budget indicators 2011-12
TRANSCRIPT
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Budget Indicators
Sergio M. MarxuachPolicy Director
Center for the New EconomyJune 2011
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Consolidated Budget
Consolidated Budget
$27,568,459,000
$28,146,886,000
$29,128,862,000
$28,142,842,000
$28,624,086,000
$26,500,000,000
$27,000,000,000
$27,500,000,000
$28,000,000,000
$28,500,000,000
$29,000,000,000
$29,500,000,000
2008 2009 2010 2011 2012
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Federal FundsFederal Funds % CB
20.17%
24.95%23.52%
21.91% 22.51%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
2008 2009 2010 2011 2012
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General Fund General Fund Budget
$9,242,000,000$9,483,792,000
$7,670,000,000
$8,133,500,000
$8,650,000,000
$5,000,000,000
$5,500,000,000
$6,000,000,000
$6,500,000,000
$7,000,000,000
$7,500,000,000
$8,000,000,000
$8,500,000,000
$9,000,000,000
$9,500,000,000
$10,000,000,000
2008 2009 2010 2011 2012
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GF PayrollGeneral Fund Payroll
$5,189,758,000
$5,501,074,000
$4,608,861,000 $4,618,242,000 $4,707,323,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
$5,000,000,000
$5,500,000,000
$6,000,000,000
2008 2009 2010 2011 2012
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Tax Revenues
Tax Revenues GF as % of GNP
12.02%
11.09%
10.89%
11.30%
11.85%
10.20%
10.40%
10.60%
10.80%
11.00%
11.20%
11.40%
11.60%
11.80%
12.00%
12.20%
2008 2009 2010 2011 2012
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Structural DeficitGeneral Fund Structural Deficit
($1,326,000,000)
($2,879,000,000)
($1,500,000,000)
($1,257,000,000)($1,341,000,000)
($3,500,000,000)
($3,000,000,000)
($2,500,000,000)
($2,000,000,000)
($1,500,000,000)
($1,000,000,000)
($500,000,000)
$0
2008 2009 2010 2011 2012
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Non Recurring Revenues
Non Recurring Revenues
$804,000,000$1,173,107,000
$4,379,000,000
$2,266,171,000
$1,850,672,000
$0
$500,000,000
$1,000,000,000
$1,500,000,000
$2,000,000,000
$2,500,000,000
$3,000,000,000
$3,500,000,000
$4,000,000,000
$4,500,000,000
$5,000,000,000
2008 2009 2010 2011 2012
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Debt ServiceDebt Service as % of Consolidated Budget
11.03% 11.32%
12.52%13.76%
15.05%
0.00%
2.00%
4.00%
6.00%
8.00%
10.00%
12.00%
14.00%
16.00%
2008 2009 2010 2011 2012
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Debt/GNPDebt/GNP
20
40
60
80
100
120
1962 1966 1970 1974 1978 1982 1986 1990 1994 1998 2002 2006 2010
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Debt/GNPPublic
FY GNP %Δ Debt %Δ PD/GNP
2000 41,418.6 -- $24,188.8 -- 58.4%
2001 44,046.5 6.3% $27,159.6 12.3% 61.7%
2002 45,071.3 2.3% $30,012.6 10.5% 66.6%
2003 47,479.4 5.3% $32,524.5 8.4% 68.5%
2004 50,708.7 6.8% $37,433.6 15.1% 73.8%
2005 53,752.4 6.0% $40,268.3 7.6% 74.9%
2006 56,732.3 5.5% $43,136.3 7.1% 76.0%
2007 59,520.5 4.9% $46,183.3 7.1% 77.6%
2008 61,665.2 3.6% $53,392.9 15.6% 86.6%
2009 62,677.8 1.6% $58,414.9 9.4% 93.2%
2010 63,291.5 1.0% $62,206.2 6.5% 98.3%
2011 64,973.0 2.7% $63,809.0 2.6% 98.2%
CAGR 4.2% 9.2%
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Government EmploymentGovernment Employment
212,879 213,502
201,629
180,095 180,788
160,000
170,000
180,000
190,000
200,000
210,000
220,000
2008 2009 2010 2011 2012
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Debt + Pensions
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Relative Burden of Combined Pension and Debt
Personal Income GDP Per Capita
% of Revenue
Hawaii 27.7% 16.2% $ 7,987 210.3%
Puerto Rico 180.4% 94.4% $ 16,157 436.8%
Source: Moody's
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Mandatory Spending + ARCFY 2011
Contributions to Municipalities $355,000,000
University of Puerto Rico $691,000,000
Judicial Branch $348,000,000
Rent Payments PBA $217,000,000
GO Debt Service $201,000,000
Other Debt Service $517,000,000
ARC for ERS, TRS, & JRS $2,105,000,000
Total Mandatory Spending + ARC $4,434,000,000
Total GF Spending $9,149,500,000
MS/GF 48.5%
ARC/GF 23.0%
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What to Keep in Mind• Risk of downgrade• Revenue Performance:
– (1) changes in SUT collections, which are expected to increase 22.5% as a result of the implementation of the IVU Lotto and
– (2) the performance of the new excise tax on sales by multinationals with operations in Puerto Rico to their foreign affiliates
• Phase-out of ARRA funds and the depletion of the Fiscal Stabilization Fund
• Public Pension Reform• Challenges at the federal level:
– Debt Ceiling– FY 2012 Budget– Social Security, Medicare, Medicaid
• Subsidies to Public Corporations
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Conclusions• The government has achieved significant success in
restraining the growth rate of government spending since 2008
• Federal funds, however, continue to account for more than one-fifth of all government spending in Puerto Rico
• The medium term trend reflects a decrease in general fund payroll expenditures
• But the use of ARRA funds, the Stabilization Fund, and debt refinancing casts some doubt on the true extent of the reduction in general fund spending
• It is very difficult to accurately forecast tax revenues at this time because taxpayers, both individual and corporate, are still adjusting to the new rules
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Conclusions• The trend with respect to the structural deficit continues to
be negative because it has stayed essentially flat over the last five fiscal years
• The use of non-recurring funds shows a mixed or uncertain trend at this time – Short term trend appears to be downward, especially in contrast
with the peak in 2010 – Medium term trend has shown an increase in the use of non-
recurring funds • Debt service indicators show a negative trend both absolute
and relative amounts dedicated to debt service have increased significantly since 2008
• The overall trend with respect to total public indebtedness is still negative – Not clear that the slowdown experienced during 2011 will be
permanent
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Conclusions• Government employment has decreased significantly from
212,879 in 2008 to a projected 180,788 in 2012, a reduction of 32,091 workers, or 15.1%
• Several short-term risks could further blur the short-term fiscal picture:– A GO rating downgrade by Moody’s; – the implementation of the new, massively amended, tax code; – the phase-out of ARRA funds and the depletion of the Fiscal
Stabilization Fund; – the complexity of pension reform; – budget cuts at the federal level; and – the need to increase subsidies for public corporations