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by Robert Becker

March 16, 2001
Copyright © 2001 THE PUERTO RICO HERALD. All Rights Reserved.

In Puerto Rico, government is the 600-pound gorilla that sits wherever it wants to. Commonwealth and municipal governments employ one-third of the work force, AND provide the main source of income, through contracting, for thousands of local businesses. Through their borrowing, they also have a huge impact on the banking and investment industries.

An administration’s stewardship of the economy is an important standard by which it will be judged, which is why Gov. Sila Calderón and her administration are busy portraying the financial situation they inherited as a shambles.

The process began after Calderón’s November elections victory, when her transition team began a chorus of complaints about the fiscal messes they found in government agencies. More recently, Calderón’s financial people warned that government revenues would fall short by $500 million for fiscal year 2001, and that overspending in the Education and Health departments would create an additional $200 million shortfall.

The chorus grew to a crescendo last Wednesday evening, when a somber-looking Calderón delivered to the Legislature her state of the commonwealth budget message -- or as critics put it, the " state of the territory" address.

By painting a bleak fiscal picture, the current Popular Democratic Party administration is trying to lower public expectations. They’re saying that the previous administration left the cupboard bare, so there’s not enough money to do what they promised. They are also trying to spin the story so that whatever accomplishments they rack up will look good in comparison.

That’s politics as usual. But Calderón has systemic problems to face that go much deeper than politics. Puerto Rico’s economy is cooling off, in much the same fashion as that of the United States, and the commonwealth is now seeing the inevitable drop in tax revenues. The prudent thing for any chief executive to do would be to offset the revenues shortfall with cuts in spending.

True to the Popular Democratic Party’s quasi-socialist tax-and-spend philosophy, Calderón has proposed no cuts in government spending and no privitizations of bloated public corporations. She has in fact proposed new programs in her campaign and in the PDP platform that would entail hundreds of millions of dollars in additional spending. She’s got something up her sleeve for everyone.

One such example is Vieques. Calderón trolled for the anti-Navy vote in the 2000 campaign by promising to spend $50 million for Vieques development. She did it to offset the Navy’s announcement that it would spend $40 million in its campaign to stay on the small offshore island.

Calderón also outlined in her budget message she will spend $102 million on "special communities" -- low-income wards and barrios that she wants to develop.

Calderón has also promised to grant pay raises to police, fire fighters and emergency Medical Services workers. and to give bigger Christmas bonuses to public workers. She also wants municipalities to be able to buy back from private owners the community health centers that the Rosselló administration had privatized.

The most important Calderón budget numbers aree the percentage increases spending in her general fund budget and in her consolidated budget, which combined operational funds with capital expenditures. The base line figures ares till fuzzy, as her budget planners are giving different numbers than the Rosselló people, but the increases look to be about 3 percent to 4 percent. Contrary to the practice of her predecessors, Calderón did not provide the press with advance copies of her budget speech, leaving the next days news reports largely devoid of meaningful statistics.

All told, Calderón highlighted in her speech to the Popular Democratic party-controlled Legislature more than $500 million in new or redirected government spending to a myriad of special interests and legitimate public purposes. But, Calderón’s budget message did not say where the money to pay for all of these things will come from, because nobody seems to know the answer to that yet.

While Calderón and her surrogates were painting a bleak picture of the central government’s fiscal health, the opposition New Progressive Party was crunching some numbers of their own. Jorge Santini, the newly-elected NPP mayor of San Juan, said that Calderón, the former mayor, bequeathed him city finances in a state of " fiscal emergency," and ordered austerity measures including restrictions on overtime, vacation and sick leave and perks such as cellular phones, beepers and municipal vehicles.

Santini said that under Calderón’s administration, the city has a $64 million deficit for the current fiscal year. Santini said the central government under Calderón was now projecting a deficit of 2 to 3 percent of its budget, compared to a municipal deficit of her creation that is 17 or 18 percent of the total budget.

Robert Becker, Managing Editor of The San Juan Star, writes the weekly Puerto Rico Report column for the Puerto Rico Herald. He can be reached directly at:

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