A decline in net position may indicate a  deteriorating financial position. (See figure 2.) Puerto Rico’s general revenue in fiscal year 2014 was  $13.8 billion, of which 75 percent or $10.3 billion was tax revenue. Puerto Rico’s declining net position for the primary government  reflects its deteriorating financial position. Experts Identified Several Factors That Have Contributed to Puerto Rico’s High Debt Levels

Puerto Rico officials, representatives from ratings agencies that we spoke  to, and publically available reports that we reviewed cited various major  factors as contributors to Puerto Rico’s high debt levels. According to the February 28, 2017,  version of the Puerto Rico government’s fiscal plan, Puerto Rico’s  capacity to issue debt at favorable rates postponed the  implementation of fiscal reforms and controls necessary to balance  Puerto Rico’s budget. Outcomes of Restructuring Process Will Determine Outlook for Repayment of Debt

Puerto Rico had missed up to $1.5 billion in debt service payments as of  September 2016. American Samoa

		American Samoa’s Total Public Debt More Than Doubled and It Grew from 5 to 11 Percent of GDP between Fiscal Years 2005 and 2015

			Total Public Debt Outstanding

American Samoa’s total public debt outstanding grew from $27 million in  fiscal year 2005 to $69.5 million in fiscal year 2015. American Samoa’s General Revenue Grew and Net Position Was Positive and Generally Improving between Fiscal Years 2005 and 2015

American Samoa’s general revenue fluctuated, but trended upward  between fiscal years 2005 and 2015. American Samoa’s Bonded Debt Was Issued Primarily to Fund Infrastructure Projects

According to territory officials, American Samoa has never issued debt to  fund government operating costs and does not intend to do so. According to territory  officials and our prior work, American Samoa’s economy relies heavily on  the tuna processing and canning industry. Commonwealth of the Northern Mariana Islands (CNMI)

		CNMI’s Total Public Debt Declined by $100 million, Decreasing to 16 Percent of GDP between Fiscal Years 2005 and 2015

			Total Public Debt Outstanding

CNMI’s total public debt outstanding declined from $251.7 million in fiscal  year 2005 to $144.7 million in fiscal year 2015. Component units in CNMI also issue debt. CNMI also has significant pension liabilities, but the exact amount of the  net pension liability is not included in the territory’s most recent single  audit report because the government has not complied with accounting  standards that require it to do so. Guam

		Guam’s Total Public Debt More Than Doubled and It Grew from 24 to 44 Percent of GDP between Fiscal Years 2005 and 2015

			Total Public Debt Outstanding

Guam’s total public debt outstanding increased from almost $1 billion in  fiscal year 2005 to $2.5 billion fiscal year 2015, with the majority of the  increase occurring between fiscal years 2008 and 2015 when total  outstanding public debt grew 13 percent on average per year. Despite Guam’s Recent and Expected Economic Growth, Growing Pension Fund Liabilities May Present a Risk

Despite economic growth, we found that Guam faces large fiscal risks  related to unfunded pension liabilities and other post-employment benefits  (OPEB) that, if unaddressed, may hamper its ability to repay existing debt  and increase its need to issue debt. During this period, total public debt outstanding increased by about  $800 million, and almost all of USVI’s public debt was in the form of  bonds. USVI’s General Revenue Remained Stagnant and Net Position Was Generally Declining between Fiscal Years 2005 and 2015

USVI’s general revenue showed almost no growth in the 10-year period  between fiscal years 2005 and 2015. In September 2016, the administration released its 5-year financial plan. Territory officials cited several reasons for the large unfunded pension  and OPEB benefit liabilities. Appendix I: Objectives, Scope, and Methodology

Our objectives were, for each U.S. territory—Puerto Rico, American  Samoa, the Commonwealth of the Northern Mariana Islands (CNMI),  Guam and the U.S. Virgin Islands (USVI)— to describe: (1) trends in  public debt and its composition between fiscal years 2005 and 2015, (2)  trends in revenue and its composition between fiscal years 2005 and  2015, (3) the major reported drivers of the territory’s public debt, and (4)  what is known about the ability of the territory to repay public debt. To determine the major reported drivers of public debt and what is known  about the territories’ ability to repay this debt, we interviewed officials from  the territories’ governments, including officials from the Governors’  offices, departments of finance or treasury, and the agency responsible  for issuing and marketing bonded debt. 2. 6. We  do not rank the U.S. territories in this report. 9.
Why GAO Did This Study

