[San Juan, Puerto Rico - October 16, 2024] - The executive director of the League of Puerto Rico Cities, Cristina Miranda Palacios, rejected as a permanent solution the creation of the Municipal Essential Services Fund, established by the Fiscal Control Board to replace the now defunct Equalization Fund, since, in her opinion, this new distribution of funds does not do justice to local governments.
“We have to change the narrative. The Equalization Fund was not a subsidy or a handout, it was the way to redistribute the money collected by the central government back to the local governments, which are the main providers of essential services,” Miranda Palacios said.
A Municipal Radiography conducted by the League of Cities estimated that the elimination of the Equalization Fund would cause some 43 local governments on the island to be “fiscally unviable” as of the close of this fiscal year, in June 2025. In this x-ray, it was anticipated that with the elimination of this transfer, 26 local governments will lose up to 10% of their budgets, while 9 others will lose up to 20%. Leaving 43 local governments with a reduction of between 30% to 60% of their budget.
“Local governments are the main providers of direct service to the citizenry, this attack on their fiscal capacity is an attack on the neediest populations in the country.
As we have said since 2020, some 43 local governments will become fiscally unviable next fiscal year, for this there is no plan, there is no alternative but there will continue to be the need of those most vulnerable and who will not have the possibility of seeking help from the central government,” said the executive director of the organization.
In view of this scenario, Miranda Palacios stressed that the correct alternative is to resume the model of transfers to local governments through a permanent formula. Starting with the creation of the Economic Development Fund for municipalities, which the Fiscal Control Board approved on page 48 of the 2017 Fiscal Plan. This new fund was presented as a “counterpart” to the elimination of the Equalization Fund, estimating that it could raise up to $426 million, to cover the $350 million loss suffered by local governments. The phased elimination of the Equalization Fund occurred this year. However, this new financial measure, promised by the Government and approved by the Fiscal Control Board, never arrived.
“We stand by the implementation of permanent measures for our local governments, so that they, in turn, can continue to provide essential services to our communities and our country,” Miranda Palacios reaffirmed.
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