Puerto Rico's annual general obligation bond bill could increase to $425 million again after Gov. Anibal Acevedo Vila vetoed a measure last week that would have cut the borrowing plan by $175 million.
Speaker of the House José Aponte and Senate President Kenneth McClintock favored a plan to use existing revenues to meet an annual payment of $175 million to the Government Development Bank for Puerto Rico for past Public Improvement Fund loans, totalling $1.2 billion, that the bank extended to the central government. But the administration has said the legislature should follow with current laws that dictate how the government should pay the yearly $175 million PIF payment via the island's annual GO borrowing. In addition, GDB president Jorge Irizarry said because officials are estimating a deficit for fiscal 2008, it's unrealistic for the government to use revenues that could instead help fill the budget gap. In 2006, the government implemented a one-time, 5% flat tax on retirement withdrawals that generated $240 million of revenue.
"The laws that originated the loans at GDB provide that these loans will be paid by the Public Improvement Fund," Irizarry said. "That's the way the laws are written so to now say that GDB's payment of $175 million should come from the $240 million I would say is irresponsible because they know there's a budget deficit, they know there's a cash deficit. And to require the Secretary of Treasury to make this $175 million payment from current revenues, which other laws provide for from the Public Improvement Fund, is simply a political ploy ... and the governor was forced to veto it and they knew this beforehand."
Irizarry said he wrote to the legislature and met with lawmakers about the issue and to explain that the $240 million is needed to help balance the current budget and not meet the $175 payment to the GDB.
"We have plenty of capacity under the GO to pay this," he said. "This is the second year where they have delayed approval of the GO issue, which is an economic stimulus. Government investment has one of the highest multiplier effects on the economy."
Lawmakers have until June 30 to pass not only the $425 million bond bill, but also the island's $9.48 billion fiscal 2009 budget.
