Cash-Strapped Gov't Days From Shutdown in Puerto Rico

Nearly 1,600 schools shuttered. Some 205,000 public workers unpaid. Most government offices closed.

The U.S. Caribbean territory is staggering under a nearly $740 million budget shortfall and heading toward a grim scenario Monday, when it will run out of cash to pay salaries and provide public services if local lawmakers don't approve a bailout plan.

Talk of the possible shutdown dominated the island Wednesday.

Puerto Ricans jammed gas stations and supermarkets amid rumors that truck drivers would go on strike to force the government to resolve the crisis. Callers flooded talk-show phone lines, expressing anxiety about how it would affect them. Union leaders and government workers lashed out at politicians.

A doctors' group said the government may not be able to provide adequate medical care for the 1.6 million people with public health insurance in the U.S. territory. The doctors said 1 million government-funded prescriptions filled each month were also at risk.

Puerto Rico's Department of Natural and Environmental Resources said it will stop issuing construction permits: a halt in building hotels, parking and other projects would be a blow to the tourist-based economy.

Essential services such as police and hospitals are to remain open.

Gov. Anibal Acevedo Vila promised to maintain limited, essential health coverage, but urged Puerto Rico's 3.9 million residents to pressure their lawmakers to approve his plan to take out a $638 million loan backed by a 7 percent sales tax.

The money would carry Puerto Rico through June 30, the end of this fiscal year.

Puerto Rico's House of Representatives wants to impose a 4 percent sales tax instead and has refused to review the governor's plan. The island now has no sales tax.

Protests on both sides were planned in front of the legislature on Thursday.

"Beginning next Monday, May 1, the majority of agencies of the central government will not be able to operate," Acevedo Vila warned in a televised address late Tuesday. "The agencies will not be able to provide their services and thousands of public employees will be without pay."

Puerto Rico has been digging itself into a financial hole for years.

The public payroll swelled in the 1960s and now accounts for about 30 percent of the work force. Public debt soared and Puerto Rico for years has borrowed money to cover gaps in its budget, piling up one loan after another.

Ripple effects promised to disrupt the island's economy if there is a shutdown.

Several private security companies, claiming the government owes them money, said this week they might pull 15,000 security officers on duty at government facilities. The education department said it could lose $260 million in federal funding if schools close early.

The Puerto Rico Tourism Company said it plans to provide alternative routes for tourists during protest marches planned for Thursday and Monday, including in the colonial section of San Juan, one of Puerto Rico's top tourist destinations.

The tourism agency said most tourist services should not be affected, since they are provided by private companies.

Many opposition lawmakers in the House blame the crisis on the governor, who has clashed with them over budget proposals in recent years. The government is using the 2004 budget because the two sides never agreed on the 2006 and 2005 budgets.

Last year, the legislature approved borrowing $500 million to keep the government running.

"They're running out of options," said David Hitchcock, a director at credit rating agency Standard & Poor's.

Standard & Poor's and Moody's Investors Service say Puerto Rico's economic outlook is negative and have put Puerto Rico on a special watch status -- with the possibility of further downgrading the government's credit rating -- a move that effectively would make it more expensive for the territory to borrow money.