2006 Puerto Rico budget crisis
Encyclopedia
The 2006 Puerto Rico
budget crisis was a political, economic, and social
crisis that saw much of the government of Puerto Rico
shut down after it ran out of funds near the end of the 2005-2006 fiscal year. The shut down lasted for two weeks from May 1, 2006 through May 14, 2006, leaving nearly 100,000 public employees without pay and closing more than 1,500 public schools. The crisis was publicly criticized by the business sector, non-profit organizations, Puerto Rican celebrities, and the general public (by means of opinion polls), and was described as the consequence of a political power struggle between the Commonwealth's main opposing political parties: the Popular Democratic Party
and the New Progressive Party
.
refused to approve the Governor of Puerto Rico
's budget-balancing proposals, preventing the central government from raising sufficient revenue and decreasing expenditures for the 2005-2006 fiscal budget.
Following the general elections in 2004, the Puerto Rican government was split between opposing political parties, with Governor Aníbal Acevedo Vilá
of the Popular Democratic Party
(PPD), and a Legislature
controlled by the New Progressive Party
(PNP). Due to an elections dispute
, the elections had to be decided by the Supreme Court of Puerto Rico
, and relations between the Governor and the Legislature have been poor since. The legislature has refused to approve the Governor's proposed budgets since the elections, the Governor vetoed the budget the Legislature approved and the government has been operating on the budget approved for the 2005 fiscal year.
The PNP has repeatedly opposed further borrowing for operating purposes by the already heavily indebted government, and blamed increased levels of spending under Acevedo Vilá's predecessor, Sila María Calderón
(also of the PPD), for Puerto Rico's financial problems. The PNP has advocated a fiscal reform
and the use of money set aside for income tax
refunds and unemployment benefits in the short term.
On the other side, some blame former Governor Pedro Rosselló
, the PNP's former president and current senator, for the excessive expenses during his administrations (1993–2000).
did not have enough cash flows to pay projected operating expenses for the months of May
and June
, including the salaries of thousands of public employees. The governor asked the Legislative Assembly of Puerto Rico
to approve an emergency loan of over $500 million USD
so that the government could keep running, which the government would repay using 1% of a newly proposed sales tax, or else the Governor would order a partial shutdown of central government operations, including the closing of numerous agencies. The Puerto Rico Government Development Bank
offered to supply the loan, but insisted on a tax reform plan that requires this new tax to be collected with a predetermined rate or amount be set aside exclusively for the loan repayment. The NPP-majority Senate
approved the loan based on the proposed tax rate, but the NPP-majority House of Representatives
refused to do so.
The House opposed the Governor's proposed rate of the sales tax
, suggesting a lower rate. While Governor Acevedo Vilá proposed a global 7% rate, the House instead proposed a global 5.5% rate. The House also proposed a 5% corporation tax, but the Governor has argued that this would violate a number of tax incentive contracts with American corporations, and that it may even violate the Constitution of Puerto Rico
.
In a televised address on April 27, Governor Acevedo Vilá announced that most of the government agencies would be shut down beginning May 1, and would remain closed unless the House approved the economic plan. Government activities relating to health and security (including hospitals and police stations) would remain open, although medical professionals questioned whether hospitals would function if staff went unpaid and also raised the issue of government-funded prescriptions, whilst private security firms on contract to the government said they might cease work if the government did not pay what it owes them.
Senate President Kenneth McClintock
said that the shutdown was unnecessary since the government had enough funds to continue paying public workers until the first week of June and that under no circumstance should public schools be shut down. NPP President Pedro Rosselló
said he did not think Governor Acevedo Vilá would shut down the government and accused him of trying to create "uneasiness" and "intimidate the Legislature".
A public demonstration against the shutdown, named the Puerto Rico Shouts march, attracted thousands of people on April 28. Later on, labor
leaders called for a general strike
if the shutdown occurred.
