Puerto Rico’s House of Representatives gave initial approval to a $9.8 billion fiscal 2016 budget that cuts spending. It now heads to the Senate.
Lawmakers passed the bills Monday night in a 28 to 20 vote, according to the House website. The Senate plans to vote Wednesday on the budget, Senator Jose Nadal Power, chairman of the Senate Finance Committee, said in a text message. The junk-rated commonwealth needs an approved budget before it can sell as much as $1 billion of tax- and revenue-anticipation notes, called Trans.
“The importance of passing this budget is to ensure that the government has funds to continue operations,” House Speaker Jaime Perello told reporters Monday before the chamber voted. “The Trans financing is crucial as we transition from one fiscal year to the next.”
The plan guarantees general-obligation payments and “is the first budget in many years” with no long-term borrowing to pay for operations, he said.
“We have dedicated the largest amount to debt payment, with 16 percent of the budget,” Perello said later during debate.
Lawmakers anticipate any changes the Senate makes to the bill will be worked out in a conference committee. Puerto Rico has until June 30 to pass a budget for the fiscal year beginning July 1.
The legislature is considering about $674 million of spending cuts to balance the budget. Island residents will begin paying an 11.5 percent sales tax July 1, up from 7 percent, generating about $1.1 billion of new revenue.
Puerto Rico’s cash crunch is pushing the commonwealth to delay tax rebates, slow payments to suppliers and borrow from a state-run insurance agency that provides disability compensation. Its Government Development Bank, which lends to the commonwealth and its localities, had $778 million of net liquidity May 31, down from $2 billion in October.
Puerto Rico securities have declined this year. General obligations maturing in July 2035 traded Tuesday at an average price of 79.5 cents on the dollar, the lowest since May 14 and down from 87.1 cents at the start of the 2015, according to data compiled by Bloomberg.