By The Star Staff
Puerto Rico revenues, which saw a boom after the pandemic and the injection of federal funds, saw a decline in fiscal year 2024, which began last July, the Financial Oversight and Management Board said in a recent mid-year financial report.
“This is a sign that revenues may have slowed and a reminder that the revenue outlook is uncertain,” said Robert Mujica, the oversight board’s executive director. “The government will need to prioritize any additional spending to ensure the Commonwealth can afford commitments in the long term.”
The mid-year report provided a detailed analysis of Puerto Rico’s fiscal position in the first half of the current fiscal year 2024 and potential risks to the financial projections in the Fiscal Plan for Puerto Rico. The report is based on financial data available through Dec. 31, 2023.
General Fund revenues have grown since the pandemic but plateaued in the previous fiscal year which ended in June 2023. Receipts for last December were below projections for the current year and showed a year-over-year decline. For the first month this year, actual revenues were below projections and last year’s collections.
For the year to date, cumulative General Fund revenue has surpassed the forecast by $540 million and last year’s revenue by about $400 million. October 2023 accounted for about 50% of the year-to-date outperformance, which may represent a lagging impact from tax year 2022 because final payments for extension filers were due in October 2023, the oversight board said.
General Fund expenditures year to date were $111 million below the same period last year and $900 million below forecast, primarily due to delays in recording $355 million of expenditures and an additional $350 million of differences in the timing of when expenditures were being incurred compared to the forecast.
Cash balances increased but most cash remains allocated for specific purposes and certain spending is not yet reflected in the Treasury Single Account balance, and cash balance remains limited when considering the economic uncertainties and financial risks.
Risks include the uncertain long-term outlook regarding Medicaid federal funds and additional commonwealth contributions to fund disaster relief projects due to inflation-based cost escalation and match requirements.
The mid-year report also incorporates additional risks that have recently emerged, including the implementation of OECD (Organisation for Economic Co-operation and Development) Pillar 2 conforming tax legislation globally and recent legislation impacting spending or revenues. In the second quarter, the island Legislature continued its trend of passing or enacting at least eight pieces of legislation amounting to a total estimated unfunded annual cost between $10 and $26 million, the oversight board pointed out.