous administrations borrowed millions of dollars to cover the island's debt for decades.
Despite the economic woes, Rossello said the government's general fund will now ensure that retired government workers keep receiving monthly pensions even as the island's public retirement system that is underfunded by about $50 billion collapses. To offset the $2 billion pension payment, Rossello proposes cuts such as eliminating millions of dollars in annual subsidies to Puerto Rico's 78 municipalities, prompting some mayors to start charging for garbage collection and possibly other services.
Rossello also said he is setting aside a $200 million reserve demanded by a federal control board that threatened to furlough tens of thousands of government workers if the reserve is not included in the budget.
In addition, the governor said he will soon submit a tax reform bill that will include more than $200 million in tax breaks and exempt everyone from paying taxes on the first $12,500 earned. He also said retirees would not pay taxes on the first $25,000 earned instead of the current $15,000 if the bill is approved.
A copy of the budget was not immediately available, and Rossello did not provide details on how much money he set aside for education, health and public safety.
"The lack of transparency has not allowed the people to understand how the budget is being increased to $9.5 billion during an economy that is shrinking," said Rep. Rafael Hernandez of the island's main opposition party.
Hernandez said he also was concerned about a nearly 50 percent cut to nonprofit organizations.
"The weight and sacrifice that the people of Puerto Rico will have to bear in upcoming years will be place squarely on the back of workers and those who are most in need," he said.
Legislators expect to hold public hearings starting Monday and have until June 25 to finalize the budget. The governor's party controls both the House of Representatives and the Senate.