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Bill Requires Federal Report on Puerto Rico Government Budgeting

The U.S. Senate committee with jurisdiction over Federal relations with the U.S.’ territories held a hearing today on legislation that would require a Federal evaluation of annual revenue and expenditure estimates by the insular governments.

The U.S. Government Accountability Office (GAO), a non-partisan investigative arm of Congress, would report and make recommendations on the territorial budget forecasts to congressional committees.

Estimating more revenue than will be collected and less spending than will be done helps make budgets seem to be balanced.  It also, however, leads to larger budget deficits, which have to be made up by costly borrowing, often through government bonds.

At the end of last month, the Government of Puerto Rico approved its budget for Commonwealth Fiscal Year 2014, which began July 1st.  Members of the legislature’s statehood party minority and, reportedly, economists and bond rating agencies have expressed concern that the budget forecasts of the new “commonwealth” party administration were unrealistic.

From Fiscal Years 2009 through 2012, the previous statehood party administration was  conservative in its revenue projections, reducing Puerto Rico’s deficits further than planned.

But Puerto Rico’s representative to the Federal government and statehood party president,  Pedro Pierluisi, told the Senate Energy and Natural Resources Committee today, “between Fiscal Year 2006 and 2008, the Puerto Rico government overestimated revenue by $1.13 billion, $822 million, and $718 million dollars, respectively.”

A “commonwealth” party administration was in office during Fiscal Years 2006-8.

Supporting the legislation, Resident Commissioner Pierluisi noted that inaccurate budget projections have “a negative, cascading effect—resulting in larger deficits, excess borrowing, credit downgrades, higher interest payments, and the diminished ability to meet pension obligations and make important investments in education, infrastructure, public safety and other priority areas.”

Puerto Rico government bonds are hovering just above ‘junk’ status because of the government’s huge debt and continued excessive spending and because of the Commonwealth’s poor economy.

Governor Garcia Padilla’s Administration strongly rejected the idea that the insular government would benefit from the GAO report.

Garcia’s secretary of public affairs also wrongly attributed the proposal to Pierluisi.

The requirement is part of an “Omnibus Territories” bill that includes a number of other provisions. Energy and Natural Resources Committee Chairman Ron Wyden (D-Oregon) and Ranking Minority Member Lisa Murkowski (R-Alaska) sponsored the bill, although Wyden said at the hearing  they did because territories have no representation in the Senate and they were not necessarily committed to the bill’s proposals.

The bill is similar to legislation sponsored in the House of Representatives, where the territories have representatives who can only vote in committees of which they are members, by delegates from territories.

Another section of the bill that would benefit Puerto Rico would require the U.S. Interior Department to assign a team to develop and help implement plans for territories and nations in free association with the U.S. to reduce dependence upon imported fossil fuels and transition to indigenous energy sources.  There would be benefits for the environment and, hopefully, electricity costs, which are extremely high in Puerto Rico and other territories.  Annual progress reports would also be required.

The Interior Department opposed the provision in the hearing.

The Department also threw cold water on a final provision of the bill that would affect Puerto Rico.  It is based on legislation originally sponsored by Pierluisi and would authorize Interior to provide the support for protecting endangered marine turtles in territories that it can now provide in foreign countries.

Interior’s witness at the hearing said that the Department supported the intent of the proposal but did not have the funding for providing the assistance in U.S. territories that it provides in foreign countries.



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