Fiscal board presents budget to Legislature

Reiterates warning about uncertain federal funding outlook

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

By The Star Staff

With a warning regarding the uncertain future of federal funding, the Financial Oversight and Management Board has submitted the proposed General Fund budget for fiscal year 2026, developed in collaboration with Gov. Jenniffer González Colón, to the Puerto Rico Legislature for prompt consideration.

Robert F. Mujica Jr., the oversight board’s executive director, unequivocally stated that the budget “reflects our current understanding of Puerto Rico’s fiscal reality.”

“It demonstrates that the fiscal responsibility established in previous years enables the Commonwealth to effectively respond to the evolving federal funding landscape,” he said.

Mujica emphasized the need for vigilance, stressing that the overall effects of recent and upcoming changes in federal government policies and funding on Puerto Rico’s finances and economy are still uncertain.

“Like many states, municipalities, and territories across the U.S., we are prepared to revisit the budget with the governor and Legislature if federal funding levels fluctuate,” he said.

Earlier this week the oversight board approved the proposed General Fund budget, affirming its compliance with the Fiscal Plan for Puerto Rico. Set at $13.1 billion, the budget represents a 1.5% increase over the certified budget for fiscal year 2025 and includes strategic reclassifications of general fund revenues as special revenue, developed with the assistance of the Office of Management and Budget.

González Colón commended the close collaboration between her fiscal team and the oversight board in crafting a budget that prioritizes public spending while targeting critical areas. She underscored her unwavering commitment to justice for retirees, the safety of residents, and ensuring robust access to healthcare.

The governor acknowledged a significant methodological change in developing this budget, reinforcing a strong resolve that it sets a positive course for the fiscal year 2027 budget process.

“We will continue to work hand-in-hand with the Oversight Board and the Legislative Assembly to ensure that this budget is effectively implemented for the benefit of all Puerto Ricans,” González Colón said.

Over 64% of the General Fund, or $661 million, was allocated to education, public safety, healthcare, and pension payments. The increase in spending is strategically focused on targeted, one-time investments that foster fiscal responsibility and long-term sustainability, rather than creating new ongoing expenses, officials said.

Recognizing potential risks to Puerto Rico’s fiscal stability, especially regarding reductions in federal support, the budget includes robust safeguards to protect essential services. Those measures consist of budgetary reserves, increased holdbacks, and mechanisms for repurposing funds in response to federal policy shifts.

To ensure the continuity of critical services, the release of specific funds tied to service expansions will be postponed until there is enhanced clarity on potential federal funding reductions. If federal funds decrease and cannot be offset, the funds originally designated for expansion will be redirected to cover essential services previously supported by federal funding.

The General Fund budget deliberately excludes special revenue funds, which are generated from fees and services designated for specific purposes, as well as federal funds. When accounting for special revenue and federal funding, the consolidated commonwealth budget for fiscal year 2026 totals $32.6 billion.

In direct response to a request from González Colón, the oversight board has authorized the reallocation of the collected excise tax on rum producers (rum cover-over) from the General Fund to the special revenue fund. This strategic shift reduces the General Fund budget from $13.3 billion to $13.1 billion, while correspondingly increasing the special revenue fund budget.

The oversight board and the governor said they will engage proactively with the Legislature up until June 3, when the Legislature will submit its proposed budget for the oversight board’s thorough consideration. The members of the oversight board will certify the finalized budget by June 30, with the aim of establishing a strong foundation ahead of the new fiscal year, which commences on July 1.