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The government of
Puerto Rico Puerto Rico (; abbreviated PR; tnq, Boriken, ''Borinquen''), officially the Commonwealth of Puerto Rico ( es, link=yes, Estado Libre Asociado de Puerto Rico, lit=Free Associated State of Puerto Rico), is a Caribbean island and unincorporated ...
is a
republican Republican can refer to: Political ideology * An advocate of a republic, a type of government that is not a monarchy or dictatorship, and is usually associated with the rule of law. ** Republicanism, the ideology in support of republics or agains ...
form of
government A government is the system or group of people governing an organized community, generally a state. In the case of its broad associative definition, government normally consists of legislature, executive, and judiciary. Government is ...
with
separation of powers Separation of powers refers to the division of a state's government into branches, each with separate, independent powers and responsibilities, so that the powers of one branch are not in conflict with those of the other branches. The typic ...
, subject to the jurisdiction and sovereignty of the
United States The United States of America (U.S.A. or USA), commonly known as the United States (U.S. or US) or America, is a country primarily located in North America. It consists of 50 states, a federal district, five major unincorporated territori ...
.Constitution of the Commonwealth of Puerto Rico, Article I, Section 2
Article I of the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
defines the government and its political power and authority pursuant to U.S. . Said law mandated the establishment of a local constitution due to Puerto Rico's political status as a commonwealth of the United States. Ultimately, the powers of the government of Puerto Rico are all delegated by the
United States Congress The United States Congress is the legislature of the federal government of the United States. It is bicameral, composed of a lower body, the House of Representatives, and an upper body, the Senate. It meets in the U.S. Capitol in Washing ...
and lack full protection under the
U.S. Constitution The Constitution of the United States is the supreme law of the United States of America. It superseded the Articles of Confederation, the nation's first constitution, in 1789. Originally comprising seven articles, it delineates the nation ...
. Because of this, the
head of state A head of state (or chief of state) is the public persona who officially embodies a state Foakes, pp. 110–11 " he head of statebeing an embodiment of the State itself or representatitve of its international persona." in its unity and l ...
of Puerto Rico is the
President of the United States The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United States ...
. Structurally, the government is composed of three branches: the
executive Executive ( exe., exec., execu.) may refer to: Role or title * Executive, a senior management role in an organization ** Chief executive officer (CEO), one of the highest-ranking corporate officers (executives) or administrators ** Executive dir ...
,
legislative A legislature is an assembly with the authority to make laws for a political entity such as a country or city. They are often contrasted with the executive and judicial powers of government. Laws enacted by legislatures are usually known ...
, and
judicial branch The judiciary (also known as the judicial system, judicature, judicial branch, judiciative branch, and court or judiciary system) is the system of courts that adjudicates legal disputes/disagreements and interprets, defends, and applies the law ...
. The executive branch is headed by the governor, currently
Pedro Pierluisi Pedro Rafael Pierluisi Urrutia (born April 26, 1959) is a Puerto Rican politician and lawyer currently serving as governor of Puerto Rico. He has previously served as Secretary of Justice, Resident Commissioner, acting Secretary of State, i ...
, who is also the
head of government The head of government is the highest or the second-highest official in the executive branch of a sovereign state, a federated state, or a self-governing colony, autonomous region, or other government who often presides over a cabinet, ...
. The
legislative branch A legislature is an assembly with the authority to make laws for a political entity such as a country or city. They are often contrasted with the executive and judicial powers of government. Laws enacted by legislatures are usually known ...
consists of a bicameral legislature, namely the Legislative Assembly, composed by the Senate as its
upper house An upper house is one of two chambers of a bicameral legislature, the other chamber being the lower house.''Bicameralism'' (1997) by George Tsebelis The house formally designated as the upper house is usually smaller and often has more restric ...
and by the
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
as its lower house. The governor and legislators are elected by popular vote every four years. The
judicial branch The judiciary (also known as the judicial system, judicature, judicial branch, judiciative branch, and court or judiciary system) is the system of courts that adjudicates legal disputes/disagreements and interprets, defends, and applies the law ...
is headed by the
Chief Justice of the Supreme Court of Puerto Rico The Chief Justice of the Supreme Court of Puerto Rico ( es, Jefe del Tribunal Supremo de Puerto Rico) is the presiding officer of the Supreme Court of Puerto Rico. The post of Chief Justice was created by Article V of the Constitution of Puerto ...
, currently
Maite Oronoz Rodríguez Maite Oronoz Rodríguez (born 1976) is a Puerto Rican jurist and chief justice of the Supreme Court of Puerto Rico. Oronoz Rodríguez is Puerto Rico's first openly gay chief justice. Early years and education Oronoz Rodríguez earned her bac ...
. The legal system is a mix of the civil law and the
common law In law, common law (also known as judicial precedent, judge-made law, or case law) is the body of law created by judges and similar quasi-judicial tribunals by virtue of being stated in written opinions."The common law is not a brooding omnipres ...
systems. Members of the judicial branch are appointed by the governor with
advice and consent Advice and consent is an English phrase frequently used in enacting formulae of bills and in other legal or constitutional contexts. It describes either of two situations: where a weak executive branch of a government enacts something prev ...
from the Senate.


