Policy Report – Your budget and your priorities, the Oversight Board and Fiscal Unilateralism

Summary of the 2024-2025 budget as proposed by the Government and commented on by the FOMB. While the Board proposed the same amount of $13,062 million as the Executive’s version, it established a new distribution. The FOMB also reduced by almost $900 million the $13,954 million version approved by the Legislative Assembly that the Board invalidated once again relying on PROMESA. See the graphs below.

Espacios Abiertos’ team, under the direction of Daniel Santamaría-Ots, EA’s Research Director, produced this report and visualization. (You can Access the report in its English version here.)

With the purpose of democratizing access to fiscal information, Espacios Abiertos created the Fiscal Observatory, to foster better knowledge and understanding of the allocation of public funds through the visualization of the government’s budget (central government, municipalities, and debt service).  Currently, the Fiscal Observatory allows you to access the proposed budget for the next fiscal year 2024-2025, as well as access the interactive dashboard with every budget approved, revenues and expenses since 2006.  Over 50,000 fields of official data, easily available. Visit and explore our platform at https://www.observatoriofiscalpr.com

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While our elected bodies and the Financial Oversight and Management Board (FOMB) seem unable to agree on what constitutes the first balanced budget (see FOMB, letter to the Secretary of the Puerto Rico Department of Treasury) that could potentially lead to an exit in four years from the entity created by the U.S. Congress, the Board continues to determine each year both the amount and the composition of the budget for the people of Puerto Rico.

This fiscal year, beginning July 1, is no exception. In a first letter sent on May 16 to the executive branch (see FOMB, Notice of Violation to the proposed Commonwealth of Puerto Rico Budget for Fiscal Year 2024-2025), and pursuant to Section 202(c)(1)(B) of the PROMESA Act, the Board once again informs the people of Puerto Rico that the proposed (see OMB, Proposed Budget by the Governor for the Fiscal Year 2024-2025) General Fund budget does not reflect their public policy priorities. Although the Board proposed the same amount of $13,062 million as the executive version, it determined a new composition. In a second letter (see FOMB, Notice of Non-Compliance to the Legislative Assembly regarding the General Fund Budget for Fiscal Year 2024-2025) sent on June 23 to the Legislative Assembly, and pursuant to Section 202(d)(1) of the PROMESA Act, the Board this time invalidates the $13,954 million budget approved with a broad majority in both the House of Representatives and the Senate of Puerto Rico. Thus, we see once again that the Board not only decides the composition but also the size of the General Fund budget. This scenario worsens as the unilateral decision-making in budgetary matters has removed public budget debates and citizen participation (see EA, Two Budgets and Zero Participation) in public hearings. While letters and certifications are exchanged between the Board and the Puerto Rican government, the democratic deficit corners citizens’ right to decide.

The Board has again determined that this year will approve certain measures, condition some, and deny others. Overall, this has resulted in the denial of $515.8 million and the approval of $401 million for the proposed General Fund budget for the next fiscal year. For example, while it conditions $102 million to the University of Puerto Rico (UPR) for the second consecutive year, it disallows $82 million to municipalities, denies $20 million to implement the social reconstruction and violence prevention plan, or declines $15.3 million to hire 856 special education coordinators, the Board does authorize $14 million to supplement funding for political party contributions.

Do these priorities represent your public policy and budget priorities?

Let’s analyze the Board’s message in response to the executive’s request for incremental funds and budget changes. The letter contains four major sections: 1) approved budget items that comply with the certified fiscal plan in force and with certain requested information requirements; 2) denied budget items that do not comply with the certified fiscal plan but could be reconsidered during the next fiscal year; 3) permanently denied items; and finally, 4) revised budget items with authorized budget increases and decreases. Access the Report here.

The Board approved $130.7 million after the executive’s requests complied with the certified fiscal plan in force and included certain additional information requirements. The most notable items include $30 million from the Department of Natural and Environmental Resources (DNER) for the rental of diesel pumps for flood control ($15 million directly to the agency and another $15 million through allocations under the custody of OMB), $15 million from the Adoption Service of the Department of Family and Children Administration (ADFAN) for the “Homes” family care services initiative, and $14 million to supplement funding for political party contributions ($12 million to match political party donations and $2 million for campaign administrative expenses as per Law 222 of 2011).

The Board rejected $396.9 million that could be reconsidered if they comply with the certified fiscal plan in force and with certain additional information requirements. Among the most important denied items subject to conditions for future approval are: first, and as occurred last year, the conditionality of $102 million to the University of Puerto Rico (UPR) until a strategic plan is presented; second, the denial of $80 million to municipalities to finance their Medicaid contributions for not complying with Law 29 of 2019; and third, the disapproval of $69.6 million for the Financial Management Agenda due to lack of detail on its estimated costs. Fourth, the rejection of $21 million for the decentralization of the Department of Education (IDEAR) due to insufficient information and lack of clarity in the methodology used to justify the investment. Lastly, fifth, the refusal of $20 million to implement the social reconstruction and violence prevention plan for not providing adequate information, including its objective, business plan, and specific use of funds. The denial of these items and the rest shown in the graph could be approved under certain conditions if the Board believes they comply with the certified fiscal plan in force and the pre-established conditions in its letter to the executive.

The Board denied $118.9 million to the government without the possibility of amendment for not complying with the current certified fiscal plan. Among the most relevant permanently denied items are the following initiatives: first, the Board rejected $45.7 million to finance the public service reform initiative. While the government requested $74 million to finance this reform, the Board only granted $25 million. Second, it denied $18.9 million for technology investment (PRITS): the government requested $23 million for various technological initiatives and the Board only granted $4.1 million to renew Microsoft, Oracle, and other security software licenses. Third, it rejected $15.3 million to hire special education coordinators for the Department of Education. The executive requested $20 million to hire 856 special education coordinators and the Board granted $826,000 to launch a pilot program to evaluate the needs of these coordinators and $3.9 million in incentives for the pilot itself. Fourth, it denied $10.5 million to the Office for Socioeconomic and Community Development (ODSEC) to finance two programs that promote well-being and improve the quality of life of the elderly. The government requested $21 million and the Board granted $10.5 million. Fifth, it declined $9.2 million to the State Elections Commission. The government requested $31 million and the Board granted $21.8 million.

Lastly, the Board authorized budget changes worth $270.4 million, modifying 44 budget items by authorizing increases in forty (40) of them and decreases in four (4). Among the largest items is the $110.7 million increase, mostly intended to finance part of the payroll of the Department of Education due to the expiration of federal ESSER (“Elementary and Secondary School Emergency Relief”) funds; second, a $44 million increase for electricity and water payments to certain government agencies; third, a $21.7 million increase to finance the administrative office of the Department of Public Safety; and fourth, a $20.1 million increase to finance salary adjustments and surgical materials for the Medical Services Administration (ASEM).

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To provide accountability for the budgetary processes—both central government and municipalities—and the country’s public debt, Espacios Abiertos created the Fiscal Observatory. Here, you can access the proposed budget for the next fiscal year 2024-2025, already approved by the Legislative Assembly but still pending certification by the Board on or before June 21, 2024. Visit and explore our platform at the Fiscal Observatory of Puerto Rico.