The San Juan Daily Star
A proposal to divide Equalization Fund balance among smaller towns
By The Star Staff
Bayamón Mayor Ramón Luis Rivera Cruz, an influential leader in the New Progressive Party, suggested on Wednesday distributing the $80 million remaining in the municipal Equalization Fund from the previous fiscal year among small municipalities to allow them to operate and prevent them from losing federal funds.
The Financial Oversight and Management Board wants to phase out the Equalization Fund, which was created to stabilize the finances of the island’s municipalities when they lose revenues as a result of central government actions such as when the government exempts firms from the payment of municipal taxes to attract investors. The fund is nourished by contributions not collected by the municipalities, such as the exempted basic tax, 35% of the net income of the Traditional Lottery and 2.5% of the net internal income of the General Fund, as well as 2% of traffic fines and 0.20% of the tax not collected from residential exemption.
As a result of the phasing out of the fund, some 30 municipalities are at risk of severe fiscal deprivation.
The Mayors Association, which groups Popular Democratic Party mayors, this week met with the Gov. Pedro Pierluisi Urrutia with the objective of making pertinent claims in defense of the Equalization Fund. The local authorities present at the meeting stated and reiterated that the plan approved by the Financial Oversight and Management Board on the reduction and eventual elimination of this Equalization Fund would represent between 15% and 80% of the budget of the municipalities.
The Equalization Fund is a mechanism designed to generate fiscal stability for municipalities and offer services to communities, which is why it is one of the most important issues for local authorities and demands a prompt solution. Municipalities are the first line of attention to citizens, mayors are quick to point out. It is town governments that offer answers and provide services at the community level, from the collection and disposal of solid waste to social services and health care. If the Equalization Fund disappears, communities and citizens will suffer serious consequences, the mayors said.
With the approval of the budget by the oversight board, some 30 municipalities would be at risk of disappearing with the elimination of the Equalization Fund, which distributes economic resources among the municipalities, as of fiscal year 2024, said Toa Baja Mayor Betito Márquez García of the New Progressive Party.
For fiscal year 2023, which began July 1, municipalities have $40 million.
Márquez García said that in Toa Baja, a municipality that contributes to the Equalization Fund, people come to work from other towns that do not have as many businesses, for example, and he would not be able to help them.
“One of the elements that we must take into consideration regarding the Equalization Fund is precisely that,” Márquez García said. “There are small municipalities that do not have businesses as do San Juan, Bayamón, Toa Baja. It is a solidarity effort.”