History

Puerto Rico was ceded to the United States by
Spain , image_flag = Bandera de España.svg , image_coat = Escudo de España (mazonado).svg , national_motto = ''Plus ultra'' (Latin)(English: "Further Beyond") , national_anthem = (English: "Royal March") , i ...
at the end of the
Spanish–American War , partof = the Philippine Revolution, the decolonization of the Americas, and the Cuban War of Independence , image = Collage infobox for Spanish-American War.jpg , image_size = 300px , caption = (cloc ...
by the
Treaty of Paris of 1898 The Treaty of Peace between the United States of America and the Kingdom of Spain, commonly known as the Treaty of Paris of 1898 ( fil, Kasunduan sa Paris ng 1898; es, Tratado de París de 1898), was a treaty signed by Spain and the United Stat ...
. The
Foraker Act The Foraker Act, , officially known as the Organic Act of 1900, is a United States federal law that established civilian (albeit limited popular) government on the island of Puerto Rico, which had recently become a possession of the United State ...
of 1900 provided for an organization of the civilian government. The Jones–Shafroth Act of 1917 re-organized the government. The
United States government The federal government of the United States (U.S. federal government or U.S. government) is the national government of the United States, a federal republic located primarily in North America, composed of 50 states, a city within a feder ...
authorized Puerto Rico to draft its own
constitution A constitution is the aggregate of fundamental principles or established precedents that constitute the legal basis of a polity, organisation or other type of entity and commonly determine how that entity is to be governed. When these princ ...
by . On June 4, 1951 the Puerto Ricans voted to hold a constitutional convention in a referendum, and elected delegates on August 27, 1951. The convention adopted a constitution on 6 February 1952 and was ratified by Puerto Rico's electorate in a referendum on March 3, 1952. The United States government approved an amended version by , and on July 10, 1952 the Constitutional Convention of Puerto Rico reconvened and approved the conditions established by . On July 25, 1952, Governor
Luis Muñoz Marín José Luis Alberto Muñoz Marín (February 18, 1898April 30, 1980) was a Puerto Rican journalist, politician, statesman and was the first elected governor of Puerto Rico, regarded as the "Architect of the Puerto Rico Commonwealth." In 1948 he ...
proclaimed that the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
was in effect.


Executive branch

The executive branch is responsible for administering public resources, as well as providing all necessary public services to the Puerto Rican general public. It is by far the largest branch in the government as well as the largest employer in Puerto Rico with more than 150,000 workers.