The United States has five territories: Puerto Rico, American Samoa, CNMI, Guam, and USVI. The territories, like U.S. states in some cases, borrow through financial markets. Puerto Rico in particular has amassed large amounts of debt, and defaulted on billions of dollars of debt payments. In response to the fiscal crisis in Puerto Rico, Congress enacted and the President signed the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) in June of 2016, which established an Oversight Board with broad powers of budgetary and financial control over Puerto Rico and requires GAO to study fiscal issues in all five U.S. territories.
In this report, for each territory for fiscal years 2005-2015, GAO examined (1) trends in public debt and its composition, (2) trends in revenue and its composition, (3) the major reported drivers of the territory's public debt, and (4) what is known about the ability of each territory to repay public debt.
GAO analyzed the territories' single audit reports; interviewed officials from the territories' governments, ratings agencies, and subject matter experts; and reviewed documents and prior GAO work.

What GAO Found

Puerto Rico: Between fiscal years 2005 and 2014, the latest figures available, Puerto Rico's total public debt outstanding (public debt) grew from $39.2 billion to $67.8 billion, reaching 66 percent of Gross Domestic Product (GDP). Despite some revenue growth, Puerto Rico's net position was negative and declining during the period, reflecting its deteriorating financial position. Experts pointed to several factors as contributing to Puerto Rico's high debt levels, and in September 2016 Puerto Rico missed up to $1.5 billion in debt payments. The outcome of the ongoing debt restructuring process will determine future debt repayment.
American Samoa: American Samoa's public debt more than doubled in fiscal year 2015 to $69.5 million, but remained small relative to its economy, with a debt to GDP ratio of 10.9 percent. American Samoa's debt was primarily used to fund infrastructure projects. Between fiscal years 2005 and 2015, revenues grew and the government's net position was positive and generally improving. GAO previously reported that American Samoa relies heavily on the tuna processing and canning industry. Disruptions in this industry could affect its ability to repay debt.
Commonwealth of the Northern Mariana Islands (CNMI): CNMI's public debt declined from $251.7 million to $144.7 million between fiscal years 2005 and 2015, decreasing CNMI's debt to GDP ratio to 16 percent. Most of CNMI's debt was used to refinance prior debt and fund infrastructure projects. Despite revenue growth since fiscal year 2011, CNMI's net position was negative and generally declining during the period. GAO previously reported that labor shortages may affect GDP. This could impede CNMI's ability to repay debt in the future.
Guam: Between fiscal years 2005 and 2015, Guam's public debt more than doubled from almost $1 billion to $2.5 billion, with a debt to GDP ratio of 44 percent for fiscal year 2015. Most of Guam's debt was used to comply with federal requirements and court orders. Revenue grew during this period, and net position fluctuated significantly, with a negative balance in fiscal year 2015. Despite recent and expected economic growth, GAO found that large unfunded pension and other post-employment benefit (OPEB) liabilities may present a risk.
U.S. Virgin Islands (USVI): Between fiscal years 2005 and 2015, USVI's public debt nearly doubled, reaching $2.6 billion and a debt to GDP ratio of 72 percent. Since 2010, most of USVI's debt was used to fund general government operations. Revenue remained stagnant and net position was negative and declining during the period, reflecting a deteriorating financial position. While USVI holds a year's worth of debt service payments in reserve, GAO found that economic uncertainty and looming government pension fund insolvency by 2023 may hamper repayment. In early 2017, USVI was unable to access capital markets to issue new debt at favorable rates. Although the government adopted a financial plan intended to reduce expenditures and increase revenue, the plan does not address USVI's significant unfunded pension and OPEB liabilities and it is unclear whether the plan will produce the intended level of savings.

What GAO Recommends

GAO is not making recommendations in this report.