Lawmakers start hearings on proposed $9.5B budget
Members of the House and Senate Treasury Commissions began Wednesday public hearings on the proposed budget for the 2017-2018 fiscal year, which exceeds $9.5 billion, outlined in Joint House Resolutions 186 and 187.
The proposed amount is broken down into $9.1 billion in net income and $390 million to be received from the sale of assets or funds available through the three Retirement Systems: Government, Judiciary and Teachers.
The proceeds of asset sales and available funds will be used to subsidize the way pensions are paid, he said. This budget represents a net increase of $575 million compared with 2016-2017 budget, due to non-recurring revenues, which are in the consolidated budget.
Meanwhile, the consolidated budget that draws on federal funding, own income, other income and special funds, among others reaches $25.6 billion (2017) and $25.5 billion (2018), respectively. The $25.6 billion is broken down into $9.1 billion in net revenues to the General Fund, $390 million in other appropriations from the General Fund, $6.3 billion in federal funds $2.0 billion in other income, $7.0 billion in own income, $515 million in special state funds and $25 million in loans and bond issues.
The hearing included testimony from the government’s fiscal component, led by the Executive Director of the Fiscal Agency and Financial Advisory Authority, or AAFAF, Gerardo J. Portela, accompanied by Office of Management and Budget Executive Director José Rosado-Marrero, Treasury Secretary Raúl Maldonado-Gautier, and the President of the Government Development Bank, Christian Sobrino.
During his testimony, Portela said it is the first time a fiscally responsible budget is drawn up.
“It ensures the welfare of the people. We are confident that the preparation, approval and implementation of the budget will return trust to the government,” he said.
This is the first Zero-based budget the Legislature is evaluating under the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) and certified by the Financial Oversight and Management Board for Puerto Rico on June 2.
AAFAF’s recommended budget for fiscal year 2017-18 increased from $40 million to $90 million, mainly for expenses related to professional services, payroll and reserves. The remaining items jumped due to increased staffing and operational needs formerly provided by the GDB.
“Given the nature of AAFAF’s mission, expenditures on legal and financial advisory services are critical to the functioning of the government within the context of the fiscal and legal situation it’s facing. Payroll expenses increase to the extent that petitions and responsibilities imposed by the Fiscal Oversight Board escalate,” said Portela.
Meanwhile, the consolidated budget of the OMB recommended for the next fiscal year shows a 34 percent increase compared to the current fiscal year. This responds mostly to increased payroll and related costs ($661,000) and professional services ($2,089) needed to comply with the provisions set by PROMESA.
Maldonado-Gautier said the Oversight Board has already approved collections measures and other initiatives underway. He also denied that the government will pass a budget without tax measures to support it.
The Treasury Department’s recommended budget for fiscal year 2017-18 amounted to $249.4 million. Resources include $90.9 million from the General Fund Joint Resolution, $120.7 million in Special Assignments (including $90 million in a reconciliation adjustment of the Fiscal Plan) and $37.7 million from Special State Funds corresponding to the lottery.
“The General Fund Joint Resolution shows a reduction of $20.5 million compared to the resources allocated for fiscal year 2016-17,” Maldonado-Gautier said.
The government officials explained that payments to suppliers are not affected under the Title III restructuring clause included in PROMESA. They also stated that no reductions are contemplated in pensions.
Hearings continue today with testimony from the Courts Administration Office and the Office of Socioeconomic Development.