Jointly Developed Budget; More Than Two-Thirds Allocated to Health, Education, Public Safety, Housing, and Retirees; Managing Risks and Maintaining Discipline Remains Critical; Progress Towards Implementation of Modified Accrual Accounting Standards; More Steps Reforming Budget Process Underway
San Juan, PR – June 29, 2026 – The Financial Oversight and Management Board for Puerto Rico announced that it certified the $33.6 billion fiscal year 2027 consolidated budget for the Commonwealth of Puerto Rico, compliant with the Fiscal Plan for Puerto Rico. The budget for the fiscal year that starts on July 1, 2026, is the second consecutive budget developed jointly by the administration of Governor Jenniffer González Colón, the Legislative Assembly, and the Oversight Board.
“The fiscal year 2027 budget is another step forward on the path to fulfill PROMESA’s mandate of fiscal responsibility, but it is just one step,” said the Oversight Board’s Executive Director Robert F. Mujica, Jr. “Many steps need to follow to transform the budget process to ensure Puerto Rico maintains the stability achieved under PROMESA. The joint-leadership model to develop the budget must lead to full Government ownership of the budget process without continued reliance on the Oversight Board to keep the budget in balance. In addition, the capital budget must still be developed; enacted reserves must be continued and fortified; Government accounting must be materially strengthened; all appropriations, including federal funds, must be approved by the Legislature, not just the General Fund; and Government agencies must become more fiscally accountable and efficient.”
“The Government must take the lead on all of these initiatives and become champions of reform,” Mujica said. “Only then can we assure that Puerto Rico does not fall back into bankruptcy. This is particularly important now that we are certifying a budget that reflects considerable risk. Tax revenues have slowed, the risk of materially rising healthcare costs is real, and education continues to face pressures from funding gaps and demographic declines. Audited financial statements needed to restore Puerto Rico’s access to the capital markets continue to be far behind schedule. These issues can be overcome with sustained discipline, but for now, they are risks that must continue to guide budgets and the budget process.”
The Government has made progress towards adopting modified accrual accounting standards as required under PROMESA. The Oversight Board and the Government have aligned on the applicable guidelines regarding the development of budgets in accordance with those standards and the Oversight Board will continue to evaluate the Commonwealth’s implementation of those guidelines for the fiscal year 2027 and fiscal year 2026 budgets, as well as the supporting documentation, methodologies, and reporting necessary to assess compliance with applicable requirements under PROMESA.
Commonwealth budgets have been balanced on a cash basis since the Oversight Board began certifying them under PROMESA. But timely audited financial statements remain essential to restoring Puerto Rico’s access to the capital markets — a central purpose of PROMESA and a condition for the Oversight Board’s termination — and their prolonged absence was among the factors that eroded market confidence and contributed to Puerto Rico’s bankruptcy. The most recent statements the Government completed are for fiscal year 2022, leaving its financial reporting well behind schedule.
The consolidated budget consists of the $13.2 billion General Fund budget, the $5.5 billion Special Revenue Fund budget, and the $14.9 billion Federal Fund budget. Total expenditures of $33.6 billion are roughly flat from the previous year’s budget, reflecting slowing tax collection and uncertainty around the Government’s future revenue. The budget prepares the Government for the continued loss of federal funding and rising Medicaid costs associated with increases to contracts with healthcare providers.
More than two-thirds of the budgeted expenditures go to health, education, public safety, housing, and government pensions. This budget further includes funding for infrastructure investments such as road repairs, and to improve care services for disabled adults and seniors, and childcare services. The Government decided to reduce spending in certain areas, particularly payroll and operating expenses in some agencies to make room for additional funding in priority areas, including salary increases for police and corrections officers.
Two areas continue to pose significant fiscal risks due to their scale, uncertainty, and structural characteristics: the Medicaid program and the Puerto Rico Department of Education. Medicaid constitutes one of the most material fiscal risks facing the fiscal year 2027 Commonwealth Budget. Puerto Rico remains subject to a statutory federal Medicaid cap, under which any expenditure exceeding the federal limit must be financed entirely by the Commonwealth. Ongoing negotiations of Managed Care Organization contracts have not yet been incorporated into the certified budget. Since even modest deviations from projected expenditures may have significant fiscal consequences, control language was added in the fiscal year 2027 budget resolution requiring the Puerto Rico Health Insurance Administration to submit any proposed changes to Medicaid benefits or services for review and approval by the Puerto Rico Office of Management and Budget and the Oversight Board. This will ensure that changes are evaluated for potential fiscal impact before they are implemented.
The Department of Education continues to face structural pressures that materially affect the sustainability of its fiscal year 2027 budget. The expiration of federal pandemic‑relief funds, persistent overspending in certain programs and services, and longstanding weaknesses in budget planning and fiscal management contribute to increased risk. The continued reliance on non‑recurring resources to finance recurring obligations, including for special education, further elevates the likelihood of mid‑year shortfalls.
The Oversight Board has also certified the fiscal year 2027 budgets for:
- The Puerto Rico Industrial Development Company (PRIDCO)
- The Public Corporation for the Supervision and Insurance of Cooperatives in Puerto Rico (COSSEC)
- The University of Puerto Rico (UPR)
- The Puerto Rico Sales Tax Financing Corporation (COFINA)
- The Municipal Revenues Collection Center (CRIM)
- The Puerto Rico Aqueduct and Sewer Authority (PRASA)
- The Puerto Rico Highways and Transportation Authority (HTA)
- The Puerto Rico Electric Power Authority (PREPA)
The budgets are available on the Oversight Board’s website at https://oversightboard.pr.gov/budgets/