Many on the island have pointed out that this deadlock between the Senate and the House of Representatives to solve the impending budget crisis further validates the case for downsizing the Puerto Rican Legislative branch to a unicameral body. In a referendum held on July 10, 2005, Puerto Rican voters overwhelmingly approved the change to a unicameral legislature by 456,267 votes in favor versus 88,720 against, although three-quarters of voters chose to abstain. This change would become effective in January 2009 if an additional referendum were held to specifically amend the Puerto Rican Constitution and tailor it to the new legislative body, which is highly unlikely since the House defeated a Senate-passed proposed constitutional amendment.
There were several protests on May 1, some in front of the Puerto Rican Capitol
, and another in the Golden Mile
financial district. Another protest occurred in front of the Department of Labor, where a confrontation between protesters and police broke out when students started to throw rocks at the windows of several banks. Several people were injured in the incident.
On May 2 the shut down continued. The New Progressive Party held a meeting and decided to stick with the 5.5% tax proposal, stating that there wouldn't be any type of negotiation. Another meeting between the Speaker of the House of Representatives and the Governor ended in dispute with the Governor leaving less than 15 minutes after the meeting started. Protests were held also in front of the main offices of Popular, Inc. in Hato Rey
and the Capitol.
On May 3, Governor Acevedo Vilá accepted an invitation by José Aponte
, Speaker of the House, to meet with him alone in the Capitol
. Acevedo Vilá suggested to Aponte that Senator Kenneth McClintock
, President of the Senate
, should be present. Aponte didn't agree. Acevedo Vilá arrived to the Capitol in company of Alfredo Salazar
, the President of the Puerto Rico Government Development Bank
, Juan Carlos Méndez,Secretary of Treasury, and Aníbal José Torres, Secretary of Government. Aponte, as agreed, asked Acevedo Vilá to meet alone with him. Fifteen minutes after the meeting Acevedo Vilá left abruptly. According to Acevedo Vilá, Aponte began to complain at some point during the meeting, specifically mentioning that a few days earlier, the Secretary of Treasury changed the financial numbers given under oath in a public hearing, and that the Secretary was absent in a meeting one week earlier, making it difficult for the House to reach him. At some point during the meeting, Acevedo Vilá noticed a smiling face in Aponte and commented that he was happy to see him smile during such time of crisis. At this point, versions differ. Allegedly, Aponte told Acevedo Vilá that he has "seen the face of distress" of Acevedo Vilá in recent days, and that if he needed a handkerchief for his tears, he could let him know. At that point Acevedo Vilá left, feeling that "it was an insult to the Puerto Rican people left in the streets". Aponte denied this, and accused the Governor of lying.
On May 4, Acevedo Vilá marched from La Fortaleza
, the Governor's house, to the Capitol
. It was the first time in Puerto Rican history
that such an event has happened. In Puerto Rican custom, the Governor walks from the Capitol to La Fortaleza when he takes the oath of office
. Acevedo Vilá was criticized due to the similarities between this march and an episode of the TV series The West Wing
, in which the President of the United States
(portrayed by Martin Sheen
) walks from the White House
, home of the President, to the U.S. Capitol
, home of the U.S. Congress, in order to resolve a federal budget crisis.
On May 8, Moody's
downgraded Puerto Rico's general obligation debt to Baa3 from Baa2, and appropriation bonds to junk status at Ba1 from Baa3.
The Legislature has since approved a sales and use tax, with a portion set aside for repaying the loan. The NPP leadership insisted on a maximum combined sales tax of 5.5% (4% state and 1.5% municipal), but the NPP team working on the proposed legislation botched the document and placed wording in it that made the state sales tax 5.5%, for a total of 7%. The Senate immediately recognized the error and placed the bill for immediate approval. Once it was approved, it was revealed that no Senators from the Rosselló faction of the NPP had read the bill, and they had approved with their votes exactly what Governor Acevedo Vilá wanted. The House then attempted to block the bill from reaching the Governor for his signature, but the Puerto Rico Supreme Court ordered the Speaker to complete the process. Just prior to the beginning of the sales tax enactment on November 15, former Governor Carlos Romero Barceló
filed a lawsuit attempting to derail the initiation of the tax, but that too failed to gain any traction in the Courts, and businesses began collecting the new tax on November 15.
