In a televised announcement, Puerto Rico Gov. Alejandro García Padilla unveiled his proposed budget for the new fiscal year that is $700 million lower than the current budget and sets aside $200 million to pay creditors as the next $2 billion dollar bond payment deadline looms.
García Padilla proposed a budget for the next fiscal year of $9.1 billion. Gov. Padilla said it will not raise taxes but calls for almost $3 billion cuts in spending for the next year.
"Although the budget for fiscal [year] 2017 would be lower than the current one, it would not reduce the budgets set aside for health services, education, public safety, agriculture and social welfare, and instead guarantees the services that [related] agencies bring," García Padilla said.
Regarding the $200 million to pay creditors, Gov. Padilla said "we have made clear that we're not going to pay more than what is fair so as not to affect essential services."
"Paying it in full would have meant stripping health services from approximately more than a million people, or we would have had to lay off countless number of police officers, closed a hospital, be left without school transportation or garbage collection," said Gov. Padilla.
House Speaker Paul Ryan and Treasury Secretary Antonio Weiss announced a bipartisan bill to deal with the Puerto Rico crisis. The bill calls for the creation of an ovesight board that has significant power over the government's spending, budgeting, debt payment and other decisions.
Puerto Rico has a $72 billion debt to creditors and has defaulted on bond payments and on July 1 the island must pay more than $700 million, or face another default. Puerto Rico is unable to restructure these loans unless Congress passes legislation.