Thread: Puerto Rico's government closes down

http://www.chron.com/disp/story.mpl/nation/3833308.html

May 1, 2006, 10:05PM

Puerto Rico's government closes down
Cash crunch shutters schools, triggers protests
By MANUEL RIVERA
Associated Press

SAN JUAN, PUERTO RICO - Schools closed. Building permits were on hold. Renewing a driver's license was impossible.

Many basic functions of Puerto Rico's government were unavailable Monday as the U.S. commonwealth ran out of money and imposed a partial public-sector shutdown putting nearly 100,000 people — including 40,000 teachers — out of work and granting an unscheduled holiday to 500,000 public school students.

The shutdown — the first in Puerto Rico's history — happened despite last-minute attempts by members of the legislature and Gov. Anibal Acevedo Vila to agree on a bailout plan.

Police and other emergency services were not affected, but dozens of public offices were shuttered or partially closed.

Hundreds of government employees stood in the rain outside the capitol to protest the politicians' failure to avoid the shutdown and to spur them into resolving the impasse.

"I'm not earning any money and the kids don't have classes," said Sonia Ortiz, a 44-year-old teacher and single mother of two who attended the protest. "I have savings but not enough."

Later, protesters threw rocks at San Juan police during a march near the Department of Labor and Human Resources.

"This is clearly a matter of lawmakers not getting along and dragging this out while we, the workers who supply this country with essential services such as education, are kept from doing our work," said elementary school teacher Ernesto Gavines.


'Solve this quickly'
Another protest turned into a confrontation between police and masked youths, who scrawled graffiti calling for revolution. Officers used nightsticks to disperse the protesters and one youth was taken away in an ambulance. There were no reports of arrests.

Puerto Rico is saddled with a $740 million budget shortfall because the legislature and the governor have been unable to agree on a spending plan since 2004.

Conflicting sales tax proposals have been floated that would allow the island to secure a line of credit so it could pay public salaries through the end of the fiscal year on June 30. The island currently has no sales tax.

"They have to solve this quickly," said Juan Marrero, a shop owner in a San Juan suburb, whose business was hurt by the closure of a nearby elementary school.


Sales tax proposed
All 1,600 public schools on the island closed Monday, two weeks before the end of the academic year, along with 43 government agencies. Acevedo blamed "legislative inaction."

"As of 8 a.m. this morning, I don't have in hand a single legislative proposal that resolves this crisis," he told reporters.

Overnight, the leader of the Senate proposed a 5.9 percent sales tax that he said would raise enough money to pay off an emergency $532 million line of credit that the government needs to finish the fiscal year.

Leaders in the House of Representatives said they would support only a 4 percent tax.

Acevedo insisted that 7 percent sales tax was necessary, saying anything less would only postpone the crisis until July 1, when the next fiscal year begins.

The New Progressive Party, which controls the legislature, has blamed the governor for the crisis. The two sides never agreed on the 2005 or 2006 budgets. The government is using the 2004 budget to operate as debts pile up.

The government is Puerto Rico's largest employer, with some 200,000 workers. Salaries make up about 80 percent of the government's operational costs.

http://www.bloomberg.com/apps/news?pid= ... in_america

Puerto Rico Government Shuts Down as Budget Agreement Stalls
May 1 (Bloomberg) -- Puerto Rico's government was partially shut down and schools were closed as the U.S. commonwealth was unable to reach an agreement for a loan that would have kept it from running out of money by the end of its fiscal year.

Some 95,000 Puerto Rico employees didn't go to work today as the government closed all but essential operations such as hospitals and police stations, said Camille Toro, a financial adviser at the Puerto Rico Government Development Bank. Lawmakers have been unable to agree on the size of island-wide sales tax tied to a loan from the development bank.

``The government knew for a while that this was going to happen,'' Toro said in a telephone interview.

Puerto Rico Governor Anibal Acevedo Vila said last week that he would order the closure of government agencies unless the legislature was able to reach an agreement that would close the budget shortfall it faces for the next two months. Acevedo Vila, a member of a political party that supports having Puerto Rico remain a commonwealth, has battled with pro-statehood legislators over the size of a sales tax increase to help close the budget gap.