Governor

The
head of government The head of government is the highest or the second-highest official in the executive branch of a sovereign state, a federated state, or a self-governing colony, autonomous region, or other government who often presides over a cabinet, ...
is the Governor of Puerto Rico, who is elected every four years in a general election. The position is similar in nature, responsibility, and power as those of a governor of a U.S. state. The position of Governor has the overall responsibility of the state of the commonwealth, equivalent to the state of the union in the U.S. The official residence of the governor is
La Fortaleza La Fortaleza (lit., "The Fortress" ) is the official residence of the governor of Puerto Rico. It was built between 1533 and 1540 to defend the harbor of San Juan. The structure is also known as Palacio de Santa Catalina (Saint Catherine's Palac ...
, the oldest executive mansion in continuous use in the Western Hemisphere. The Governor has the authority to nominate agency heads, trial and appellate judges, as well as Supreme Court
justice Justice, in its broadest sense, is the principle that people receive that which they deserve, with the interpretation of what then constitutes "deserving" being impacted upon by numerous fields, with many differing viewpoints and perspective ...
s and directors of public corporations, although these must be confirmed by the Senate and, in a handful of cases, the House, as well. Similar to a U.S. State, the Governor has authority over the Puerto Rico National Guard. Although Puerto Rico does not have the position of Lieutenant Governor, sections 7 and 8 of the Constitution empower the Secretary of the Puerto Rico State Department to act as Acting Governor, should the governor be absent from Puerto Rico, become temporarily disabled or unable to discharge his/her duties, and as Governor for the remainder of the term should a permanent vacancy occur.


Lieutenant Governor

Puerto Rico does not have a post for lieutenant governor but it has a Secretary of State which performs a similar role. The Secretary of State is the successor of the Governor and is empowered to act as
acting governor An acting governor is a person who acts in the role of governor. In Commonwealth jurisdictions where the governor is a vice-regal position, the role of "acting governor" may be filled by a lieutenant governor (as in most Australian states) or an ...
— the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
and
Puerto Rican law The legal system of Puerto Rico is a mix of the civil law and the common law systems. Language Puerto Rico is the only current U.S. jurisdiction whose legal system operates primarily in a language other than American English: namely, Spanish. Be ...
establishes a governmental line of succession starting with the Secretary of State.


Acting Governor

Article IV of the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
establishes that the Secretary of State should serve as
acting governor An acting governor is a person who acts in the role of governor. In Commonwealth jurisdictions where the governor is a vice-regal position, the role of "acting governor" may be filled by a lieutenant governor (as in most Australian states) or an ...
when the Governor is not available. The
Constitution A constitution is the aggregate of fundamental principles or established precedents that constitute the legal basis of a polity, organisation or other type of entity and commonly determine how that entity is to be governed. When these princ ...
and
Puerto Rican law The legal system of Puerto Rico is a mix of the civil law and the common law systems. Language Puerto Rico is the only current U.S. jurisdiction whose legal system operates primarily in a language other than American English: namely, Spanish. Be ...
establishes a governmental line of succession for special cases when neither the Governor nor the Secretary are available.


Cabinet

Article IV of the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
establishes that the Governor shall be assisted by
Secretaries A secretary, administrative professional, administrative assistant, executive assistant, administrative officer, administrative support specialist, clerk, military assistant, management assistant, office secretary, or personal assistant is a wh ...
who shall collectively constitute the Governor's advisory council and be designated as the ''Council of Secretaries'' although it's mostly referred to as the ''Cabinet''. The Cabinet is composed by the Constitutional Cabinet, composed by the Secretaries established by the Constitution, and the Operational Cabinet, composed by the Secretaries established by extraconstitutional
Puerto Rican law The legal system of Puerto Rico is a mix of the civil law and the common law systems. Language Puerto Rico is the only current U.S. jurisdiction whose legal system operates primarily in a language other than American English: namely, Spanish. Be ...
or appointed by the Governor. These Cabinets do not exist as agencies, but are referred as such in transcripts, records, official documents, and conversations for brevity and easiness. All Cabinet members are nominated by the
Governor A governor is an administrative leader and head of a polity or political region, ranking under the head of state and in some cases, such as governors-general, as the head of state's official representative. Depending on the type of political ...
and then presented to the Senate for
advise and consent Advice and consent is an English phrase frequently used in enacting formulae of bills and in other legal or constitutional contexts. It describes either of two situations: where a weak executive branch of a government enacts something previ ...
by a simple majority. If they are approved, they are sworn in and then begin their duties. All members receive the title of ''Secretary''. Members of the Cabinet serve at the pleasure of the Governor, who may dismiss them or reappoint them (to other posts) at will.


