SAN JUAN, Puerto Rico (AP) – Puerto Rico's governor said Friday he will soon submit one of the most austere budgets in the island's history and appealed to President Barack Obama's administration and a divided local legislature to work together in finding solutions for the U.S. territory's fiscal crisis.
The call from Gov. Alejandro García Padilla came just hours after Puerto Rico's Government Development Bank released a report warning of a possible moratorium on debt payments. The bank also said it and the government could run out of money in the first quarter of fiscal year 2016 if new revenue isn't generated soon.
"Liquidity is significantly strained," the report said.
Bank officials also said the government might not have enough money to fund public programs and services and honor debt payments unless it goes through with a planned bond sale or approves an alternate measure to raise money.
Puerto Rico is struggling to raise new revenue as it faces $72 billion in public debt. Legislators recently rejected a proposal for a new tax despite warnings from García that rejection would have a detrimental effect on an increasingly unstable economy. García has since said he would act alone if needed within his constitutional powers as the island struggles through a nearly decade-long economic slump.
"The current crisis was not created overnight and it cannot be resolved from one day to the next," the governor said as he urged the U.S. Congress to approve a measure that would allow Puerto Rico to file for bankruptcy under Chapter 9.
There are currently no federal or local laws that allow Puerto Rico to declare bankruptcy if needed, and investors are growing increasingly concerned that some state agencies might go bankrupt. A federal judge ruled in February that a local law that would have allowed public agencies to restructure their debts was unconstitutional. García's administration is appealing the ruling.
In addition to the proposed budget, García's administration also is working on a five-year fiscal adjustment plan. The development bank projected that the government will end this fiscal year with a $191 million budget deficit following an estimated revenue shortfall of $651 million.