Toro said approval from the legislature of a sales tax plan was needed before the development bank could make a $531 million loan to cover the government's expenses for the next two months. Acevedo supports a 7 percent increase in the sales tax, while leaders in the Legislature lower chamber have proposed a smaller 4 percent increase.

Borrowing

The Caribbean island, whose per-capita debt burden is 61 percent higher than Connecticut, the U.S. state with highest tax-supported per-capita debt, has repeatedly borrowed money from the development bank to balance its budget.

The island's borrowing to cover operating deficits has caused its debt rating to drop to near-junk status. The government has borrowed $5 billion from the development bank as spending on education and employee payroll climbed faster than revenue. Standard & Poor's rates Puerto Rico's debt BBB, the second-lowest investment grade ranking, and on March 22 signaled it may cut the rating further, which could reduce the value of $24 billion of Puerto Rico debt.

Three out every 10 workers in Puerto Rico are employed by the government and employee payroll represents about 80 percent of government spending. The commonwealth is also saddled with a pension shortfall of about $10 billion.



To contact the reporter on this story:
William Selway in San Francisco at at wselway@bloomberg.net.

http://www.miami.com/mld/miamiherald/news/14485661.htm

Posted on Wed, May. 03, 2006

Puerto Rico's governor walks out of talks

BY FRANCES ROBLES
frobles@MiamiHerald.com

SAN JUAN - Negotiations to resolve Puerto Rico's fiscal crisis broke down Tuesday night, when the governor walked out of a meeting with the leader of the House of Representatives in a furious huff.

Gov. Aníbal Acevedo met for the first time face to face with House leader José Aponte to hash out differences over the partial shutdown of the island's central government.

The governor says the island is facing a $740 million deficit to fund payroll through the end of the fiscal year, and insists a $531 million line of credit and 7-percent sales tax are the only solution.

Aponte has refused to approve that, and has even accused the governor of hoarding money.

On Tuesday, the meeting between the two men lasted just minutes.

Acevedo's version of events: A few minutes after the meeting began, Aponte looked at Acevedo's anguished face and said, ``If you want, I can get you a tissue.''

''He disrespected me!'' Acevedo told reporters on the steps of the Capitol as he walked out. ``He disrespected me and all Puerto Ricans who have tears in their eyes.''

The shutdown has forced about 95,000 civil servants out of work, mostly Department of Education employees. More than 500,000 school children are missing the last two weeks of classes, as 1,500 schools are shuttered.

''It was an insult to the human situation we are going through,'' Acevedo told television channel 4 this morning. ``I immediately told him I had nothing more to say.''

Aponte's version:

''The governor at one point asked me if I was happy with what was happening,'' he told reporters. ``I said no, that I felt very disappointed and that this whole situation created a sad and anguished environment.''

The failed meeting further complicated an impasse Puerto Rico has faced for more than a week, since Acevedo announced he would close the government if the loan was not approved. House legislators had round-the-clock sessions all weekend, coming up with a variety of proposals later rejected by the Senate.

In a crisis deeply split along party lines, negotiations appear to be heading nowhere. In recent days, city and town mayors have stepped up to offer other compromises, but the leader of the opposition New Progressive Party has said legislators will remain firm against Acevedo's proposals.

Acevedo warned the crisis must be resolved soon: credit agencies have cautioned that Puerto Rico's credit rating -- already on alert status -- could be downgraded.

http://www.oxfordpress.com


Puerto Rican government shutdown continues
By JOHN LANTIGUA
Cox News Service
Thursday, May 04, 2006
SAN JUAN, Puerto Rico — The shutdown of large sectors of the Puerto Rican government, due to a battle between political leaders of rival parties, passed through its third angry day Wednesday.

Some 95,000 public employees are out of work, without pay, all public schools have been closed just two weeks before the end of the school year and many government offices are shuttered.

Demonstrations have been staged daily, at least one of them violent. On Wednesday, the shutdown continued to produce an outpouring of rage against the Puerto Rican political establishment.

"This crisis is exploding now, but it has been coming a long time," said Betty Pena, 47, a middle school teacher from the city of Caguas, who Wednesday marched in a loud but peaceful protest at the Capitol Building here.

Pena is one of about 46,000 public school teachers out of work. A divorced mother of two who earns about $1,500 per month, she must now support her family on a $133 per week unemployment check and a small food allowance.