Executive departments

The day-to-day enforcement and administration of laws is delegated by the Governor to 16 executive departments created by the Constitution or by statute to deal with specific areas of government. The heads of the departments, chosen by the governor and approved by the Senate (with the exception of the Secretary of State, who requires Senate and House confirmation), form a council of advisers generally known as the Governor's Cabinet. The Constitution provides for the creation of at least 8 departments: Departments of
State State may refer to: Arts, entertainment, and media Literature * ''State Magazine'', a monthly magazine published by the U.S. Department of State * ''The State'' (newspaper), a daily newspaper in Columbia, South Carolina, United States * ''Our S ...
,
Justice Justice, in its broadest sense, is the principle that people receive that which they deserve, with the interpretation of what then constitutes "deserving" being impacted upon by numerous fields, with many differing viewpoints and perspective ...
,
Education Education is a purposeful activity directed at achieving certain aims, such as transmitting knowledge or fostering skills and character traits. These aims may include the development of understanding, rationality, kindness, and honesty ...
,
Health Health, according to the World Health Organization, is "a state of complete physical, mental and social well-being and not merely the absence of disease and infirmity".World Health Organization. (2006)''Constitution of the World Health Organiza ...
,
Treasury A treasury is either *A government department related to finance and taxation, a finance ministry. *A place or location where treasure, such as currency or precious items are kept. These can be state or royal property, church treasure or i ...
,
Labor Labour or labor may refer to: * Childbirth, the delivery of a baby * Labour (human activity), or work ** Manual labour, physical work ** Wage labour, a socioeconomic relationship between a worker and an employer ** Organized labour and the la ...
,
Agriculture Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people t ...
,
Commerce Commerce is the large-scale organized system of activities, functions, procedures and institutions directly and indirectly related to the exchange (buying and selling) of goods and services among two or more parties within local, regional, nation ...
, and
Public Works Public works are a broad category of infrastructure projects, financed and constructed by the government, for recreational, employment, and health and safety uses in the greater community. They include public buildings ( municipal buildings, sc ...
. However, due to the increase in population, economy, and public needs over the years, the Puerto Rico government has expanded the executive branch by establishing additional executive departments not specified in the Constitution. These additional departments are established by public law or so-called "reorganization plans", as approved by the legislative assembly. The title of
Secretary A secretary, administrative professional, administrative assistant, executive assistant, administrative officer, administrative support specialist, clerk, military assistant, management assistant, office secretary, or personal assistant is a ...
is given to the heads of the executive departments, whose position is also created by statute. Cabinet member is another title primarily given by the media and the public, though it is considered unofficial. All cabinet-level Secretaries are first nominated by the Governor and are confirmed by the legislative assembly. Each department has different
division Division or divider may refer to: Mathematics *Division (mathematics), the inverse of multiplication *Division algorithm, a method for computing the result of mathematical division Military *Division (military), a formation typically consisting ...
s, agencies, bureaus,
office An office is a space where an organization's employees perform administrative work in order to support and realize objects and goals of the organization. The word "office" may also denote a position within an organization with specific du ...
s, and services, each with specific duties, in order to provide the necessary services to the general public across the island.


