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Government must tighten its belt


February 17, 2005
Copyright © 2005 CARIBBEAN BUSINESS. All Rights Reserved.

During the four years of the Sila Calderón administration, big government became the order of the day. The Commonwealth’s payroll increased by over 42,000 salaried employees from 2001 to 2004; $17 billion was issued in new debt; and the budget deficit for fiscal 2005 is projected to surpass more than $1 billion, a new record for the government of Puerto Rico.

In Puerto Rico, there are over 320,000 public-sector employee–one out of every three salaried employees works for the government. By comparison, the private sector has lost nearly 51,000 jobs since 2001. The increase in government jobs is the primary reason Puerto Rico’s unemployment is at 10% and not higher.

To reduce its historic budget deficit and continue financing the massive payroll, the government is now talking about tax reform; another way of saying taxes will be increased, again. But the question that remains to be answered is how long should Puerto Rico’s taxpayers continue to subsidize the government’s inefficiency?

The fact is that more government employees and increased taxes over the past four years have not led to safer streets, better and accessible healthcare for those who need it, quality education, better streets, roads and highways, improved services to the business community, adequate infrastructure, and a long list of other services the government should provide and that would contribute to the quality of life in Puerto Rico.

This year over 100,000 government employees will be renegotiating their collective bargaining agreements. Most will demand that the government (i.e. taxpayers) provide them with higher salaries and benefits. What about the demands for greater productivity from public employees? In Florida, there is one state government employee serving an average of 86 residents; in North Carolina, one state employee serves 59 residents; and in Puerto Rico, we have one state employee for every 13 residents. The inefficiency, lack of productivity, and mismanagement has gotten completely out of hand.

The crisis in the public sector has led many in the business community to demand that fiscal reform go along with the higher taxes the government in seeking. Others, such as the Ana G. Méndez University System has invested in economic studies to examine the possible restructuring of the island’s government and help create economic growth. This was done in the hope that it would ignite a debate calling for a restructuring and downsizing of the commonwealth government. Florida, with a population of 17 million has 14 government agencies, says José F. Méndez, president of the university. By comparison, Puerto Rico with four million people has 130 government agencies.

The economic study commissioned by Ana G. Méndez University provides excellent examples of state governments where public services were privatized, outsourced, or provided through joint public and private partnerships. The results are better services for the state’s residents, a smaller state bureaucracy, increased employment, more productivity, and a reduced burden on the state’s taxpayers. Florida and North Carolina were able to achieve these results with private sector-led initiatives and economic development.

Puerto Rico’s private sector needs to carefully examine the example of these two states and others, and take a much more aggressive stance in demanding fiscal reform from the Commonwealth government. The private sector and business associations must also present a united front to call for increased productivity and fiscal reform from the government, no matter what political party one belongs to. This is an issue that has nothing to do with political views or status-related issues. It’s simply an issue of economics. The government’s restructuring in Florida and North Carolina didn’t happen overnight. In the case of Florida, the achievements have taken more than a decade. The key point is that we have to start somewhere. Improved and quality public services must be demanded by Puerto Rico’s private sector and its residents. It’s about time we start to put our house in order to get our tax dollars’ worth.

This Caribbean Business article appears courtesy of Casiano Communications.
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