Puerto Rico lawmakers Monday began hammering out a fiscal 2011 budget in conference committee after both chambers last week added changes to the spending plan.
Legislators must pass the $9.13 billion budget by midnight on Wednesday. Fiscal 2011 begins July 1.
Lawmakers are considering using $45 million of “excess” sales-tax revenue designated for repayment of sales tax bonds, called COFINA bonds, by their Spanish acronym, and diverting those funds to the fiscal 2011 budget.
The COFINA fund has $45 million of sales tax revenue that the commonwealth did not use in fiscal 2010, according to a Senate aide who is working on the budget negotiations.
Payments to bondholders would not be affected by the change, the aide said.
COFINA receives the first 2.5 cents of the seven-cent sales tax and it has a pledged allocation amount of $550 million in fiscal 2010 and $572.2 million in fiscal 2011. That base amount increases annually by 4% to $1.85 billion in fiscal 2041.
Puerto Rico has $5.2 billion of senior sales-tax debt outstanding and $8.3 billion of subordinate sales-tax bonds outstanding, according to the official statement for COFINA’s most recent bond deal. That $1.6 billion new-money and refunding transaction priced on June 22.
The sale included $1.5 billion of current-interest bonds with a final term maturity in 2041 that priced with a 5.25% coupon and a 5.47% yield. A final serial maturity in 2042 priced with a 5.12% coupon with a 5.14% yield.
Lawmakers anticipate the commonwealth could generate $110 million of new revenue in fiscal 2011 for its general fund from a property-tax amnesty program. That program would give delinquent property owners a period of time to make good on past bills and also allow owners with unregistered property to come forward without paying a penalty.
In addition, the legislature is debating a plan to increase the commonwealth’s share of revenue from slot-machines at casinos. The government could gain an additional $33 million of slot-machine revenue.
Earlier this year, Gov. Luis Fortuño’s plan to expand and regulate video lottery terminals failed in the legislature. The casino and hotel industry, among others, fought against the plan, which was expected to bring in $220 million of new revenue for Puerto Rico’s coffers.
The $9.13 billion fiscal 2011 spending plan — about $60 million smaller than the proposal that Fortuño released in late April — includes $1 billion of COFINA bond proceeds to help balance the budget.
The administration is working towards eliminating structural deficits by fiscal 2013.
Officials anticipate Puerto Rico will generate $7.6 billion of revenue from its current tax base. Focusing on better tax compliance, especially sales-tax revenue collections, is expected to generate additional revenue.
In this budget cycle, the administration and lawmakers have looked towards increasing tax collections rather then imposing tax hikes or new fees.
Fortuño’s budget last year, his first, included increases to the personal income tax, corporate tax, a new property tax, and a sales tax hike.
The administration has been reducing spending through layoffs, early retirement incentives, and expenditure cuts.
Fiscal 2011 expenditures are $2 billion less than in fiscal 2009, according to the Government Development Bank for Puerto Rico, the commonwealth’s fiscal adviser.
Puerto Rico’s fiscal 2010 budget included $2.5 billion of COFINA bond proceeds to help balance that spending plan, compared to the $1 billion that it anticipates using in fiscal 2011.
Standard & Poor’s rates Puerto Rico BBB-minus. Moody’s Investors Service rates the commonwealth A3.
