Editing Government of Puerto Rico (section)

==Government finances==
{{Main article|Puerto Rico government budget balance|Budget of the Government of Puerto Rico|Puerto Rico Consolidated Fund|Puerto Rico General Fund}}
{{Update|inaccurate=yes|section|date=November 2012}}

Puerto Rico's central government, which includes all three branches of government but excludes public corporations and municipalities, has an annual general budget that currently ranges from $8.5 billion to $9 billion in revenues and expenditures.<ref name="PR_2005_budget">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 30; Statement of Revenues and Expenditures - Budget and Actual – Budget Basis – General Fund</ref> The government also receives more than $4.2 billion annually in [[subsidy|subsidies]] and [[federal aid]] from the United States.<ref name="PR_Op_and_Cap_Grants">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Operating and Capital Grants and Contributions (columns)</ref> A substantial portion of this amount is earmarked for [[Public welfare in Puerto Rico|public welfare]], including funding educational programs (such as [[Head Start (education)|Head Start]]), subsidized housing programs (such as [[Section 8 (housing)|Section 8]] and [[Public housing in Puerto Rico|public housing projects]]), and a [[Nutrition Assistance for Puerto Rico|food stamp]] system called the [[Nutrition Assistance for Puerto Rico]] program.

[[List of government-owned corporations of Puerto Rico|Government-owned corporations]] generate approximately $6.3 billion in general revenues by charging citizens for the services they provide. The largest government-owned corporation, the [[Puerto Rico Electric Power Authority]] (PREPA), generates almost half of those revenues alone ($3 billion). However, government-owned corporations generate about $10.6 billion in expenses when combined, requiring substantial subsidies by the central government. In 2005, the central government provided more than $2.6 billion in subsidies, while the remaining expenditures were funded through interest and investment earnings.<ref name="PR_components">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 38; Combining Statement of Activities: Major Component Units</ref>

When considering all three branches of government, including all government-owned corporations and municipalities, the government of Puerto Rico's annual expenditures can reach to more than $28 billion.<ref name="PR_Activities1">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Primary Government and Component Units Expenditures (column)</ref>

===Central government revenues===
{{Further|Taxation in Puerto Rico}}

The central government's main source of revenue is income tax imposed on individual citizens and private companies, which can amount to approximately $5.5 billion.<ref name="PR_2005_budget"/> Other significant sources of revenue include excise taxes on imports, cigarettes, liquor, hotel rooms, cement, and vehicles ($2 billion);<ref name="PR_2005_budget"/> and lotteries ($870 million).<ref name="PR_2005_proprietary">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 32; Statement of Revenues, Expenses, and Changes in Net Assets-Proprietary Funds</ref>

====Sales and Use Tax====
{{Main article|Puerto Rico Sales and Use Tax|Puerto Rico Sales Tax Financing Corporation}}

On November 15, 2006, the government eliminated the excise tax of 6.6% on imports (taxes on cigarettes, liquor, and cars are still in effect) and substituted it for a 5.5% islandwide [[Puerto Rico Sales and Use Tax|Sales and Use Tax]], plus a municipal sales tax of 1.5%, for a total of 7%, in what has been known as the [[Puerto Rico Tax Reform]].<ref>{{cite news |author= Miguel Díaz Román |title= Incierto el impacto del nuevo tributo|url=http://www.endi.com/noticia/portada/noticias/incierto_el_impacto_del_nuevo_tributo/110378 |newspaper=[[El Nuevo Día]] |date=2006-11-15 |access-date=2006-11-15|language= es}}</ref> This change was partly due to the government's growing expenditures and fiscal deficits which remained unchecked and uncorrected for several years, until several [[credit agency|credit agencies]] warned public officials that all general-obligation [[Bond (finance)|bonds]] issued by the government were to be downgraded if the problem was not corrected.<ref name="Rodríguez">{{cite news|first=Magdalys |last=Rodríguez |url=http://www.endi.com/2006/05/01/index/412858.asp?category=Ultima+hora&title=No+hubo+acuerdo+y+el+gobierno+amanecio+cerrado&artdate=2006/05/01 |title=No hubo acuerdo y el gobierno amaneció cerrado |newspaper=[[El Nuevo Día]] |access-date=2006-05-01 |language=es }}{{dead link|date=May 2017|bot=medic}}{{cbignore|bot=medic}}</ref>

