New governor declares fiscal emergency in Puerto Rico

SAN JUAN, Puerto Rico — Puerto Rico’s new governor on Thursday declared a fiscal emergency because of the U.S. Caribbean island’s darkening budget forecasts and a towering deficit of $3.2 billion.

Gov. Luis Fortuño, who on Jan. 2 inherited an island government that is battling a lengthy recession, proposed a fiscal plan calling for government agencies to slash operational costs by 10 percent in order to bring revenue and expenditures in line.

Fortuño, a Republican who is the leader of the pro-statehood New Progressive Party, said failing to take immediate action to rein in spending would put Puerto Rico’s economy in a calamitous depression.

“The present deficit of $3.2 billion is the greatest, in percentage terms, of all the (U.S.) states,” Fortuño told reporters in the capital, San Juan.

“As I indicated in my inaugural message, there is no doubt that the crisis we face is very serious, but we are going to move ahead.”

A two-year moratorium on corporate tax credits and an additional 5 percent tax on corporations doing business on the U.S. island are among the measures proposed by Fortuño to shore up Puerto Rico’s fragile fiscal state.

Fortuño and his economic advisory committee rejected any proposals to reduce the size of Puerto Rico’s sprawling government of full-time workers, which employs 200,000 people out of a population of 3.9 million.

Instead, Fortuño’s team plans to institute a hiring freeze and called for the dismissal of 11,000 part-time public employees.