Puerto Rico
Puerto Rico , officially the Commonwealth of Puerto Rico , is an unincorporated territory of the United States, located in the northeastern Caribbean, east of the Dominican Republic and west of both the United States Virgin Islands and the British Virgin Islands.Puerto Rico comprises an...
budget crisis was a political, economic, and social
Social
The term social refers to a characteristic of living organisms...
crisis that saw much of the government of Puerto Rico
Government of Puerto Rico
The Government of Puerto Rico is a republican form of government subject to U.S. jurisdiction and sovereignty. Its current powers are all delegated by the United States Congress and lack full protection under the United States Constitution...
shut down after it ran out of funds near the end of the 2005-2006 fiscal year. The shut down lasted for two weeks from May 1, 2006 through May 14, 2006, leaving nearly 100,000 public employees without pay and closing more than 1,500 public schools. The crisis was publicly criticized by the business sector, non-profit organizations, Puerto Rican celebrities, and the general public (by means of opinion polls), and was described as the consequence of a political power struggle between the Commonwealth's main opposing political parties: the Popular Democratic Party
Popular Democratic Party of Puerto Rico
The Popular Democratic Party of Puerto Rico is a political party that supports Puerto Rico's right to self-determination and sovereignty, through the enhancement of Puerto Rico's current status as a commonwealth....
and the New Progressive Party
New Progressive Party of Puerto Rico
The New Progressive Party of Puerto Rico is a political party that advocates for Puerto Rico's admission to the United States of America as the 51st state...
.
Background
There is much debate over the long-term causes of the crisis and Puerto Rico's economic fortunes in general, but the immediate cause of this crisis was a dispute where the Puerto Rico LegislatureLegislative Assembly of Puerto Rico
The Legislative Assembly of Puerto Rico is the territorial legislature of the Commonwealth of Puerto Rico. The structure and responsibilities of the Legislative Assembly are defined in Article III of the Constitution of Puerto Rico....
refused to approve the Governor of Puerto Rico
Governor of Puerto Rico
The Governor of Puerto Rico is the Head of Government of the Commonwealth of Puerto Rico. Since 1948, the Governor has been elected by the people of Puerto Rico...
's budget-balancing proposals, preventing the central government from raising sufficient revenue and decreasing expenditures for the 2005-2006 fiscal budget.
Following the general elections in 2004, the Puerto Rican government was split between opposing political parties, with Governor Aníbal Acevedo Vilá
Aníbal Acevedo Vilá
Aníbal Salvador Acevedo Vilá is a Puerto Rican politician and lawyer. He served as the eighth Governor of the Commonwealth of Puerto Rico, a Commonwealth of the United States, from 2005 to 2009. He is a Harvard University alumnus and a graduate of the University of Puerto Rico School of Law,...
of the Popular Democratic Party
Popular Democratic Party of Puerto Rico
The Popular Democratic Party of Puerto Rico is a political party that supports Puerto Rico's right to self-determination and sovereignty, through the enhancement of Puerto Rico's current status as a commonwealth....
(PPD), and a Legislature
Legislative Assembly of Puerto Rico
The Legislative Assembly of Puerto Rico is the territorial legislature of the Commonwealth of Puerto Rico. The structure and responsibilities of the Legislative Assembly are defined in Article III of the Constitution of Puerto Rico....
controlled by the New Progressive Party
New Progressive Party of Puerto Rico
The New Progressive Party of Puerto Rico is a political party that advocates for Puerto Rico's admission to the United States of America as the 51st state...
(PNP). Due to an elections dispute
Puerto Rico General Elections of 2004
The Puerto Rico General Elections of 2004 took place on Election Day, Tuesday, November 2, 2004. After a count by the State Commission of Elections, the winner was inaugurated to a four-year term as Governor of Puerto Rico on January 2, 2005....
, the elections had to be decided by the Supreme Court of Puerto Rico
Supreme Court of Puerto Rico
The Supreme Court of Puerto Rico is the highest court of the Commonwealth of Puerto Rico, having judicial authority within Puerto Rico to interpret and decide questions of Commonwealth law. As the highest body of the judicial branch of the Puerto Rican government, it is analogous to one of the...
, and relations between the Governor and the Legislature have been poor since. The legislature has refused to approve the Governor's proposed budgets since the elections, the Governor vetoed the budget the Legislature approved and the government has been operating on the budget approved for the 2005 fiscal year.
