House passes fiscal responsibility bill in step toward a post-fiscal board future

Rep. Eddie Charbonier Chinea, chairman of the House Finance Committee

By THE STAR STAFF

Speaker of the Puerto Rico House of Representatives Carlos “Johnny” Méndez Nuñez, along with House Finance Committee Chairman Eddie Charbonier Chinea, announced on Monday the approval of bills 1261 and 1262, which lay the foundation for unprecedented fiscal responsibility in the island government.

“This package of measures that we approved is aimed at creating an unprecedented infrastructure for the management of public funds through transparency and total fiscal responsibility, which will place Puerto Rico closer to fulfilling all the goals established in the Puerto Rico Oversight, Management and Economic Stability Act, better known as PROMESA,” the House speaker said.

Charbonier emphasized that the measures approved in the lower chamber represent “the beginning of a post-Financial Oversight and Management Board Puerto Rico.”

“These bills represent a new way of using the people of Puerto Rico’s funds with greater fiscal discipline and clarity,” he said of the measures filed by Gov. Jenniffer González Colón.

House Bill (HB) 1261, which passed unanimously (48-0), seeks to create the Budget Stabilization Reserve Fund to reach the 13.5% cap on the total balance in the General Fund allocated for expenditures. During this fiscal year (2025-2026), which ends on June 30, the Reserve Fund will receive a deposit of $729 million.

Likewise, the House approved (48-0) HB 1262, which creates the “Puerto Rico Government Public Capital Projects Fund,” thus establishing a permanent fiscal and managerial structure that allows the organization of the government’s public capital investment, separating it from recurring operational expenses.

The legislation requires prior tax certifications and establishes controls to ensure that each project meets criteria for scope, cost, schedule and expected results. Additionally, both the Treasury Department and the Office of Management and Budget will assume key responsibilities in implementing and regulating the new system.

The practice at the national level is to favor the creation of multi-year capital improvement plans, asset inventories, prioritization criteria, financing analyses and public disclosure mechanisms. HB 1262 incorporates those elements, per the recommendations of the Government Finance Officers Association, by requiring project-specific budgets, multi-year planning, cost analyses and performance metrics.

Separating operational and capital expenditures, the lawmakers noted, will allow for more responsible decision-making, avoid disorderly competition for resources, and reduce risks associated with unfinished or fiscally unviable projects.