Government-owned corporations

Puerto Rico has also established several government-owned corporations in order to provide basic and public services to its citizens, including electricity, water, transportation, and education, among others. These are separate legal entities from the Commonwealth, but the government owns virtually all of these corporations' stock. Each corporation is headed by an Executive Director who is appointed by the corporations’ Board of Directors. The directors are nominated by the Governor and confirmed by the state legislative assembly. Although government-owned corporations are separate from the commonwealth government, who generate their income and expenses independently, several of those have faced financial troubles, and have constantly relied on so called “bail-outs” from the commonwealth to offset recurring losses and deficits, and have been unable to legally declare bankruptcy.


Legislative branch

Article III of the
Constitution of Puerto Rico The Constitution of the Commonwealth of Puerto Rico ( es, Constitución del Estado Libre Asociado de Puerto Rico) is the controlling government document of Puerto Rico. It is composed of nine articles detailing the structure of the government a ...
grants all legislative powers of the commonwealth government to the
Legislative Assembly of Puerto Rico The Legislative Assembly of Puerto Rico ( es, Asamblea Legislativa de Puerto Rico) is the territorial legislature of the Commonwealth of Puerto Rico, responsible for the legislative branch of the government of Puerto Rico. The Assembly is a bic ...
, which is divided into two chambers: a 27-member Senate and a 51-member
House of Representatives House of Representatives is the name of legislative bodies in many countries and sub-national entitles. In many countries, the House of Representatives is the lower house of a bicameral legislature, with the corresponding upper house often c ...
. The chambers are presided over by the President of the Senate and the Speaker of the House, respectively. Both positions are occupied by an active member of each body, elected by a majority of both chambers. The current heads are Senator Eduardo Bhatia and Representative Jaime Perelló Borrás, respectively. Members are elected to both chambers in
general elections A general election is a political voting election where generally all or most members of a given political body are chosen. These are usually held for a nation, state, or territory's primary legislative body, and are different from by-elections ( ...
held every four years, along with the elections for the Governor and the 78 municipal mayors. Each member of the Legislative Assembly represents an electoral district, with the exception of a number of legislators who are considered at-large and represent the island as a whole. Members representing specific districts are elected by the citizens residing within the district, while at-large legislators are elected by accumulation of all island votes.


Constitutional changes

In recent years, two referendums have been held to propose constitutional changes to substantially modify the composition of the Legislative Assembly. Various organizations pushed for changing the legislative assembly from the current two-chamber system (House and Senate) prevalent in 49 of the 50 states of the nation to one-chamber (
unicameralism Unicameralism (from ''uni''- "one" + Latin ''camera'' "chamber") is a type of legislature, which consists of one house or assembly, that legislates and votes as one. Unicameral legislatures exist when there is no widely perceived need for multi ...
). The reasons for this proposed change was based on the growing public opinion that members of the assembly are overpaid, and that a smaller assembly might achieve the same work results as the bicameral one with less public expenditures. However, an official report of 1995 indicates that this argument should not be considered the primary objective because the savings are not significant. The legislative spending in Puerto Rico, compared with the consolidated government budget is less than 1% of total government spending. Lacking the two-thirds majority necessary in both houses of the Legislature to submit constitutional amendments to the electorate, in 2004 the Popular Democratic Party's then-majority approved legislation to hold a
referendum A referendum (plural: referendums or less commonly referenda) is a direct vote by the electorate on a proposal, law, or political issue. This is in contrast to an issue being voted on by a representative. This may result in the adoption of a ...
, not on a particular constitutional amendment as such, but on the general concept of switching from a bicameral to a unicameral system which was held on July 10, 2005. Attended by less than 25% of the islands' electorate, Puerto Rican voters approved the change to a
unicameral legislature Unicameralism (from ''uni''- "one" + Latin ''camera'' "chamber") is a type of legislature, which consists of one house or assembly, that legislates and votes as one. Unicameral legislatures exist when there is no widely perceived need for multi ...
by 456,267 votes in favor, versus 88,720 against. (
Voter turnout In political science, voter turnout is the participation rate (often defined as those who cast a ballot) of a given election. This can be the percentage of registered voters, eligible voters, or all voting-age people. According to Stanford Univ ...
was 22.6% of the electorate.) Almost four years later, incoming Governor
Luis Fortuño Luis Guillermo Fortuño Burset (born 31 October 1960) is a Puerto Rican politician who served as the governor of Puerto Rico, an unincorporated territory of the United States, from 2009 to 2013. Fortuño served as the first secretary of econom ...
(from the New Progressive Party or New Party of Progress (NPP)) discarded the alternative of unicameralism claiming that the NPP's platform, rather than advocating unicameralism, supported submitting to the people a constitutional amendment proposing a substantial reduction in seats in the existing bicameral legislature. In 2012, Governor Fortuño proposed, and by a two thirds majority in both houses, the Legislature approved submitting to the people a constitutional amendment reducing the size of the House from 51 to 39 seats and the Senate from 27 to 17 seats, essentially a 30% reduction in size. However, in an August 18, 2012 referendum, the constitutional proposition failed by a 54% to 46% margin.


