2006 Puerto Rico Budget Crisis - Settlement

Settlement

On 4 May, 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 8 May under the Archbishop of San Juan, which negotiated with the Governor, the Legislature and the banks. It reported on 10 May 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 13 May, 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 15 November, 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 15 November.