Puerto Rico governor proposes 8.8% spending increase
Puerto Rico Gov. Ricardo Rosselló, under pressure to accept austerity measures as the territory restructures its bond debt, is proposing a fiscal year 2020 General Fund budget with 8.8% more spending than the current year’s budget.
The governor's $9.527 billion plan, 6% larger than the approved fiscal 2017 budget, was released publicly Monday. It is under review by the Puerto Rico Oversight Board, which signaled last week it has concerns. The Puerto Rico Oversight, Management, and Economic Stability Act gives the board final authority over the island government’s budget.
“Considering the out-migration we have seen and the island’s history of questionable spending habits it is concerning to see this increase in spending, especially as they have defaulted and are in the midst of restructuring their debt,” said Shaun Burgess, Cumberland Advisors portfolio manager. “It makes me question whether they have adopted the structural reforms and mentality necessary for the long term health of the commonwealth.”
The proposed budget includes $139.4 million for debt payment. A knowledgeable source said none of this would be for bond debt.
Major increases are for "government entities," which would receive $887 m million or 360% more, and professional services, which would receive $80 million or 14.9% more.
The categories that the budget projects will show funding cuts include other operational expenses ($247 million or 59% less), federal matching funds ($192 million or 83% less), payroll and related costs ($126 million or 4.4% less).
Gustavo Vélez, chairman of Inteligencía Económica, responded to the budget on Twitter: “If my memory doesn’t fail me, Puerto Rico went bankrupt in 2016? Every day things become more surreal …”
Burgess said, “They should be focusing on controlling their spending and rightsizing the government.”
Puerto Rico Economic Development Bank said the economic activity index in January was up 0.2% from December, and was down 0.2% in February from January.