updated 5/14/2006 12:09:54 AM ET 2006-05-14T04:09:54

Puerto Rico’s governor signed legislation on Saturday ending a partial government shutdown that closed the territory’s public schools and idled half the government work force.

More than 100,000 government workers and a half-million students will return to work and classrooms Monday after a two-week break they never planned for was resolved with the signature.

“The government will reopen and return to normal on Monday,” Gov. Anibal Acevedo Vila said.

The end to the budget impasse came several hours after Puerto Rico’s Senate authorized an emergency loan to fund the government’s operations and payroll until the end of the fiscal year on June 30.

Bailout aimed at resolving financial crisis
Earlier, the opposition-dominated House unanimously approved the bailout hours after Acevedo warned that the deal to end the shutdown — which affected almost 10 percent of workers in the U.S. Caribbean territory — could unravel if lawmakers failed to act.

The Senate and the House also approved a fund to help pay down the island’s debt, using 1 percent of an as-yet undetermined new sales tax.

A bitter divide between Acevedo and lawmakers over the budget shortfall led to the island’s first-ever shutdown.

The Senate put off until Tuesday consideration of a third measure, proposed by the House, intended to save some $300 million next year by eliminating and consolidating government agencies.

Lawmakers said the budget reform would eliminate only contract employees, not civil servants.

But union leaders and the governor’s staff said the proposal — which would cut roughly 3.5 percent of the government’s budget — would result in layoffs. Currently, salaries make up about 80 percent of the U.S. commonwealth’s operational costs.

The shutdown, which began May 1, crippled government services and hurt businesses.

Island economy takes a hit
Hotels, shops and restaurants reported a drop in business as thousands of government workers struggled to get by on unemployment benefits of up to $133 per week.

The shutdown also led New York-based Moody’s Investors Service to cut the rating of the territory’s general obligation bonds to one notch above junk status — affecting about $25 billion of government debt.

Before the shutdown, Moody’s and Standard & Poor’s — another major credit rating agency — had warned that Puerto Rico’s government, which employs roughly 200,000 people out of a population of 3.9 million, needed to implement major fiscal changes and spending restraint.

Several Puerto Rican economists said the partial government shutdown has not produced savings for the treasury because the government will have to pay overtime to police officers that worked security details during daily protests and other expenses.

Officials have said furloughed workers would be paid for work days they missed during the shutdown.

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