Puerto Rico's House of Representatives approved belt-tightening measures for government employees Friday.
Puerto Rico Gov. Alejandro García Padilla expects that the Special Law for Government Fiscal and Operational Stability will remain in place for the next few years.
The law declares a state of emergency for the fiscal situation. The executive branch is directed to cut spending for professional services or purchases by 10% (except for services that are not divisible, like consultancy studies). There will be a hiring freeze with some exceptions.
The measure bans pay raises for years of service, meritorious service, or other reasons.
It gives the governor the power to require fiscal measures to apply to government corporations as well as to government agencies.
It prohibits the government from hiring professional services for more than $100,000 in a fiscal year without permission of the government's chief of staff.
It directs that the government's subsidy for the University of Puerto Rico remain at the fiscal 2014 level for the next few years.
The measure reduces the size of the government's Christmas bonus to its workers.
The Senate will consider the measure next.
Passage of the measure is a prerequisite for adoption of Gov. Alejandro García Padilla's proposed budget. The House is expected to take up the budget later this week, a source close to the governor said.
Puerto Rico's government has until the end of this month to adopt a fiscal 2015 budget. The fiscal year begins on July 1.
The governor has proposed a budget that he has described as balanced.
Outside analysts have noted that Puerto Rico's March general obligation bond included $270 million in capitalized interest for fiscal 2015. Because of this they say that the governor's proposed budget could not be called balance. The $270 million would be 2.8% of the proposed $9.64 billion budget.
Nevertheless, the budget would have a substantially smaller deficit than that found in fiscal 2014. The reduction in deficit from the current fiscal year budget is achieved more by spending cuts than by revenue increases.