The situation reached a turning point when the executive branch of the government was partially shutdown, the events now known as the [[2006 Puerto Rico budget crisis]]. Thirty-three (33) agencies were closed and 95,762 employees were sent home without pay. Following public bickering between the two main political parties, the new sales tax was approved in favor of the excise tax on imports on May 10, 2006, ending the budget crisis.<ref name="Rodríguez"/>

===Central government expenditures===
{{Update|section|date=November 2012}}

The largest types of expenditures made by the government are those related to education. In 2005 alone, the government expended more than $5 billion in public education and  education-related programs, representing approx. 28% of total government expenditures (excluding public corporations).<ref name="PR_2005_activities_expenditures">[http://www.hacienda.gobierno.pr/downloads/pdf/cafr/FINANCIAL_REPORT_2005.pdf Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report] for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Expenditures (line items)</ref> Other significant expenditures include [[Public housing in Puerto Rico|public housing]] and welfare ($3.4 billion or 19%), public safety ($2.5 billion or 14%) and public health ($2.3 billion or 13%).<ref name="PR_2005_activities_expenditures"/>

===Public debt===
{{Main article|Public debt of Puerto Rico}}

In May 2007, local economists expressed serious concerns when it was revealed that the [[Puerto Rico public debt]] equaled to 76% of its [[gross national product]] (GNP), making it one of the most indebted countries by percentage in the world, even more than the United States.<ref name="ENDI_76_centavos">[http://www.endi.com/noticia/portada/noticias/debe_puerto_rico_76_centavos_de_cada_dolar/208760 ''Debe Puerto Rico 76 centavos de cada dólar''] by Joanisabel González, [[El Nuevo Día]], May 5, 2007, accessed May 5, 2007 (Spanish)</ref>{{update inline|date=November 2012}}  Economists have criticized the government's fiscal policy, whose level of expenditures and indebtedness has increased significantly within the past decade while the economy was grown at a much slower pace. Between 2000 and 2006 alone, Puerto Rico's GNP rose 5.37%, while its public debt's relation to GNP rose 18%.<ref name="ENDI_76_centavos"/> By comparison, many other Latin American countries have seen reductions in their GNP-public debt percentages during that same time period.<ref name="ENDI_76_centavos"/>

By early 2017, the [[Puerto Rican government-debt crisis]] posed serious problems for the government which was saddled with outstanding bond debt that had climbed to $70 billion or $12,000 per capita<ref name="Baribeau">{{cite web |url=https://www.forbes.com/sites/debtwire/2017/01/23/united-states-virgin-islands-risks-capsizing-under-weight-of-debt/#570913e73673 |title=United States Virgin Islands Risks Capsizing Under Weight Of Debt |last=Baribeau |first=Simone |date=January 23, 2017 |website=[[Forbes]] |access-date=February 15, 2017}}</ref> at a time with a 45 percent poverty rate and 12.4% unemployment that is more than twice the mainland U.S. average.<ref>{{cite web |url=http://www.thefiscaltimes.com/latestnews/2017/01/18/Puerto-Rico-oversight-board-favors-more-time-restructuring-talks |title=Puerto Rico oversight board favors more time for restructuring talks |author=Nick Brown |date=January 18, 2017 |website=Fiscal Times |publisher=The Fiscal Times |access-date=February 16, 2017}}</ref><ref name="Baribeau"/> The debt had been increasing during a decade long recession.<ref>{{cite news |author=Associated Press<!--Staff writer(s); no by-line.--> |title=Puerto Rico Gets More Time |url=http://www.starherald.com/news/nation_world/puerto-rico-gets-more-time-to-propose-fiscal-plan/article_b805f0e6-f333-5d33-8d94-d29a610d820a.html |newspaper=Star Herald |location=Scottsbluff, ME |date=January 29, 2017 |access-date=February 16, 2017 }}{{dead link|date=July 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref>

