Puerto Rico board approves $10B budget as resignations loom

A federal control board that oversees Puerto Rico’s finances has approved a new budget that largely suspends austerity measures and government cuts for one year as the U.S. territory struggles to recover from hurricanes, earthquakes and the pandemic

SAN JUAN, Puerto Rico — Puerto Rico awoke to a new budget approved early Wednesday that largely suspends austerity measures and government cuts for one year as the U.S. territory struggles to recover from hurricanes, earthquakes and the pandemic.

A federal control board that oversees Puerto Rico’s finances approved the $10 billion budget after rejecting a different one that Gov. Wanda Vázquez recently submitted and contained numerous incentives and spending increases that critics say were unrealistic.

Puerto Rico’s 2021 consolidated fiscal year budget is 10% bigger than last year’s, mainly because it anticipates a 17% increase in federal funds. The majority of spending targets health care, education and government pension payments, while areas including housing and agriculture will see cuts.

The budget also contains $83 million worth of incentives in the general fund, including awards ranging from $5,000 to $100,000 for schools that meet certain requirements including teacher and student attendance.

José Carrión, the board’s chairman, said it’s the fourth consecutive year that Puerto Rico’s government has submitted a budget inconsistent with a fiscal plan that serves as the island’s economic blueprint.

“There can’t be spending we can’t afford,” said Carrión, who announced he is stepping down in early October.

Puerto Rico remains mired in a deep economic crisis as it restructures a portion of its more than $70 billion public debt load created by decades of mismanagement, corruption and excessive borrowing to balance budgets. The board has said it expects to complete the bankruptcy-like process this year.

Board members said they largely suspended austerity measures and government cuts to allow Puerto Rico’s government to impose long sought-after reforms, including increasing the local labor participation rate, making it easier to do business on the island and providing cheaper and more reliable electricity.

During a two-hour meeting on Wednesday to talk about the budget, several board members chastised Puerto Rico officials for not presenting audited financial statements since 2017.

“It’s really disheartening,” said board member Carlos García, who also announced he is stepping down in late August.

Congress created the board in 2016 as part of a law known as PROMESA that a group of Democratic legislators are pushing to amend, saying the board has not done enough to protect Puerto Ricans and improve the island’s economic situation.