GLOBAL ECONOMY

Puerto Rico's general fund revenue $600M below estimates as financial woes continue

SAN JUAN, PUERTO RICO - JULY 01:  The Puerto Rican flag flies near the Capitol building as the island's residents deal with the government's $72 billion debt on July 1, 2015 in San Juan, Puerto Rico. Governor of Puerto Rico Alejandro García Padilla said in a speech recently that the people of Puerto Rico will have to make sacrifices and share the responsibilities to help pull the island out of debt. (Photo by Joe Raedle/Getty Images)

SAN JUAN, PUERTO RICO - JULY 01: The Puerto Rican flag flies near the Capitol building as the island's residents deal with the government's $72 billion debt on July 1, 2015 in San Juan, Puerto Rico. Governor of Puerto Rico Alejandro García Padilla said in a speech recently that the people of Puerto Rico will have to make sacrifices and share the responsibilities to help pull the island out of debt. (Photo by Joe Raedle/Getty Images)  (2015 Getty Images)

Puerto Rico's government announced Friday that overall general fund revenue collected this past fiscal year was more than $600 million below what was estimated amid a worsening economic crisis that has spooked U.S. investors.

Treasury Secretary Juan Zaragoza said the government collected nearly $9 billion for fiscal 2014-2015, a $76 million drop compared with the previous year.

"It's a reflection of the difficult fiscal and economic situation the island faces," he said in a statement, adding that it directly impacts the government's liquidity.

Zaragoza blamed the drop on a variety of economic issues, including the elimination of a gross receipts tax in 2014. He said his department will take several measures to boost revenue collection, including stepping up the fight against widespread tax evasion.

The general fund now faces a more than $700 million deficit as Puerto Rico enters its ninth year in recession. The fund provides financial backing for general obligation bonds and supports agencies that don't generate their own revenue, including the departments of health and education.

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The announcement comes as the U.S. territory struggles to generate revenue as it faces a $72 billion public debt load that the governor has said is unpayable.

Puerto Rico economist Gustavo Vélez said it is worrisome that general fund revenues missed the estimated mark by more than $600 million.

"That's a dangerous number," he said in a phone interview. "It shows the economic crisis has accelerated."

Vélez criticized the government for consistently using what he said were too-optimistic estimates that have contributed to the debt load. He also said the government can no longer tap into Puerto Rico's financially struggling Government Development Bank to help offset the more than $700 million general fund deficit.

"The bank cannot loan any money," he said. "It has no access to the markets."

The administration of Gov. Alejandro García Padilla recently increased the island's sales tax to 11.5 percent and created a 4 percent tax on professional services that will go into effect Oct. 1 to help generate more revenue. Critics including Vélez have warned that imposing more taxes will further constrict the economy.

Garcia also has promised to deliver a five-year fiscal adjustment plan by Aug. 30 to address the island's economic woes amid concerns that government agencies could soon go bankrupt.

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