CPI: Category 5 — the fiscal hurricane no one talks about

On October 21, 2008, two weeks before the elections, the Centro de Periodismo Investigativo (CPI) published an analysis of the government’s audited financial statements and Government Development Bank (BGF) bond offerings: the next governor — whichever party — would inherit a fiscal “hurricane” that the campaign barely mentioned.

In fiscal year 2008, collections fell short by $418 million; a balancing trick, according to CPI, was delaying payments to suppliers “for a short period.” The current fiscal year’s budget was approved with a $1,258 million deficit and, “as an exception” to the ban on borrowing to balance, authorization was given to issue debt collateralized by tax collections. The main driver of the gap: in 2007 the government spent $922 million more than in 2006. Accumulated government debt was around $17,700 million.

Despite ~11,700 fewer government posts between 2005 and 2008, the public sector remained employer of 27.6% of employees. The Planning Board reported “growth” of −2.1% in the just-closed fiscal year; cement −10.7% in FY2008. On the IVU: previously it contributed 57% of government revenue via taxes; afterward it fell to 52%; 23% of IVU collections (~$210 million) came from only 20 establishments. Retirement systems were shown bankrupt by $9,956 million; in 2007 remaining Puerto Rico Telephone stock sales were used to pay benefits.

CPI cited CNE (Sept. 2008): scarce revenue from incentives, a complex tax system and weak enforcement; high spending from obsolete programs, clientelist hiring and private clientelism. CPI August 2008 vs 2007: +12.3% overall (food +16.8%; lodging +20.8%). Tourism: visitors −12.3% through May 2008; tourist spending from $3,369 million (2006) to $3,143 million (2007). Budget deficit ≠ theft. Debt issuance ≠ crime. Primary: CPI 2008-10-21.

Source: Centro de Periodismo Investigativo. https://periodismoinvestigativo.com/2008/10/categoria-5-el-huracan-del-que-nadie-habla/