Fiscal board submits $12.4 billion general fund budget
By The Star Staff
The Financial Oversight and Management Board submitted to the island Legislature on Wednesday the proposed general fund budget for the Commonwealth of Puerto Rico’s upcoming fiscal year (FY) 2023, which starts in July, totaling $12.4 billion.
Gov. Pedro Pierluisi Urrutia in a reaction said he will ask the Legislature to join him in opposing the oversight board’s budget.
The board’s proposed FY 2023 general budget allocates almost 70% of the funding to education, public safety, health, pensions and economic development. The budget includes pay increases for public employees, significant funding to protect future retirees from economic uncertainty, and increased funding for the University of Puerto Rico in accordance with Act 53-2021.
A diagram provided by the oversight board shows that 16% of the funding will go to education, 26% to PayGo and pension-related expenses, 9% to debt-related expenses, and only 6% will go toward economic development.
“The FY2023 general fund budget provides the government with additional investments in critical services to improve the quality of life for the people of Puerto Rico,” the oversight board’s chairman, David Skeel, said in a statement. “The budget is consistent with Puerto Rico’s path to fiscal responsibility and provides the government with the stability that is critical in this time of global economic uncertainty.”
The FY2023 budget prioritizes security for current and future government retirees with about 26% of total general fund spending on pensions: $2 billion for current government retirees, and $1.3 billion for the pension reserve trust that protects future retirees should the budget fall into deficit, as well as the enhanced retirement benefits the oversight board and the government agreed to provide to Puerto Rico’s police officers. Education makes up 16% of general fund spending, and 11% is allocated to public health services, including cancer research, emergency health services and mental health initiatives.
The proposed budget also includes almost $700 million more in targeted investments than the current-year budget. Investments in government services and efficiencies increase by over $320 million, including over $150 million in pay increases to provide Department of Education professionals with more competitive salaries. Further, almost $230 million is allocated to critical infrastructure improvement, including funding to the Highways and Transportation Authority, $79 million to public health, and $35 million to public safety.
In addition, the FY2023 budget continues to incentivize agencies to improve the services they provide to residents. The budget includes almost $110 million in additional funding available to agencies upon the completion of specified milestones tied to teacher and student attendance in the public school system; health services programs promoting prevention, early detection, and specialized treatment; and the implementation of a new employee evaluation system and recruitment platform for government employees.
The general fund budget also includes about $1 billion in debt payments following the confirmation of the Plan of Adjustment to reduce the commonwealth’s total liabilities by 80%. Those payments include the contingent value instrument that shares the current economic upside between government and creditors, an agreement that allowed a deeper reduction of the commonwealth’s debt.
The general fund budget is only one part of the consolidated government budget the members of the oversight board will certify by June 30. The budget the Legislature will now review is based mostly on tax revenue and does not include special revenue funds, which comprise revenue the government generates from fees and services, or federal funds. The oversight board will work with the Legislature between now and June 13, when the Legislature submits its proposed general fund budget to the board for consideration.
Pierluisi said the oversight board once again rejected his version of the budget, and so he will ask the Legislature to make a common front against the federal entity created under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA.
“We are reviewing the budget that the board is going to submit to the Legislative Assembly. I am going to express myself formally on this subject,” the governor said in response to questions from the press. “At this stage of the matter, what I am going to do is ask the Legislative Assembly to join my demands in different areas, for example, in defense of the municipalities, for example, in defense of the University of Puerto Rico, among others. So, of course, we are in the process of going line by line to see what the biggest divergences or differences are between the board’s budget and mine.”