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Puerto Rico Governor Proposes First Balanced Budget in Over 10 Years

Members of Puerto Rico's legislature will begin debating the island's first balanced budget proposal in more than 10 years, submitted Wednesday by Governor Alejandro García Padilla.

"Our island needs radical changes," said Padilla as he addressed the legislature on Tuesday. "For too long, previous proposals have only been cosmetic or sought a collective applause," he said.

The budget includes $1.4 billion in cuts and adjustments. The plan includes consolidating 25 government agencies and cutting spending for most agencies by about 8 percent. The Governor also pledged $775 million to pay off debt, which is over half a billion more that last year's budget.

Puerto Rico economist Gustavo Velez said the island "cannot go to the market to borrow more money - they have no choice but to face reality, to operate with the resources they have." Garcia inherited a $2.2 billion dollar deficit and high unemployment when he took office in January of 2013.

Garcia has made changes to some public pension systems and has been attracting international companies with tax incentives. Recently both German-based Lufthansa Technik and Arizona-based Honeywell Aerospace said they would each invest over $20 billion to expand their business in Puerto Rico.

After the budget proposal, hundreds of unionized workers protested the cuts and opposition party legislator Lourdes Ramos criticized Garcia for not acknowledging the island's contracting economy. The legislature will be debating the next few weeks.

--Reporting by the Associated Press