Today, the Puerto Rican government will comply - nearly two years overdue - with the delivery of the audited financial statement for fiscal year 2016. The document shows how insolvency of the main government retirement systems affects the Treasury.
For Treasury Secretary Raúl Maldonado, analysis on each new advance in PROMESA Title III debt restructuring process, as well as problems with agencies computer systems and obstacles due to hurricanes Irma and María have resulted in delays to file the Comprehensive Annual Financial Report (CAFR) for the fiscal year that closed June 31, 2016.
According to the report on the island's finances released three years ago, there is a difference of $2.505 billion between the income and expenses of the General Fund, even though there was an increase in government revenues after the Sales and Use Tax (SUT) changed from 7 percent to 11.5 percent.
The government had an accumulated deficit of $70.295 billion, said the Assistant Secretary of Central Accounting Omar Rodríguez.
Most of this results from the debt of government retirement systems, which have to be included after changes in accounting guidelines in 2015.
The actuarial debt of the three main government retirement systems - central government, teachers, and judicial - totaled $37.3 billion in 2016. Rodríguez said that if the debt of the pension plans of public corporations were added, it would increase to $42 billion. The actuarial debt is the sum of money that a pension system should have if it were to pay all its obligations at once.
The official noted that this data show a trend of an annual increase of about $2.5 billion in the accumulated deficit.
In 2015, the accumulated deficit totaled $67.037 billion.
Assistant Treasury Secretary Francisco Peña said that this deficit happens when “we see the government as a whole, its total assets, and its complete long-term debt.”
The Oversight Board granted the government several deadlines for the delivery of the report. The last one expired on March 31.
The 2015 financial statements were submitted in July 2018. Unlike that document, in the 2016 financial statements, the auditors- the firm KPMG - did not question the validity of the information provided by the government, noted Maldonado.
On the contrary, the Treasury Secretary indicated that auditors only modified five of the opinions of the 13 units into which the government's fiscal operations are divided. And this, to include additional information to what they had already received, mostly related to pension obligations and the loss of cash reported by multiple government agencies as a result of the deposits they had in the Government Development Bank (GDB).
Treasury advisor Ramón Ponte explained that the blow resulting from the GDB's insolvency was recorded in 2015, so there is an improvement in 2016.
TheTreasury did not share a copy of the financial statements with the press.
Maldonado acknowledged that filing audited financial statements will take the government a few more years.
The Treasury expects to file 2017 financial statements between September and next October, while the 2018 document could be in the hands of the Board by March 2020. The year´s financial statements could be ready by summer 2020.
Maldonado recalled that delays in filing audited financial statements have affected Puerto Rico's credibility in the financial markets, and said that there will be two teams working simultaneously on the 2017 and 2018 financial statements.
They filed the financial statement just as they reached the final phase of the island's budget for the next fiscal year. The Assistant Treasury Secretary said they expect to submit and publish a first draft of the consolidated budget this Thursday.
Peña said the recommended budget for fiscal year 2019-2020 will have an increase of about $950 million in revenue, funds that will be used to finance the government's health plan, now known as Vital.
These funds would allow the Puerto Rican government to continue with the health plan if they don´t achieve a federal appropriation for Medicare.
Maldonado said that health, education, and safety are pillars, “in terms of our priorities. If federal funds do not arrive, we will have to find the funds to meet that need.”
"It's not a superfluous expense, that's a necessary expense. If that is not included, there will be people who will not be able to cover their health expenses. This is a non-negotiable item. We can negotiate things with the Board, but that item is not going to be negotiated," Maldonado added.