The PNP has repeatedly opposed further borrowing for operating purposes by the already heavily indebted government, and blamed increased levels of spending under Acevedo Vilá's predecessor, Sila María Calderón
Sila María Calderón
Sila María Calderón Serra is a Puerto Rican politician and businesswoman who served as the seventh Governor of the Commonwealth of Puerto Rico from 2001 to 2005. She is the first and, to date, only woman elected to that office...
(also of the PPD), for Puerto Rico's financial problems. The PNP has advocated a fiscal reform
Fiscal adjustment
A fiscal adjustment is a reduction in the government primary budget deficit, and it can result from a reduction in government expenditures, an increase in tax revenues, or both simultaneously....
and the use of money set aside for income tax
Income tax
An income tax is a tax levied on the income of individuals or businesses . Various income tax systems exist, with varying degrees of tax incidence. Income taxation can be progressive, proportional, or regressive. When the tax is levied on the income of companies, it is often called a corporate...
refunds and unemployment benefits in the short term.
On the other side, some blame former Governor Pedro Rosselló
Pedro Rosselló
Pedro Juan Rosselló González, M.D., , is a Puerto Rican physician and politician who served as the sixth Governor of the Commonwealth of Puerto Rico from 1993 to 2001...
, the PNP's former president and current senator, for the excessive expenses during his administrations (1993–2000).
Crisis
In April 2006, Governor Anibal Acevedo Vilá (PPD) announced that the central government of Puerto RicoGovernment of Puerto Rico
The Government of Puerto Rico is a republican form of government subject to U.S. jurisdiction and sovereignty. Its current powers are all delegated by the United States Congress and lack full protection under the United States Constitution...
did not have enough cash flows to pay projected operating expenses for the months of May
May 2006
May 2006 was a month with thirty-one days.The following events also occurred during the month:...
and June
June 2006
June 2006 was the sixth month of that year. It began on a Thursday and ended after 30 days on a FridayThe following events also occurred during the month:...
, including the salaries of thousands of public employees. The governor asked the Legislative Assembly of Puerto Rico
Legislative Assembly of Puerto Rico
The Legislative Assembly of Puerto Rico is the territorial legislature of the Commonwealth of Puerto Rico. The structure and responsibilities of the Legislative Assembly are defined in Article III of the Constitution of Puerto Rico....
to approve an emergency loan of over $500 million USD
United States dollar
The United States dollar , also referred to as the American dollar, is the official currency of the United States of America. It is divided into 100 smaller units called cents or pennies....
so that the government could keep running, which the government would repay using 1% of a newly proposed sales tax, or else the Governor would order a partial shutdown of central government operations, including the closing of numerous agencies. The Puerto Rico Government Development Bank
Puerto Rico Government Development Bank
The Government Development Bank of Puerto Rico was the brainchild of Governor Rexford Guy Tugwell, who signed Law 252 of May 13, 1942, creating the institution in charge of economic development for the Government of Puerto Rico...
offered to supply the loan, but insisted on a tax reform plan that requires this new tax to be collected with a predetermined rate or amount be set aside exclusively for the loan repayment. The NPP-majority Senate
Senate of Puerto Rico
The Senate of Puerto Rico is the upper house of the Legislative Assembly of Puerto Rico, the territorial legislature of Puerto Rico. The Senate is composed of 27 senators, representing eight constituent senatorial districts across the commonwealth, with two senators elected per district; an...
approved the loan based on the proposed tax rate, but the NPP-majority House of Representatives
House of Representatives of Puerto Rico
The House of Representatives of Puerto Rico is the lower house of the Legislative Assembly of Puerto Rico, the territorial legislature of Puerto Rico...
refused to do so.
The House opposed the Governor's proposed rate of the sales tax
Sales tax
A sales tax is a tax, usually paid by the consumer at the point of purchase, itemized separately from the base price, for certain goods and services. The tax amount is usually calculated by applying a percentage rate to the taxable price of a sale....
