Puerto Rico lawmakers begin reviewing proposed budget
Puerto Rico Government Development Bank President Javier Ferrer told lawmakers Tuesday that without the necessary measures, the institution he heads will not have the capacity to float petitions by public corporations by summer.
“The bank does have capital, but if no action is taken, on June 30 the GDB will not [have any],” said Ferrer in response to questions from Finance Committee Chair Sen. José Nadal-Power. “We need the approval of laws that result in recurring revenue, to repay loans.”
Currently, the Puerto Rico Highway Authority is the GDB’s main burden, representing more than 25 percent of the loans in its portfolio, with more than $7 billion in debt, Ferrer said.
Other corporations draining the GDB’s coffers are the Puerto Rico Aqueduct and Sewer Authority and the Ports Authority.
Other members of the government’s economic team also testified during Tuesday’s budget hearings held jointly by the House and Senate.
In her presentation, Treasury Secretary Melba Acosta defended the recommended $9.8 billion budget for Fiscal 2014, to be able to meet government promises, including granting police officers sick pay and covering salary hikes for public employees approved through collective bargaining agreements under the prior administration.
In her lengthy presentation, Acosta outlined the most significant proposals to shore up taxes, including increasing cigarette taxes to $16.15 from $11.15 for every 100 sticks — which would generate $47 million in new money — and imposing a new 1 percent tax on insurance policies underwritten by local companies, which would generate another $101 million for Treasury.
Those measures are in addition to a number of adjustments to close loopholes and improve the level of collections and shore up new revenue.
The list includes tweaking the exemptions granted to resellers, who currently pay no taxes on good purchased for their businesses and effecting a 2 percent surcharge on self-employed people who make up to $200,000 a year. With its approval, Treasury would collect $50 million a year.
Another measure in the works entails placing an additional threshold on taxpayers who buy homes worth $1 million or more, limiting their mortgage interest deductions to a maximum of $35,000 a year. That would shore up $16 million in new revenue, Acosta said.
Meanwhile, Office of Management and Budget Executive Director Carlos Rivas said the proposed budget is “fiscally responsible, because one, it assumes and includes all of the island’s fiscal obligations and two, it dramatically reduces the projected deficit, and three, it limits increases in operating costs to the amount that covers the actual government operation.