After scrapping a plan to get more taxes from video lottery terminals, Puerto Rico officials must find $220 million from additional spending cuts and revenue initiatives before the end of the month to balance a proposed $9.2 billion fiscal 2011 budget.
Carlos Garcia, president of the Government Development Bank for Puerto Rico, said the administration’s first priority is to avoid further layoffs or new taxes to fill the $220 million gap. Fiscal 2011 begins July 1.
The commonwealth already reduced its payroll significantly, implemented a new property tax, and boosted sales and corporate taxes last year to balance the current fiscal 2010 budget.
“We’re not concerned,” Garcia said. “We’re confident that between ourselves and the Legislature during the next few weeks we will have the alternatives, which will be probably a combination of some revenue measures and some cost-reduction measures.”
Gov. Luis Fortuño on April 26 released a $9.2 billion fiscal 2011 budget proposal that relies upon tougher tax compliance to help generate $240 million of additional revenue.
He also included an initiative to better regulate video lottery terminals that already exist in bars and to allow such gaming in other facilities.
Officials were expecting $220 million from the VLT plan, but some legislators and religious groups questioned expanding gambling on the island.
“There was some opposition about the implementation of it and the governor basically decided that given the opposition and the concerns of many groups, that it was best to retire the bill,” Garcia said.
The $9.2 billion fiscal 2011 budget plan includes $8.2 billion of revenue and another $1 billion of deficit financing, which will come from sales tax bond proceeds. The Fortuno administration is focused on ending the government’s structural deficits by fiscal 2013.
Garcia said the government could look toward further spending reductions and a possible retirement window to cut employee costs to help fill the gap.
He doubted that better tax compliance could fill the entire $220 million shortfall.
“It is an alternative. It will probably not be the alternative that will be able to do it all, so that’s why I think it’s going to be a combination of several measures in order to be able to make up for the $220 million,” Garcia said.