OVERSIGHT BOARD ISSUES COMMONWEALTH MID-YEAR FINANCIAL REPORT
Year-to-Date General Fund Revenue Higher Than Projected; Receipts for December Below Projections; Risks to Puerto Rico’s Fiscal Stability: Medicaid Funding, Implementation of OECD Pillar 2, Unbudgeted Spending
San Juan, PR – March 8, 2024 – The Financial Oversight and Management Board for Puerto Rico today issued its mid-year financial report providing a detailed analysis of Puerto Rico’s fiscal position in the first half of the current fiscal year 2024 and potential risks to the financial projections in the Fiscal Plan for Puerto Rico. The report is based on financial data available through December 31, 2023.
General Fund Revenues have grown since the pandemic but plateaued in the previous fiscal year of 2023. Receipts for the month of December were below projections for the current year and showed a year-over-year decline, the first month this year where actual revenues were below projections and last year’s collections.
“This is a sign that revenues may have slowed and a reminder that the revenue outlook is uncertain,” said the Oversight Board’s Executive Director Robert F. Mujica, Jr. “The Government will need to prioritize any additional spending to ensure the Commonwealth can afford commitments in the long-term.”
Year to date, cumulative General Fund revenue surpassed the forecast by $540 million and last year’s revenue by about $400 million. The month of October 2023 accounted for about 50% of the year-to-date outperformance. This may represent a lagging impact from tax year 2022 because final payments for extension filers were due in October 2023.
General Fund expenditures year to date were $111 million below the same period last year and $900M below forecast, primarily due to delays in recording $355 million of expenditures and an additional $350 million of differences in timing of when expenditures were being incurred compared to the forecast.
Cash balances increased but most cash remains allocated for specific purposes and certain spending is not yet reflected in the Treasury Single Account (TSA) balance and cash balance remains limited when considering the economic uncertainties and financial risks.
Risks include the uncertain long-term Medicaid federal funds and additional Commonwealth contribution to fund disaster relief projects due to inflation-based cost escalation and match requirements.
The mid-year report also incorporates additional risks that have recently emerged. This includes the implementation of OECD Pillar 2 conforming tax legislation globally and recent legislation impacting spending or revenues. In the second quarter, the Legislature continued its trend for passing or enacting at least eight pieces of legislation amounting to a total estimated unfunded annual cost between $10 and $26 million.