Puerto Rico General Fund collections lag projections

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Puerto Rico General Fund collections were lagging by 7.5% to 16.8% as of four days before the end of the fiscal year, depending on which measures are used.

The figures are derived from a weekly cash-flow report released by the Puerto Rico Department of Treasury and Puerto Rico Fiscal Agency and Financial Advisory Authority on Tuesday. The report covered information as of June 26.

The figures come as the Title III bankruptcy court has postponed hearings on a proposed central government debt deal. Many expect the Puerto Rico Oversight Board to propose an adjustment to the negoatiated deal.

Total general fund collections were down 7.5% from the adopted liquidity plan if one includes $999 million held in a sweep account. These collections were down 16.8% if one excludes the sweep account money and only compares the general fund collections held in the Treasury Single Account to the liquidity plan projection for this account.

The Treasury Single Account is the central government’s primary bank account. While it includes money for other purposes besides the General Fund, the 16.8% shortfall figure only looks at the General Fund money in the account.

The overall TSA was down 18.9% as of June 26 compared to the Liquidity Plan’s projection. It was at $7.85 billion rather than $9.68 billion. The biggest factor for this difference was a $2.22 billion shortfall in collections.

The TSA level has generally been in decline since February 26. Around April 3 the level crossed from being above the Liquidity Plan projection to being below it.

“General Fund collections have slowed due to the COVID-19 outbreak and imposed lockdown,” the report stated. “Additionally, the lockdown has temporarily lengthened the process of reconciling and transferring collections held in a sweep account to the Treasury Single Account from two days to approximately a week.” Most but not all of the sweep account will be shifted to the TSA.

Puerto Rico commentator Cate Long tweeted, “Puerto Rico central government revenues fall just 7% short of projections after government postponed usually massive April income tax filing deadline, cut sales taxes & economy was shut since late March. Remarkable performance that bodes well for rebound.”

Cumberland Advisors Portfolio Manager and Analyst Shaun Burgess said he finds it "unsurprising that revenues have shown a steep decline. This is the story playing out all over the country as a result of the COVID-19 pandemic. It is disappointing as the commonwealth was seeing welcome economic improvements prior to the pandemic. Fortunately, the island is receiving billions in federal aid between the pandemic and natural disasters so those funds should help cushion the damage.”

Cumberland owns insured Puerto Rico debt.

The report also indicated that non-General Fund pass-through collections in the TSA were down 20% compared to the Liquidity Plan. This included a 23% decline in collections for the Highways and Transportation Authority.

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