Puerto Rico said it faces a $3 billion cash shortfall in the current fiscal year without using the bankruptcy allowed under this year's federal rescue legislation.
The island government made its case on a teleconference Wednesday, discussing a liquidity report to be presented to the Puerto Rico Oversight Board at Friday's meeting.
The figure assumes the current debt payment moratorium ends on Feb. 15, 2017, the commonwealth pays debt coming due and pays back other debt it has already defaulted on and clawed back from other government agencies. It also assumes that Puerto Rico doesn't reach agreements with its creditors by then.
The $3 billion figure would be roughly 1/3 of the commonwealth's current approved fiscal year budget.
Puerto Rico has a total of $2.2 billion debt service that is due from February to the end of the fiscal year at the end of June, the commonwealth said. In addition, the commonwealth has about $850 million in unpaid debt service and clawed-back revenue.
Even if it pays no debt service this fiscal year, the government expects to be left with just $71 million in its primary account at the end of the fiscal year.
The government has tried to address its growing financial crisis through a variety of means, a Puerto Rico official said. These have included the deferral of payments to suppliers and the deferral of tax payments. However, it would not be possible to generate $3 billion through further deferrals, he said.
The Puerto Rico Oversight, Management, and Economic Stability Act potentially allows Puerto Rico to enter a bankruptcy process if voluntary negotiations with creditors fail. It also allows for the lawsuit stay to be extended, under certain conditions, until about May 1, 2017.
In addition to facing a debt-related $3 billion shortfall this fiscal year, Puerto Rico also faces other major financial hurdles, Puerto Rico officials said. There is significant risk that it could lose $800 million in Affordable Care Act funding in fiscal year 2018 and that this would increase to $1.5 billion in fiscal year 2019.
As things stand now, the government also risks losing $500 million in ACT 154 tax revenue as federal authorization for the tax elapses in fiscal year 2018. This could rise to $1.5 billion in fiscal year 2019.