Judicial branch

The judiciary of Puerto Rico consists of the
Supreme Court of Puerto Rico The Supreme Court of Puerto Rico ( es, Tribunal Supremo de Puerto Rico) is the highest court of Puerto Rico, having judicial authority to interpret and decide questions of Puerto Rican law. The Court is analogous to one of the state supreme c ...
,
Court of Appeals A court of appeals, also called a court of appeal, appellate court, appeal court, court of second instance or second instance court, is any court of law that is empowered to hear an appeal of a trial court or other lower tribunal. In much of ...
, and the
Court of First Instance A court is any person or institution, often as a government institution, with the authority to adjudicate legal disputes between parties and carry out the administration of justice in civil, criminal, and administrative matters in accorda ...
consisting of the Superior Courts and the Municipal Courts. The Supreme Court, the commonwealth's highest court, holds its sessions in San Juan's Miramar district.


Local government

Puerto Rico is divided into 78 municipalities, each headed by a mayor. The municipalities also have a municipal legislature, which is in charge of overseeing the mayor's operations, holding public meetings, and enacting municipal resolutions and ordinances. Both the mayor and the municipal legislators are elected at-large by the municipality's citizens in general elections held every four years. Unlike most towns, cities and states in the United States, Puerto Rico does not have local or state sheriffs; sheriff duties are instead performed by the Puerto Rico Commonwealth Marshal's Office. Many municipalities have established municipal police departments, although most law enforcement activity is carried out by the Puerto Rico Police (PPR).


Government finances

Puerto Rico's central government, which includes all three branches of government but excludes public corporations and municipalities, has an annual general budget that currently ranges from $8.5 billion to $9 billion in revenues and expenditures.Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 30; Statement of Revenues and Expenditures - Budget and Actual – Budget Basis – General Fund
The government also receives more than $4.2 billion annually in
subsidies A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
and
federal aid A subsidy or government incentive is a form of financial aid or support extended to an economic sector (business, or individual) generally with the aim of promoting economic and social policy. Although commonly extended from the government, the ter ...
from the United States.Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Operating and Capital Grants and Contributions (columns)
A substantial portion of this amount is earmarked for
public welfare Welfare, or commonly social welfare, is a type of government support intended to ensure that members of a society can meet basic human needs such as food and shelter. Social security may either be synonymous with welfare, or refer specifical ...
, including funding educational programs (such as Head Start), subsidized housing programs (such as ( Section 8 and public housing projects), and a food stamp system called the
Nutrition Assistance for Puerto Rico Nutrition Assistance for Puerto Rico (NAP) es, Programa de Asistencia Nutricional (PAN) popularly known in Puerto Rico as ''Cupones'' ('' en, Food Stamps'') is a federal assistance nutritional program provided by the United States Department o ...
program. Government-owned corporations generate approximately $6.3 billion in general revenues by charging citizens for the services they provide. The largest government-owned corporation, the
Puerto Rico Electric Power Authority The Puerto Rico Electric Power Authority (PREPA; Spanish: ''LUMA'', ''AEE'') was an electric power company owned by the Commonwealth of Puerto Rico responsible for electricity generation, power distribution, and power transmission on the island. ...
(PREPA), generates almost half of those revenues alone ($3 billion). However, government-owned corporations generate about $10.6 billion in expenses when combined, requiring substantial subsidies by the central government. In 2005, the central government provided more than $2.6 billion in subsidies, while the remaining expenditures were funded through interest and investment earnings.Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 38; Combining Statement of Activities: Major Component Units
When considering all three branches of government, including all government-owned corporations and municipalities, the government of Puerto Rico's annual expenditures can reach to more than $28 billion.Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Primary Government and Component Units Expenditures (column)


