Mayors blame fiscal board for worsening municipal crisis after loss of equalization fund

By THE STAR STAFF

Puerto Rico Mayors Association President Jorge “Georgie” González Otero said Wednesday that a new report by ABRE Puerto Rico confirms what municipalities have been warning for years: the island’s local governments are under mounting fiscal strain, with 10 municipalities now classified as “unsustainable.”

González Otero, who is also the mayor of Jayuya, attributed much of the deterioration to the elimination of the Equalization Fund by the Financial Oversight and Management Board. The fund, once a central source of operating revenue for Puerto Rico’s 78 municipalities, was phased out under the Puerto Rico Oversight, Management and Economic Stability Act, commonly known as PROMESA, between 2017 and 2024.

“This unfortunate situation is something we had already warned about,” González Otero said. “The elimination of the Equalization Fund by the fiscal board is largely responsible for this reality. Taking away budget allocations while keeping -- or increasing -- municipal obligations has led us here. No one should be surprised.”

The 12th edition of ABRE Puerto Rico’s Municipal Fiscal Health Index shows that fiscal pressures continue to intensify. According to the report, 43% of municipalities posted general‑fund deficits in 2024, up from 39% the previous year -- a sign of weakening fiscal discipline and rising operational risks.

González Otero emphasized that the Equalization Fund’s removal hit dozens of towns hard.

“Nearly 37 municipalities lost more than 40% of their operating budgets because of this bad decision -- bad because it offered no alternatives,” he said. “Its elimination was planned gradually from 2017 until it was completed in 2024. Today we are seeing the results.”

The Mayors Association has long argued that the fund’s phaseout would destabilize municipal finances, especially in smaller and rural towns with limited revenue‑raising capacity. ABRE Puerto Rico’s findings, González Otero said, validate those concerns.

As municipalities confront rising infrastructure costs, aging water systems and growing service demands, local leaders warn that without new sources of support, the fiscal strain will continue to deepen.