"We need these men to get past their own interests and think of the well-being of the people," said Pena, whose daughter, Elisa, 13, marched at her side in a red-checkered public school uniform. "We have been dragged by these parties from year to year with their old interests — mainly the relation Puerto Rico should have with the United States. Meanwhile, they aren't taking care of our needs.

"We, the middle class, are the ones carrying the government and the big corporations on this island," she said. "That has to change."

Gov. Anibal Acevedo Vila of the Popular Democratic Party (PPD) sent public employees home Monday, claiming he did not have funds to run the government until June 30, end of the Puerto Rican fiscal year.

Acevedo is demanding the adoption of a 7 percent sales tax to replace a current tax on imported goods. Once he gets that sales tax, Acevedo says he will ask the Government Development Bank for a loan of $531 million to operate the government for two months.

Leaders of the rival New Progressive Party (PNP), who control the Congress, insist they will agree on nothing higher than a 5.5 percent sales tax and have demanded a new 5 percent tax on all corporations with annual gross incomes of $10 million or more.

The governor insists the PNP proposal will not raise enough money and will perpetuate the budget shortfall. But many Puerto Ricans refuse to believe that is the issue.

"They want you to think this crisis is about those numbers, but that isn't true," said Israel Marrero, a school janitor from San Juan and a vice president of the Puerto Rican Workers Union (SPT). "It has to do with the fact that one guy is from this party and the other guys are from that other party. It's all politics. Here, it's always that way."

Some 17,000 of the union's 19,000 members are out of work due to the shutdown.

Historically, the two parties have distinguished themselves by their positions on the emotional issue of the island's relation with the United States. The PPD believes Puerto Rico should remain a U.S. commonwealth, while the PNP wants the island to become the 51st state.

Nelly Cosme, 23, a school teacher at the Roberto Clemente Elementary School in the town of Carolina, near San Juan, enunciated the political frustrations of many Puerto Ricans.

"With everything that is going on here with the economy, all (the parties) talk about is the status with the United States," said Cosme. "We're tired of it. They should be solving our problems."

Cosme was one of many who said they faced serious hardship if the shutdown continues. She will receive $133 per week in unemployment benefits and she brandished a freshly-minted government food stamp card.

"They are giving me $104 per month for food," said Cosme, who lives by herself. "One hundred four dollars! Do you know how far that will get me here? Maybe two weeks."

Cosme spoke outside the Capitol Building, where late Wednesday afternoon Gov. Acevedo, accompanied by hundreds of supporters, arrived on foot from the nearby governor's palace to speak with Congressional leaders. Tuesday night, Acevedo stormed out of a meeting with PNP leader and House Speaker Jose Aponte, claiming that Aponte had insulted him.

As the governor entered the building Wednesday, a scuffle broke out between his followers and Capitol guards, but it ended quickly.

Across the city, at the upscale mall Plaza Las Americas, police SWAT team officers guarded stores against another group of protesters belonging to the Puerto Rican Federation of Teachers. It was during a demonstration by that union that violence broke out Monday. Authorities said 16 policemen were injured when they tangled with rock-throwing protesters in the financial district of San Juan known as the Golden Mile.

Police later said the violence may have been caused by people who infiltrated the march and not by union members. Wednesday's demonstration was peaceful.

Inside the mall, Roberto Rodriguez, a senior at Miguel Such High School in San Juan, said he was angry because he was supposed to be finishing the last course he needs for graduation, but couldn't because of the shutdown.

"I'm supposed to start technical school in August... but who knows if I'll be able to," said Rodriguez.

He flashed a gang hand signal to a photographer and said: "It makes me angry enough that I want to smack somebody."

Nearby, Miriam Padua, principal at an elementary school in the city of Bayamon, was spending the day with her two grandchildren, public school students unable to attend school.

"I've worked for the Department of Education for 29 years and six months, I was supposed to retire in December and now I lose my job," Padua said. "I've had quadruple bypass surgery and I've been hanging on just to get my pension.

"But now, who knows?" said Padua. "If they don't have money to pay the teachers who are working, will they have money to pay my pension? All I do is think about it. I don't sleep at night."


John Lantigua writes for the Palm Beach Post.

And the illegals in the US are boasting about the impact of their little boycott. Their boycott pales in comparison to the effect of the shutdown in Puerto Rico.