Board submits Puerto Rico budget as some question its powers


FILE – In this July 29, 2015 file photo, the Puerto Rican flag flies in front of Puerto Rico’s Capitol as in San Juan, Puerto Rico. A senior Puerto Ricon official said Tuesday, Feb. 11, 2020, that the island’s government has lost more than $2.6 million after falling for an email phishing scam. (AP Photo/Ricardo Arduengo, File)

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SAN JUAN, Puerto Rico (AP) — A federal control board that oversees Puerto Rico’s finances submitted a proposed $10 billion budget on Thursday as federal legislators debate whether to curtail the board’s power over the U.S. territory.

The proposed Puerto Rico budget is slightly bigger than last year’s and largely suspends government cuts for one year to help the island impose reforms sought by the board including increasing Puerto Rico’s labor participation rate, making it easier to do business on the island and providing cheaper and more reliable electricity.

Local government officials agree with some of the proposed changes but argue the board sometimes oversteps its boundaries as it continues to restructure a portion of Puerto Rico’s more than $70 billion public debt load amid an economic crisis.

“Over the last several years, the board has attempted to take advantage of this unclear separation of powers to gain control over day-to-day operations of the government,” said Omar Marrero, executive director of Puerto Rico Fiscal Agency & Financial Advisory Authority.

Marrero spoke at an online hearing held by the U.S. House Natural Resources Committee, which oversees affairs in U.S. territories. The committee’s chairman, Rep. Raúl Grijalva, recently submitted amendments to a federal law that created the board as part of a financial package for Puerto Rico. He and several other Democrats have said the board is not doing enough to protect Puerto Ricans and improve the island’s situation since its creation in 2016.

The changes they’re seeking include allowing the island to shed certain debt, which board executive director Natalie Jarekso said would erode the confidence of creditors and lead bondholders to seek a more expensive and restrictive type of debt.

“The board has serious concerns that several of these provisions, while well-intended, will substantially hamper its ability to effectively negotiate settlement of claims at this very critical juncture,” Jaresko said during the hearing.

The ongoing debate comes as the board and Puerto Rico’s government remain at odds over the proposed budget for fiscal year 2021, which was submitted hours before the hearing. The board rejected a different proposed budget that the government submitted, which included $170 million that in part would be used to align salaries across agencies and fund a public broadcasting station.

The board’s proposed budget includes cuts to departments including health, housing and agriculture as officials warn that general fund revenues could fall by 12% as a result of the pandemic. Board members noted that more than 70% of their proposed budget goes to education, public safety, health, economic development and pension payments, with pensions and education receiving the biggest slice at 20% each. In addition, it includes $675 million in investments for things such as improving broadband access and increasing speed in certain areas, upgrading public hospitals, and creating scholarships to attract medical students to rural areas.

The budget has to be approved by June 30.

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