Two weeks with the government shut down

In May 2006, Puerto Rico's central government did something governments rarely do: it shut down. The closure ran from May 1 to May 14, turning off much of the executive branch and, with it, more than 1,500 public schools across the island. Nearly 100,000 public employees went unpaid for those two weeks.

The immediate trigger was cash flow. The administration of Governor Aníbal Acevedo Vilá told the legislature it had no money to cover operating costs for May and June, and asked for an emergency loan of more than $500 million to bridge the gap. The Government Development Bank was willing to offer that loan, but only on one condition: that the legislature approve a new sales tax to guarantee the loan would be repaid.

That condition turned a budget problem into a political standoff. Coverage at the time described the crisis as a partisan fight between Acevedo Vilá's Popular Democratic Party administration and a legislature controlled by the opposition New Progressive Party, each side unwilling to hand the other a victory on the proposed terms. For two weeks, that standoff meant literally closed school doors and unpaid public salaries.

The crisis broke at the end the way the bank had proposed: it led directly to Puerto Rico's first general sales tax, the IVU. That single new tax stream did not just close out 2006: it became the exact source of revenue against which COFINA would be created to borrow later that same year, tying this two-week shutdown to the sales-tax bond machine that followed.

For two weeks the consequences were stark and immediate, not abstract: no school for hundreds of thousands of children, no check for tens of thousands of public employees, and a legislature and a fortress publicly unable to agree on how to reopen the government they both ran. It was a small, contained preview of a much larger fiscal adjustment still eight years away.

Sources: Crisis presupuestaria de Puerto Rico de 2006. Freeze 2026-08-22.