FY 2021-2022 budget likely to be adjusted for debt service

By The Star Staff

The budget for the next fiscal year, which starts July 1, will have to be revised, possibly in September when government officials have a clearer idea as to how much will be allocated for debt service payments.

After reaching an agreement to restructure the commonwealth’s $35 billion debt, which is expected to be finalized by December, the budget for the upcoming fiscal year (FY) does not allocate debt service payments.

House Speaker Rafael Hernández Montañez and Treasury Committee Chairman Jesús Santa said Tuesday that neither the $10.1 billion version of the budget submitted by the federal Financial Oversight and Management Board nor Gov. Pedro Pierluisi Urrutia’s proposed $10.3 billion budget has debt payments or money to absorb Puerto Rico Electric Power Authority (PREPA) workers who transfer to other agencies instead of working for LUMA Energy, the private operator of the utility’s transmission and distribution system.

Hernández Montañez said the difference between the two budgets could be reduced using surpluses from federal Coronavirus Aid, Relief, and Economic Security (CARES) Act reconstruction funds. While the oversight board estimates that government revenues will reach $10.1 billion for the next fiscal year, Treasury Secretary Francisco Parés Alicea said the figure should be closer to $10.2 billion.

The discussion on the budgets took place Wednesday even though Pierluisi as of Monday had yet to introduce his version of the budget to the Legislative Assembly. The House Treasury Committee questioned the governor’s fiscal cabinet, which comprises the heads of the Treasury Department, the Office of Management and Budget (OMB) and the Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials).

AAFAF Executive Director Omar Marrero said the government’s obligation under the most recent debt adjustment plan is expected to be about $1.15 billion per year, but the number is preliminary. The budgets do not include the Highways and Transportation Authority (HTA), which has a separate bankruptcy process.

“We should have a clearer picture by September,” Marrero said.

Hernández Montañez complained that the Legislature, which intends to complete the budget process by June 18, will have to revise the budget again before December.

“This budget should last four months and then you have to come here to adjust it and you will have to do it again when the negotiation with the HTA closes, you will have to make a reconciliation,” the House speaker said. “We will be unbalanced in September.”

The budget must also set aside an estimated $200 million to pay the salaries of PREPA workers who do not go to work for LUMA Energy and opt to be transferred to other government agencies.

Parés said the 2021 commonwealth fiscal plan projects $10.2 billion for FY 2021-2022, or a reduction of $390 million from the $10.5 billion estimated for FY 2020-2021. “The new plan estimates that there will be a reduction in revenues because the economy should shrink by 3.7%,” Parés said.

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