Central government revenues

The central government's main source of revenue is income tax imposed on individual citizens and private companies, which can amount to approximately $5.5 billion. Other significant sources of revenue include excise taxes on imports, cigarettes, liquor, hotel rooms, cement, and vehicles ($2 billion); and lotteries ($870 million).Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 32; Statement of Revenues, Expenses, and Changes in Net Assets-Proprietary Funds


Sales and Use Tax

On November 15, 2006, the government eliminated the excise tax of 6.6% on imports (taxes on cigarettes, liquor, and cars are still in effect) and substituted it for a 5.5% islandwide Sales and Use Tax, plus a municipal sales tax of 1.5%, for a total of 7%, in what has been known as the Puerto Rico Tax Reform. This change was partly due to the government's growing expenditures and fiscal deficits which remained unchecked and uncorrected for several years, until several credit agencies warned public officials that all general-obligation bonds issued by the government were to be downgraded if the problem was not corrected. The situation reached a turning point when the executive branch of the government was partially shutdown, the events now known as the
2006 Puerto Rico budget crisis The 2006 Puerto Rico budget crisis was a political, economic, and social crisis that saw much of the government of Puerto Rico shut down after it ran out of funds near the end of the 2005–2006 fiscal year. The shut down lasted for two weeks from ...
. Thirty-three (33) agencies were closed and 95,762 employees were sent home without pay. Following public bickering between the two main political parties, the new sales tax was approved in favor of the excise tax on imports on May 10, 2006, ending the budget crisis.


Central government expenditures

The largest types of expenditures made by the government are those related to education. In 2005 alone, the government expended more than $5 billion in public education and education-related programs, representing approx. 28% of total government expenditures (excluding public corporations).Commonwealth of Puerto Rico 2005 Comprehensive Annual Financial Report
for the fiscal year ended on June 30, 2005; pg. 24; Statement of Activities; Expenditures (line items)
Other significant expenditures include
public housing Public housing is a form of housing tenure in which the property is usually owned by a government authority, either central or local. Although the common goal of public housing is to provide affordable housing, the details, terminology, def ...
and welfare ($3.4 billion or 19%), public safety ($2.5 billion or 14%) and public health ($2.3 billion or 13%).


