Facing a cash crisis, Puerto Rico is turning to desperate measures to pay the bills: It’s delaying tax refunds, borrowing from its insurance company and may even legalize the black-market slot machines in grocery stores.
Lawmakers have yet to agree on a budget, with less than two weeks before the start of the new fiscal year. Without a spending plan in place, the junk-rated commonwealth won’t be able to raise as much as $1 billion from investors to keep the government running as it waits for tax revenue to flow in.
“I have to prioritize,” Treasury Secretary Juan Zaragoza said in an interview. “I have to choose between paying for education and tax refunds. It’s a clear choice.”
Such budgetary brinkmanship isn’t unique to the Caribbean island of 3.5 million people. Illinois’s workers may not be paid if a budget’s not passed this month, and California once resorted to issuing IOUs. But losing access to the bond market poses a particular blow to Puerto Rico, where borrowing to paper over deficits has left the government and its agencies teetering under $72 billion of debt — more than any U.S. state except California and New York.