, suggesting a lower rate. While Governor Acevedo Vilá proposed a global 7% rate, the House instead proposed a global 5.5% rate. The House also proposed a 5% corporation tax, but the Governor has argued that this would violate a number of tax incentive contracts with American corporations, and that it may even violate the Constitution of Puerto Rico
Constitution of Puerto Rico
The Constitution of the Commonwealth of Puerto Rico is the controlling government document of the Commonwealth of Puerto Rico. It is composed of nine articles detailing the structure of the government as well as the function of several of its institutions. The document also contains an extensive...
.
In a televised address on April 27, Governor Acevedo Vilá announced that most of the government agencies would be shut down beginning May 1, and would remain closed unless the House approved the economic plan. Government activities relating to health and security (including hospitals and police stations) would remain open, although medical professionals questioned whether hospitals would function if staff went unpaid and also raised the issue of government-funded prescriptions, whilst private security firms on contract to the government said they might cease work if the government did not pay what it owes them.
Senate President Kenneth McClintock
Kenneth McClintock
Kenneth D. McClintock-Hernández is the current Secretary of State of Puerto Rico. Mr. McClintock served as co-chair of Hillary Clinton presidential campaign's National Hispanic Leadership Council in 2008, co-chaired Clinton's successful Puerto Rico primary campaign that year and served as the...
said that the shutdown was unnecessary since the government had enough funds to continue paying public workers until the first week of June and that under no circumstance should public schools be shut down. NPP President Pedro Rosselló
Pedro Rosselló
Pedro Juan Rosselló González, M.D., , is a Puerto Rican physician and politician who served as the sixth Governor of the Commonwealth of Puerto Rico from 1993 to 2001...
said he did not think Governor Acevedo Vilá would shut down the government and accused him of trying to create "uneasiness" and "intimidate the Legislature".
A public demonstration against the shutdown, named the Puerto Rico Shouts march, attracted thousands of people on April 28. Later on, labor
Labour movement
The term labour movement or labor movement is a broad term for the development of a collective organization of working people, to campaign in their own interest for better treatment from their employers and governments, in particular through the implementation of specific laws governing labour...
leaders called for a general strike
General strike
A general strike is a strike action by a critical mass of the labour force in a city, region, or country. While a general strike can be for political goals, economic goals, or both, it tends to gain its momentum from the ideological or class sympathies of the participants...
if the shutdown occurred.
Many on the island have pointed out that this deadlock between the Senate and the House of Representatives to solve the impending budget crisis further validates the case for downsizing the Puerto Rican Legislative branch to a unicameral body. In a referendum held on July 10, 2005, Puerto Rican voters overwhelmingly approved the change to a unicameral legislature by 456,267 votes in favor versus 88,720 against, although three-quarters of voters chose to abstain. This change would become effective in January 2009 if an additional referendum were held to specifically amend the Puerto Rican Constitution and tailor it to the new legislative body, which is highly unlikely since the House defeated a Senate-passed proposed constitutional amendment.
Shutdown
On May 1, 2006, with the House of Representatives, the Senate, and the Governor having failed to reach an agreement, 45 government agencies, including island public schools, closed and 15 others were partially closed, leaving 95,762 people temporarily unemployed. The only agencies remaining open are security related, such as police and firefighter agencies, and health related agencies. 1,600 public schools were shut down, leaving 500,000 pupils without facilities.There were several protests on May 1, some in front of the Puerto Rican Capitol
Capitol of Puerto Rico
The Capitol of Puerto Rico is located on the Islet of San Juan just outside the walls of Old San Juan. The building is home to the bicameral Legislative Assembly, composed of the House of Representatives and Senate...
, and another in the Golden Mile
Golden Mile, Puerto Rico
Milla de Oro is a nickname given to a one-mile stretch of Ponce de León Avenue in Hato Rey, San Juan, Puerto Rico. The stretch is famous for the number of local and international banks and financial company's headquarters and buildings, located in the area, which have led some to call it the "Wall...
financial district. Another protest occurred in front of the Department of Labor, where a confrontation between protesters and police broke out when students started to throw rocks at the windows of several banks. Several people were injured in the incident.