The Commonwealth had been defaulting on many debts, including bonds, since 2015.  With debt payments due, the Governor was facing the risk of a government shutdown and failure to fund the managed care health system.<ref>{{cite news |last=Platt |first=Eric |date=January 19, 2017 |title=New Puerto Rico governor seeks amicable debt crisis resolution |url=https://www.ft.com/content/d9551584-de66-11e6-86ac-f253db7791c6 |archive-url=https://ghostarchive.org/archive/20221210/https://www.ft.com/content/d9551584-de66-11e6-86ac-f253db7791c6 |archive-date=2022-12-10 |url-access=subscription  |newspaper=Financial Times |location=New York |access-date=February 17, 2017}}</ref><ref name="Watson">{{cite web |url=https://www.treasury.gov/connect/blog/Pages/Secretary-Lew-Sends-Letter-to-115th-Congress-on-Puerto-Rico.aspx |title=Secretary Lew Sends Letter to 115th Congress on Puerto Rico |last=Watson |first=Dan |date=January 17, 2017 |website=Department of the Treasury |access-date=February 16, 2017}}</ref> "Without action before April, Puerto Rico’s ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico", according to a letter sent to Congress by the Secretary of the Treasury and the Secretary of Health and Human Services. They also said that "Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico’s inequitable health care financing structure and promote sustained economic growth."<ref name="Watson"/>

Initially, the oversight board created under [[PROMESA]] called for Puerto Rico's governor [[Ricardo Rosselló]] to deliver a fiscal turnaround plan by January 28. Just before that deadline, the control board gave the Commonwealth government until February 28 to present a fiscal plan (including negotiations with creditors for restructuring debt) to solve the problems. A moratorium on lawsuits by debtors was extended to May 31.<ref>{{cite news |author=Associated Press<!--Staff writer(s); no by-line.--> |url=http://www.starherald.com/news/nation_world/puerto-rico-gets-more-time-to-propose-fiscal-plan/article_b805f0e6-f333-5d33-8d94-d29a610d820a.html |newspaper=Star Herald |location=Scottsbluff, ME |date=January 29, 2017 |access-date=February 16, 2017 }}{{dead link|date=July 2017 |bot=InternetArchiveBot |fix-attempted=yes }}</ref> It is essential for Puerto Rico to reach restructuring deals to avoid a bankruptcy-like process under [[PROMESA]].<ref>{{cite web |url=http://www.thefiscaltimes.com/latestnews/2017/01/18/Puerto-Rico-oversight-board-favors-more-time-restructuring-talks |title=Puerto Rico oversight board favors more time for restructuring talks |author=Nick Brown |date=January 18, 2017 |website=Fiscal Times |publisher=The Fiscal Times |access-date=February 16, 2017 |quote=The bipartisan, seven-member oversight board was created under the federal Puerto Rico rescue law known as PROMESA, passed by the U.S. Congress last year. It is charged with helping the island manage its finances and navigate its way out of the economic jam, including by negotiating restructuring deals with creditors.}}</ref>

Statehood might be useful as a means of dealing with the financial crisis, since it would allow for bankruptcy and the relevant protection. In the [[Puerto Rican status referendum, 2020]], the majority of voters approved of Puerto Rico becoming a state.<ref>{{cite web|title=Plebiscito Resulatados Isal|trans-title=Island Plesbiscite Results|work=Comisión Estatal de Elecciones|trans-work=[[Puerto Rico State Commission on Elections]]|url=https://elecciones2020.ceepur.org/Escrutinio_General_93/index.html#en/default/PLEBISCITO_Resumen.xml|access-date=December 31, 2020|language=es|archive-url=https://web.archive.org/web/20210202072404/https://elecciones2020.ceepur.org/Escrutinio_General_93/index.html|archive-date=2021-02-02|url-status=live}}</ref> However, the referendum was non-binding, and there has been little federal action since the referendum.

According to the Government Development Bank, statehood might be the only solution to the debt crisis. Congress has the power to vote to allow Chapter 9 protection without the need for statehood, but in late 2015 there was very little support in the House for this concept. Other benefits to statehood include increased disability benefits and Medicaid funding, the right to vote in Presidential elections and the higher (federal) minimum wage.<ref>{{cite web |url=https://www.theatlantic.com/business/archive/2015/11/ben-carson-puerto-rico/415014/ |title=Why Puerto Rican Statehood Matters So Much Right Now |last=White |first=Gillian B. |date=November 9, 2017 |website=[[The Atlantic]] |publisher=The Atlantic Monthly Group |access-date=February 21, 2017 |quote=Six words: the ability to file for bankruptcy}}</ref>