• The San Juan Daily Star

Zaragoza: Gov’t, fiscal board differ on budget ‘geography,’ not size

Treasury Secretary Francisco Parés Alicea

By The Star Staff

The central government’s fiscal agencies participated Tuesday in a Senate Treasury, Federal Affairs and Financial Control Board Committee hearing on the budget for fiscal year 2022-2023 totaling $28.7 billion.

“The fiscal team arrived well prepared -- I believe it was a good exercise; we wanted to highlight differences between last year’s budget and this year, and within this year highlight the differences between La Fortaleza and the Financial Oversight and Management Board,” Committee Chairman Juan Zaragoza Gómez said in a written statement. “Contrary to last year, when there were some differences in the total amount, this year there is no difference in the total for Fortaleza and the Board; it is more a difference in geography, where the numbers are. They indicated that they feel quite confident with those reconciliation items of the Board regarding UPR and the municipalities.”

The Treasury Department, the Office of Management and Budget, and the Puerto Rico Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) participated in the hearing.

Treasury Secretary Francisco Parés Alicea reported that the consolidated budget proposed for fiscal year (FY) 2022-2023 is constituted of $12.5 billion from the General Fund, $4.9 billion in Special Funds and $11.2 billion in federal funds.

“This is a budget that invests in Puerto Rico, in our human capital and that includes the payment of the debt,” the Treasury chief said. “A budget that reduces 13 percent in contracts, while increasing 20 percent in public payroll. This is a budget that thinks of our retirees, setting aside 12 percent in a pension payment trust.”

Zaragoza asked about the difference in the General Fund budget increase this year compared to last. Parés replied that it is due to the sum of the budget process in tariffs that in the past had a final destination but now return and flow through the General Fund and are budgeted differently. As an example, he mentioned the crude oil tax that used to go to the Highways and Transportation Authority and now goes to the General Fund.

Likewise, Parés stated that the Russia-Ukraine conflict, “in addition to being a tragic and unfortunate event worldwide, has had its economic effect outside the border, including in Puerto Rico.”

“You can see it in consumption,” he said.

He indicated that what you see in the sales and use tax (IVU by its Spanish acronym), a few months later you see it in the income tax. As an example, he noted that a decrease in income was observed, and in March, the insurance sector did not have the expected performance.

“In general terms, we can make the projection, but a price is beginning to be paid for the armed conflict and Puerto Rico is not isolated from what is happening in the world,” the Treasury chief said.

Zaragoza, a certified public accountant who served as Treasury secretary under former Gov. Alejandro García Padilla, asked for details on the change in the distribution of items compared to the current fiscal year and where the increase for the next year was reflected.

OMB Executive Director Juan Carlos Blanco pointed out that the biggest change is the payment of the debt, which totals $1.5 billion per year. He also noted the pension reserve.

In addition, Blanco said there is a contribution to improve police pensions and an increase in the public payroll for teachers that is 47 percent recurrent state funds and 53 percent federal funds from Elementary and Secondary School Emergency Relief (ESSER), which the Department of Education in particular receives and which last until 2026.

“We have the money to make salary adjustments,” Blanco said. “The recruitment of 400 cadets is contemplated to be part of the Puerto Rico Police Bureau with an investment of $21 million. In addition, 300 cadets will be recruited to form part of the Fire Department, for which $10.5 million was allocated. Similarly, and in response to the need for better salaries for officials of the Department of Correction and Rehabilitation, we included a salary increase of $500 for officers, supervisors and cadets.”

Meanwhile, Zaragoza asked where the cuts in the items are seen in the new budget compared to last year’s budget. Blanco replied that the most important reduction is in the line of professional service contracts, which went down 13 percent.

There are differences in amounts allocated to the University of Puerto Rico as well, he said. The OMB chief noted that the oversight board’s budget is $500 million, while the government is placing it at $620 million.

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