Increased spending and underperforming revenues account for an estimated $3.2 billion deficit in Puerto Rico’s $9.48 billion budget for fiscal 2009, which began July 1.
The Government Development Bank for Puerto Rico last week released details of a fiscal advisory committee report. The committee anticipates expenditures to reach $10.3 billion for the current fiscal year, up from the budgeted $9.48 billion spending plan.
Meanwhile, revised revenues projections indicate $7.8 billion of total receipts in fiscal 2009, down from the original $8.5 billion revenue estimate, according to a GDB press release.
Included in the $3.2 billion deficit is a $500 million funding gap in the island’s health insurance program. In addition, Puerto Rico owes $750 million to government suppliers, several government agencies have a total deficit of $100 million, and there is an “estimated incremental cost of debt due to current market conditions,” according to the press release.
If the shortfall is not addressed, the committee projects the island will have annual deficits of more than $3 billion over the next four years.
Gov. Luis Fortuño, who was sworn into office on Jan. 2, formed the 14-member fiscal advisory committee after winning the gubernatorial election in November. The panel will announce by mid-January its suggestions for closing Puerto Rico’s deficit.
Before taking office, Fortuño pledged to immediately cut the current budget by 5% and also reduce the government’s payroll. Officials are working on crafting structurally balanced budgets by fiscal 2012
Last month, Standard & Poor’s and Moody’s Investors Service said the revised expenditure and revenue estimates would not prompt an immediate change to Puerto Rico’s credit rating. The commonwealth carries BBB-minus and Baa3 ratings from Standard & Poor’s and Moody’s, respectively.