Public debt

In May 2007, local economists expressed serious concerns when it was revealed that the Puerto Rico public debt equaled to 76% of its
gross national product The gross national income (GNI), previously known as gross national product (GNP), is the total domestic and foreign output claimed by residents of a country, consisting of gross domestic product (GDP), plus factor incomes earned by foreign ...
(GNP), making it one of the most indebted countries by percentage in the world, even more than the United States.''Debe Puerto Rico 76 centavos de cada dólar''
by Joanisabel González,
El Nuevo Día ''El Nuevo Día'' (English: ''The New Day'') is the newspaper with the largest circulation in Puerto Rico. It was founded in 1909 in Ponce, Puerto Rico, and today it is a subsidiary of GFR Media. Its headquarters are in Guaynabo, Puerto Rico. ...
, May 5, 2007, accessed May 5, 2007 (Spanish)
Economists have criticized the government's fiscal policy, whose level of expenditures and indebtedness has increased significantly within the past decade while the economy was grown at a much slower pace. Between 2000 and 2006 alone, Puerto Rico's GNP rose 5.37%, while its public debt's relation to GNP rose 18%. By comparison, many other Latin American countries have seen reductions in their GNP-public debt percentages during that same time period. By early 2017, the Puerto Rican government-debt crisis posed serious problems for the government which was saddled with outstanding bond debt that had climbed to $70 billion or $12,000 per capita at a time with a 45 percent poverty rate and 12.4% unemployment that is more than twice the mainland U.S. average. The debt had been increasing during a decade long recession. The Commonwealth had been defaulting on many debts, including bonds, since 2015. With debt payments due, the Governor was facing the risk of a government shutdown and failure to fund the managed care health system. "Without action before April, Puerto Rico’s ability to execute contracts for Fiscal Year 2018 with its managed care organizations will be threatened, thereby putting at risk beginning July 1, 2017 the health care of up to 900,000 poor U.S. citizens living in Puerto Rico", according to a letter sent to Congress by the Secretary of the Treasury and the Secretary of Health and Human Services. They also said that "Congress must enact measures recommended by both Republicans and Democrats that fix Puerto Rico’s inequitable health care financing structure and promote sustained economic growth." Initially, the oversight board created under
PROMESA The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is a U.S. federal law enacted in 2016 that established a financial oversight board, a process for restructuring debt, and expedited procedures for approving critical i ...
called for Puerto Rico's governor Ricardo Rosselló to deliver a fiscal turnaround plan by January 28. Just before that deadline, the control board gave the Commonwealth government until February 28 to present a fiscal plan (including negotiations with creditors for restructuring debt) to solve the problems. A moratorium on lawsuits by debtors was extended to May 31. It is essential for Puerto Rico to reach restructuring deals to avoid a bankruptcy-like process under
PROMESA The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is a U.S. federal law enacted in 2016 that established a financial oversight board, a process for restructuring debt, and expedited procedures for approving critical i ...
. Statehood might be useful as a means of dealing with the financial crisis, since it would allow for bankruptcy and the relevant protection. In the Puerto Rican status referendum, 2020, the majority of voters approved of Puerto Rico becoming a state. However, the referendum was non-binding, and there has been little federal action since the referendum. According to the Government Development Bank, statehood might be the only solution to the debt crisis. Congress has the power to vote to allow Chapter 9 protection without the need for statehood, but in late 2015 there was very little support in the House for this concept. Other benefits to statehood include increased disability benefits and Medicaid funding, the right to vote in Presidential elections and the higher (federal) minimum wage.


See also

*
Nutrition Assistance for Puerto Rico Nutrition Assistance for Puerto Rico (NAP) es, Programa de Asistencia Nutricional (PAN) popularly known in Puerto Rico as ''Cupones'' ('' en, Food Stamps'') is a federal assistance nutritional program provided by the United States Department o ...
* Political party strength in Puerto Rico *
Politics of Puerto Rico The politics of Puerto Rico take place in the framework of a democratic republic form of government that is under the jurisdiction and sovereignty of the United States Congress as an organized unincorporated territory. Since the 1898 invasio ...
*
Puerto Rico Federal Affairs Administration The Puerto Rico Federal Affairs Administration (PRFAA)— es, Administración de Asuntos Federales de Puerto Rico—is the executive agency of the government of Puerto Rico that represents the government of the island and its dependencies ...
* Puerto Rico Health Reform *
Law of Puerto Rico The legal system of Puerto Rico is a mix of the civil law and the common law systems. Language Puerto Rico is the only current U.S. jurisdiction whose legal system operates primarily in a language other than American English: namely, Spanish. Be ...


References


External links

* {{Governments of Puerto Rico