On May 2 the shut down continued. The New Progressive Party held a meeting and decided to stick with the 5.5% tax proposal, stating that there wouldn't be any type of negotiation. Another meeting between the Speaker of the House of Representatives and the Governor ended in dispute with the Governor leaving less than 15 minutes after the meeting started. Protests were held also in front of the main offices of Popular, Inc. in Hato Rey
Hato Rey, Puerto Rico
Hato Rey is a former ward located in the northwest part of the dissolved municipality of Río Piedras. It now stretches over three wards of the municipality of San Juan, Puerto Rico:*Hato Rey Central*Hato Rey Norte*Hato Rey Sur...
and the Capitol.
On May 3, Governor Acevedo Vilá accepted an invitation by José Aponte
José Aponte
Jose Fernando Aponte Hernández , is an accountant and former Speaker of the House of Representatives of Puerto Rico. He was born in San Juan and obtained a bachelor's degree in Accounting from the University of Puerto Rico at Rio Piedras in 1980.Aponte is married to Aida I. Rodríguez Roig, and has...
, Speaker of the House, to meet with him alone in the Capitol
Capitol of Puerto Rico
The Capitol of Puerto Rico is located on the Islet of San Juan just outside the walls of Old San Juan. The building is home to the bicameral Legislative Assembly, composed of the House of Representatives and Senate...
. Acevedo Vilá suggested to Aponte that Senator Kenneth McClintock
Kenneth McClintock
Kenneth D. McClintock-Hernández is the current Secretary of State of Puerto Rico. Mr. McClintock served as co-chair of Hillary Clinton presidential campaign's National Hispanic Leadership Council in 2008, co-chaired Clinton's successful Puerto Rico primary campaign that year and served as the...
, President of the Senate
President of the Senate
The President of the Senate is a title often given to the presiding officer of a senate, and is the speaker of other assemblies.The senate president often ranks high in a jurisdiction's succession for its top executive office: for example, the President of the Senate of Nigeria is second in line...
, should be present. Aponte didn't agree. Acevedo Vilá arrived to the Capitol in company of Alfredo Salazar
Alfredo Salazar
Alfredo Salazar is an economist and politician affiliated with the Popular Democratic Party . He is currently running for the office of Resident Commissioner of Puerto Rico to the United States Congress in the upcoming 2008 elections...
, the President of the Puerto Rico Government Development Bank
Puerto Rico Government Development Bank
The Government Development Bank of Puerto Rico was the brainchild of Governor Rexford Guy Tugwell, who signed Law 252 of May 13, 1942, creating the institution in charge of economic development for the Government of Puerto Rico...
, Juan Carlos Méndez,Secretary of Treasury, and Aníbal José Torres, Secretary of Government. Aponte, as agreed, asked Acevedo Vilá to meet alone with him. Fifteen minutes after the meeting Acevedo Vilá left abruptly. According to Acevedo Vilá, Aponte began to complain at some point during the meeting, specifically mentioning that a few days earlier, the Secretary of Treasury changed the financial numbers given under oath in a public hearing, and that the Secretary was absent in a meeting one week earlier, making it difficult for the House to reach him. At some point during the meeting, Acevedo Vilá noticed a smiling face in Aponte and commented that he was happy to see him smile during such time of crisis. At this point, versions differ. Allegedly, Aponte told Acevedo Vilá that he has "seen the face of distress" of Acevedo Vilá in recent days, and that if he needed a handkerchief for his tears, he could let him know. At that point Acevedo Vilá left, feeling that "it was an insult to the Puerto Rican people left in the streets". Aponte denied this, and accused the Governor of lying.
On May 4, Acevedo Vilá marched from La Fortaleza
La Fortaleza
La Fortaleza is the current official residence of the Governor of Puerto Rico. It was built between 1533 and 1540 to defend the harbor of San Juan. The structure is also known as Palacio de Santa Catalina . It is the oldest executive mansion in the New World...
, the Governor's house, to the Capitol
Capitol of Puerto Rico
The Capitol of Puerto Rico is located on the Islet of San Juan just outside the walls of Old San Juan. The building is home to the bicameral Legislative Assembly, composed of the House of Representatives and Senate...
