Board of commissioners to promote the uniformity of legislation in the States and To cooperate with the insular chapter of the American Legion in Puerto Rico. Transportation authority... Surplus commodity corporation. Court of tax appeals. Central civilian defense. Planning, urbanizing, and zoning board. Minimum Wage Board.. Trust funds: Puerto Rico Water Resources Authority.. War emergency fund. Expenses of officials engaged in civil and emergency defense activities. $1,000.00 801.52 3,000.00 1, 385. 87 447.95 109.30 661.70 993.49 54.00 1, 402. 15 9,855.98 300.00 1, 404. 21 516.47 400.00 1,996. 68 445. 62 567.36 339.94 5,970. 28 15, 826. 26 EXHIBIT No. 4 The following table of motorcars assigned to insular offices, departments, and agencies was referred to by the witness, P. J. Fitzsimmons: Reference was made on page 178 of the testimony of Mr. P. J. Fitzsimmons to a report showing receipts and disbursements of Puerto Rican funds. It was mentioned that those exhibits would be marked "Exhibits Nos. 3 and 4." To save repetition and unnecessary printing expense the following report on the finances of the insular government issued from the office of the Governor at San Juan, P. R., Öctober 1, 1943, is referred to because it is more comprehensive and detailed than Mr. Fitzsimmons' report submitted to the committee in May 1943. (In this connection also see report prepared by the Federal Works Agency which was printed in the hearings of this committee on S. 981.) REPORT ON THE FINANCES OF THE INSULAR GOVERNMENT OF PUERTO RICO Previous reports on the finances of Puerto Rico have been based on the figure. published in the annual reports of the treasurer and the auditor of Puerto Rico The tabulations in those reports have been accurate and correct from an accounting point of view, but they have left much if not everything to be desired from a statistical point of view. Under these circumstances it is only natural that misconceptions should arise about the finances of Puerto Rico. To be useful figures must be more than correct, they must mean something. The need for a clear statistical picture of the finances of Puerto Rico has been felt by all executives and all financial officers of the insular government for at least 15 years. But all efforts have sunk down in the mire of the complex special appropriation and special trust fund system in existence in Puerto Rico. The need has become yet more evident in recent years to Federal agencies, to congressional committees, to insular executives, to the legislature and to the public because the financial relationship between the continental United States and the island of Puerto Rico is fundamental to all determination of "political status." In an effort to clear up some of the difficulties and misunderstandings the present report is issued. It is based on a fundamental reexamination of the accounts for the years involved. It is extremely tentative. It is known that changes will be made in certain classifications. It is known that there are even inconsistencies in classification among the various tables. It was felt, however, that the survey was at a logical point where the first tentative report should be issued so that it could form the basis for discussion and criticism by the various insular financial agencies concerned. It is planned at present to issue a revision of the present study about October 15, a second revision about November 15, and to publish the final survey around the end of December. The present report has been prepared by the bureau of the budget and the office of statistics of the Office of the Governor, largely from surveys of the basic data made by the department of finance. The purpose of this report is twofold. First, to show, for the 5-year period 1939-40 through 1943-44, what the insular government of Puerto Rico has been receiving and what it has been spending its revenues for; and second to show the present financial condition of the insular treasury so as to indicate what surplus or uncommitted funds may be available for at present unanticipated emergency expenditure during the fiscal year 1943-44 or for the building up of war or post-war emergency reserves. Appropriations (exhibit A). DISCUSSION OF EXHIBITS As stated in the Governor's model budget message of March 15, 1943, to the legislature and as further stated in the hearings before the Bell committee in May and June 1943, neither the executive, nor the legislature, nor the public has ever been presented with a complete picture at one time of the anticipated expenditures of the insular government for various specific governmental purposes for the succeeding fiscal year. It was the purpose of all previous budget legislation and is also the purpose of the new budget law (Act 213 of 1942) that such a complete picture be given. Considerable progress toward this end was made in the model budget for 1943-44 but a complete picture was not attained. The 1943-44 budget covered all anticipated disbursements from the general fund but not those from the trust funds. It is helpful in considering the financial operations of the insular government to think of revenues going into and expenditures being made out of two large wallets (1) the general fund and (2) the trust funds (which might be more properly called separated funds). The revenues that go into the general fund from various tax sources are lumped together and are available for any legislatively approved expenditure regardless of the source from which the funds were collected. The revenues that go into the separated or trust funds wallet, go into over 500 compartments in the wallet and are available only for expenditure for the particular purpose for which the compartment was established by law. There are also certain general distinctions between the two funds as to source of revenue and purpose of expenditure. Almost 100 percent of the receipts of the general fund are from tax revenues and almost 100 percent of the expenditures from the general fund are for insular government purposes. But the revenues of the separated or trust funds come from many different sources; from property and excise taxes; from license fees and franchises; from the sale of services, assets, and bonds; from the Federal Government for normal State aid such as vocational education, social security, roads, etc.; from the operating charges of public service enterprises such as charges by the irrigating systems for water and power or employers' premiums for workmen's compensation insurance; from private individual contributions such as pension contributions and contributions to savings and loan associations; and from the operation of the lottery, which is peculiar to Puerto Rico. Similarly all expenditures from the trust funds are not for insular government purposes. For example, whlie the total property tax is collected by the insular treasury about three-quarters of this tax is credited to separated or trust funds for the municipality governments. The money can be spent by the municipalities for municipal purposes; it cannot be spent by the insular government for insular purposes. For example, the premiums paid by employers for workmen's compensation are received by the insular treasury and are deposited in a separated or trust fund, but they are in fact charges for the operation of a nonprofit publicservice insurance enterprise; the receipts are not available for expenditure for insular government purposes. Likewise receipts from the sale of lottery tickets are received by the insular treasury and are placed in separated or trust funds, but 60 percent must be reserved for the payment of prizes to the public that holds the winning tickets. The foregoing discussion should indicate that, because of the great number of separated or trust funds, the varying sources of receipts, the