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.