. It was the first time in Puerto Rican history
History of Puerto Rico
The history of Puerto Rico began with the settlement of the archipelago of Puerto Rico by the Ortoiroid people between 3000 and 2000 BC. Other tribes, such as the Saladoid and Arawak Indians, populated the island between 430 BC and 1000 AD. At the time of Christopher Columbus's arrival in the New...
that such an event has happened. In Puerto Rican custom, the Governor walks from the Capitol to La Fortaleza when he takes the oath of office
Oath of office
An oath of office is an oath or affirmation a person takes before undertaking the duties of an office, usually a position in government or within a religious body, although such oaths are sometimes required of officers of other organizations...
. Acevedo Vilá was criticized due to the similarities between this march and an episode of the TV series The West Wing
The West Wing (TV series)
The West Wing is an American television serial drama created by Aaron Sorkin that was originally broadcast on NBC from September 22, 1999 to May 14, 2006...
, in which the President of the United States
President of the United States
The President of the United States of America is the head of state and head of government of the United States. The president leads the executive branch of the federal government and is the commander-in-chief of the United States Armed Forces....
(portrayed by Martin Sheen
Martin Sheen
Ramón Gerardo Antonio Estévez , better known by his stage name Martin Sheen, is an American film actor best known for his performances in the films Badlands and Apocalypse Now , and in the television series The West Wing from 1999 to 2006.He is considered one of the best actors never to be...
) walks from the White House
White House
The White House is the official residence and principal workplace of the president of the United States. Located at 1600 Pennsylvania Avenue NW in Washington, D.C., the house was designed by Irish-born James Hoban, and built between 1792 and 1800 of white-painted Aquia sandstone in the Neoclassical...
, home of the President, to the U.S. Capitol
United States Capitol
The United States Capitol is the meeting place of the United States Congress, the legislature of the federal government of the United States. Located in Washington, D.C., it sits atop Capitol Hill at the eastern end of the National Mall...
, home of the U.S. Congress, in order to resolve a federal budget crisis.
On May 8, Moody's
Moody's
Moody's Corporation is the holding company for Moody's Analytics and Moody's Investors Service, a credit rating agency which performs international financial research and analysis on commercial and government entities. The company also ranks the credit-worthiness of borrowers using a standardized...
downgraded Puerto Rico's general obligation debt to Baa3 from Baa2, and appropriation bonds to junk status at Ba1 from Baa3.
Settlement
On May 4, the first signs of compromise emerged as the Senate approved a new budget-balancing package which proposed a 5.9% sales tax and a corporation tax to be placed only on corporations with earnings of more than ten million dollars. This deal was still not approved by the House. An emergency commission was formed on May 8 under the Archbishop of San Juan, which negotiated with the Governor, the Legislature and the banks. It reported on May 10 and brokered a deal which was accepted in the early hours of the following morning. Under the deal, the legislature will approve the emergency loan to finance Puerto Rico's $740 million shortfall. Having won approval by the Legislature, the Governor signed the budget-balancing package into law on May 13, officially ending the shutdown.The Legislature has since approved a sales and use tax, with a portion set aside for repaying the loan. The NPP leadership insisted on a maximum combined sales tax of 5.5% (4% state and 1.5% municipal), but the NPP team working on the proposed legislation botched the document and placed wording in it that made the state sales tax 5.5%, for a total of 7%. The Senate immediately recognized the error and placed the bill for immediate approval. Once it was approved, it was revealed that no Senators from the Rosselló faction of the NPP had read the bill, and they had approved with their votes exactly what Governor Acevedo Vilá wanted. The House then attempted to block the bill from reaching the Governor for his signature, but the Puerto Rico Supreme Court ordered the Speaker to complete the process. Just prior to the beginning of the sales tax enactment on November 15, former Governor Carlos Romero Barceló
Carlos Romero Barceló
Carlos Antonio Romero Barceló is a Puerto Rican politician who served as the fifth Governor of the Commonwealth of Puerto Rico, the second governor to be elected from the New Progressive Party and also Resident Commissioner of Puerto Rico from 1993 to 2001, making him one of the more successful...
filed a lawsuit attempting to derail the initiation of the tax, but that too failed to gain any traction in the Courts, and businesses began collecting the new tax on November 15.