different broad purposes of expenditure, and the general inflexibility and uninterchangeability of these funds, the consolidated budgeting and programming of anticipated expenditures of the trust funds as a whole for the succeeding year is extremely difficult. Individual trust funds have had budgets or partial budgets prepared for them. But no consolidated budget for all the trust funds has ever been prepared. Such a consolidated budget or program will be prepared for the fiscal year 1944-45. On the other hand, it is also clear that the budgeting or programming of anticipated expenditures from the general fund is a much simpler undertaking. It was the practical view of the newly created bureau of the budget of the Office of the Governor that expenditures from the general fund should be tackled first and such a consolidated budget for the total general fund was presented to the legislature on March 15, 1943. This was the first time that such a consolidated budget for the general fund had been prepared for the insular government. Prior to this time the only budget that was prepared was for the activities included in so-called General Appropriations Act. While all appropriations contained in the General Appropriations Act came from the general fund, yet not all appropriations from the general fund were included in the General Appropriations Act. That is, there were many special appropriations from the general fund that were for regular governmental purposes but that were still not included in the General Appropriations Act. The extent of these special appropriations in monetary terms can be shown as follows: In 1941-42 total appropriations from the general fund were $27,000,643.40 of which $15,612,340.04 was contained in the General Appropriations Act and $11,388,303.36 was represented by special appropriations from the general fund. In 1942-43, total appropriations amounted to $51,811,941.60, of which $20,554,270.16 was in the General Appropriations Act and $31,257,671.44 in special appropriations. Many reasons have been advanced as to why all appropriations for insular government operations have not been included in one appropriation act. Custom, tradition, lack of imagination, routine procedure, attempts to bypass executive and legislative control, and certain restrictions in the organic act for Puerto Rico have all had their influence. But whatever the legal or political difficulties of securing a consolidated appropriations act this should not have interfered in the prior presentation of a consolidated budget. A budget is a program or plan and can form the basis upon which executive and legislative decisions can be made regarding how much money is to be allocated to specific purposes. Whether the enabling legislation (appropriations act) is a consolidated appropriations act or a series of appropriation acts is another matter. Following this line, the first consolidated general fund budget, on a new functional classification basis, was prepared for 1943-44. The legislature did not adopt a consolidated appropriations act but nevertheless considerable progress was made in including in the General Appropriations Act many items that had hitherto been financed through special appropriations. In order to show the complete picture of the general fund for 1943-44 as it stands at the present time all appropriations from the general fund have been reconsolidated and are given in detail in exhibit A of this report and these appropriations have been related to appropriations for similar purposes from the general fund for the previous 4 years. The schedule therefore indicates the situation as it would have been if consolidated budgets and appropriation acts had been made for each of the 5 years. It should again be pointed out that this exhibit A does not contain a consolidated budget of anticipated expenditures from the separated or trust funds for the year 1943-44 or for previous years. Such a budget is not available nor is a consolidated anticipated revenue statement for these funds available. All that can be said is that in general it is expected that revenues and expenditures of trust funds in 1943-44 will be similar to what they were in 1942-43. Disbursements (exhibit B). If a budget of anticipated expenditures or disbursements from the separated or trust funds for the succeeding year is not available, it is at least logical to expect that a statement on actual expenditures or disbursements for the preceding year would be available. That is, if a consolidated budget of all funds allocated for insular government purposes is not available for the coming year, as a substitute a consolidated statement of expenditures or disbursements from all funds should be possible of reconstruction, for the previous year. Thus, always recognizing the distinction between appropriations, which represent potential expenditures, and disbursements, which represent actual expenditures, a picture of what the insular government used its revenues for could be secured. From a pure accounting standpoint such a statement must always be made at the end of each fiscal year and such a statement must always be correct and complete. These accounting statements have been issued by the insular government each year. The statements are financially correct, but they have never meant anything statistically, and could never really be used as the basis of legislative or executive decisions. They have only been the addition of all the debits of the miscellaneous unclassified ledgers of the government. For the disbursments of the government of Puerto Rico have never been classified in such a way that they would answer the following questions: 1. What are the total disbursements of a true governmental nature? 2. What are the disbursements that the treasury of the government of Puerto Rico (as distinct from the insular government itself) makes, but which are not strictly governmental? 3. What are the disbursements of the government of Puerto Rico from all sources, both general fund and trust funds, for each of the principal types of governmental service? A classification of disbursements capable of answering those questions was urgently needed for several reasons. A simple addition of the disbursements from the general fund and from the trust funds of the government of Puerto Rico does not give a true picture of the disbursements of the government. The insular government disburses considerable amounts to the municipalities, from moneys that are collected especially for them. Similarly, large disbursements are made from the special accounts of public-service enterprises. Disbursements are also made to return deposits to citizens who offer bonds or other guaranties for such purposes as the performance of contracts, or to show good faith before the initiation of legal proceedings. To meet the need for such distinct information the present classification was attempted. The results are shown in exhibit B. Previously no statistically reliable classification of disbursements had been made, and sheep, goats, and elephants had been lumped together indiscriminately. In making the classification of disbursements by functions, the same functional classification used for the appropriation budget for 1943-44 was followed as much as it was possible at the present time. This facilitates the comparison with the figures on appropriations by functions and also allows comparison with other States of the Union. It must be made clear, however, that the accompanying classification by functions is still preliminary and subject to revision. It goes as far as basic data furnished by the Treasury Department permitted. It is not throughout completely consistent with the classification made in exhibit A (appropriations). Refinement of this classification and tabulation will be continued. |