Fiscal board begins transfer of budget authority to central gov’t

Robert Mujica Jr., executive director of the Financial Oversight and Management Board for Puerto Rico

By THE STAR STAFF

The Financial Oversight and Management Board announced a significant milestone in Puerto Rico’s fiscal recovery on Wednesday: the start of a formal process to transfer budgetary control to the central government.

The move marks the beginning of a co-leadership model between the oversight board and the Office of Management and Budget (OMB) aimed at developing a consensual commonwealth budget for fiscal year 2027, which begins July 1, 2026.

Robert Mujica Jr., the oversight board’s executive director, highlighted the progress during the board’s public meeting, noting that the island government is assuming greater responsibility for fiscal planning after years of crisis management.

“This is the first step in the eventual handover of the budget process to the government,” Mujica said, emphasizing that the transition reflects Puerto Rico’s improved fiscal stability and the oversight board’s commitment to charting a path toward its eventual exit.

Under the new framework, the government and the board will collaborate closely to implement modified accrual accounting principles mandated by the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). The upcoming general fund budget is expected to be the first developed under these stricter standards, a change designed to strengthen fiscal responsibility and ensure long-term stability once the board’s mandate ends.

Another major reform is the introduction of a capital budget alongside the general fund budget. That separation will allow the government to distinguish long-term infrastructure investments from day-to-day operating expenses, improving planning and laying the groundwork for Puerto Rico’s eventual return to capital markets.

The oversight board and the OMB have already held several working sessions to facilitate the transfer of knowledge, processes and responsibilities. Budget Management Director Elisa Guardiola and OMB Director Orlando Rivera Berríos presented further details on the new budgeting process and broader reforms during the meeting.

To support the changes, the oversight board hosted its inaugural economic forecast symposium, creating a transparent and public dialogue on Puerto Rico’s five-year economic outlook. The symposium’s purpose was to help the board and the government, including the island Legislature, reach consensus on macroeconomic projections that will guide fiscal and budget planning. The event will be held annually, with preparations for the 2026 edition already underway.

The oversight board also certified the commonwealth’s fiscal year 2026 budget, jointly developed with Gov. Jenniffer González Colón’s administration and the Legislative Assembly. The budget could qualify as the first of four consecutive balanced budgets under PROMESA, a critical requirement for Puerto Rico’s financial recovery, Mujica said.

However, Mujica cautioned that uncertainty remains, particularly regarding federal funding. While earlier fears of federal cuts have not materialized -- allowing for the possible release of a 5% spending holdback -- the looming expiration of billions in federal Medicaid funding in 2027 poses a significant risk.

“We must be prepared and work with the governor to make sure the federal government understands the implications for Puerto Rico,” Mujica said.

During the meeting, González Colón underscored her administration’s commitment to modernizing fiscal management and aligning with best practices. She noted that the Budget Office launched the fiscal year 2027 budgeting process in August under a five-year multi-annual framework, refining classifications to separate recurring and non-recurring items and embedding scenario-based risk management. Agencies must now identify contingency plans for federal funding changes and operational risks before requesting additional resources.

The governor also announced the formalization of a “Budget Letter,” which sets the budget calendar and aligns agency submissions with strategic policy, fiscal plan parameters, and technical requirements such as key performance indicators, known as KPIs, and multi-year analysis. In parallel, the González Colón administration is strengthening the Office of Government Planning’s institutional capacity by integrating forecasting, capital and debt planning, and federal fund management.

“This disciplined, collaborative budgeting process is designed to safeguard fiscal responsibility and advance the post-PROMESA transition to a modern, self-sufficient fiscal administration aligned with best practices and capital markets expectations,” the governor said.