Schools and government offices across Puerto Rico have been shut down amid a financial crisis which has left only essential services in operation.
Thousands took to the streets last week to demand a solution
The US territory's 1,600 state schools have been shut, leaving 500,000 pupils and 40,000 teachers with no classes.
Almost 100,000 government workers have been temporarily left without jobs.
The Puerto Rican government has an estimated $740m (£406m) shortfall in public funds and has been unable to agree a spending plan with Congress.
Last week, tens of thousands of Puerto Ricans took to the streets to demand that politicians reach an agreement.
Governor Anibal Acevedo has blamed the crisis on "legislative inaction".
He is seeking the introduction of a 7% sales tax to pay off the loan needed to keep the government going.
The island has no sales tax, and most legislators oppose any tax higher than 5.5%.
The government is using the 2004 budget because there has been no agreement since that year with the legislature, which is dominated by the opposition New Progressive Party.
Its members blame the governor for the current crisis, which could continue for weeks.
The government is the biggest employer in Puerto Rico, accounting for up to 200,000 jobs. It pays about $500m in salaries.
Mr Acevedo has said essential health and security services will continue to operate during the shutdown.