Skift Take

Puerto Rico's popularity as a short-haul tourism destination continues to climb and has become one of the island's most lucrative industries and primary drivers of growth.

Puerto Rico’s governor unveiled a $9.8 billion operating budget Thursday night during a state of the commonwealth address in which he pledged to reduce crime, create jobs, boost school attendance and expand the U.S. territory’s tourism sector.

Gov. Alejandro Garcia Padilla said he plans to reduce the island government’s $2.2 billion deficit to $775 million in one year, in part by taxing those who earn $200,000 or more a year or who buy homes valued at $1 million or more. He did not provide details about those taxes.

“Under my administration, those who have less, contribute less, and those who have more should contribute more,” he said to boisterous applause of members of his Popular Democratic Party in the seaside Capitol in San Juan.

His announcement comes as the U.S. territory struggles to improve its financial situation, seeking improved scores from Wall Street ratings agencies that have downgraded its general obligation bonds to near-junk status.

Padilla also said that by Dec. 1, he will reduce the 7 percent sales tax to 6.5 percent and continue to exempt items including prescription medicine, books and non-processed foods.

He plans to double the equipment budget for the islandwide police force to more than $150 million to help fight crime. Padilla said the government will buy three helicopters worth $38 million and unveil a new rapid-response system that will help police identify where shots have been fired. The department’s 17,000 offices make it the second largest in U.S. jurisdiction.

“Criminals will not be better equipped than our police officers,” Padilla said.

The Caribbean island of 3.7 million people had a record 1,117 killings in 2011.

The governor also said every police officer, regardless of their rank, will receive an additional $100 a month. It’s a measure meant to appease police, who recently staged a sickout of nearly 2,000 officers a day to demand better wages and protest proposed cuts in retirement benefits.

Padilla promised that overall, more than 40,000 public employees in 28 agencies will see pay increases by next February.

Jenniffer Gonzalez, a former president of the territory’s House and a member of the opposition New Progressive Party, questioned the pledge for pay raises.

“It’s an example of how he plays with people’s expectations,” she said, adding that citizens will pay for those wage increases in other ways.

Padilla said the tourism sector will get a boost from a $9.5 million investment to improve cruise ship ports, and a plan to create a walking path from historic Old San Juan to the popular upscale neighborhood of Condado.

He promised to reduce the island’s dropout rate, which is one of the highest compared with any U.S. state. Padilla noted that 25 percent of students who enter middle school do not graduate. He said he will revamp the public school curriculum, add more art and physical education classes and create a support system for at-risk students.

Roughly 40 percent of adults over the age of 24 in Puerto Rico do not have a high school degree, according to a government study.

Eva Ayala, spokeswoman for one of the island’s main education unions, said she wasn’t sure if Padilla’s plan would work. She said teachers need financial backing by the government.

“Teachers have to pay for the majority of materials and school repairs out of their own pocket,” she said.

Padilla said the proposed budget includes $110 million to cover a range of deficiencies within the Department of Education, and $75 million for the University of Puerto Rico, the island’s largest public university, to eliminate an $800 fee that led to violent protests in recent years.

The budget calls for a $1.9 billion in public works and a 20 percent cut in electricity bills, which are on average twice that of those in the U.S. mainland.

Padilla’s proposal is $750 million higher than the current budget, which legislators of the opposition party questioned.

“This budget should focus on addressing the fiscal crisis from a standpoint of reducing expenditures, and adjust it to the reality of our revenues,” said Sen. Carmelo Rios.

Copyright (2013) Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.


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Tags: budget, puerto rico, tourism

Photo credit: Puerto Rico Gov. Alejandro Garcia Padilla speaks during a state of the commonwealth address at the Capitol building in San Juan, Puerto Rico, Thursday, April 25, 2013. Ricardo Arduengo / AP Photo

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