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Board Changes Worker Furlough Plan, Steps up Pressure for Enhanced Federal Assistance

In response to the Hurricane Maria disaster that has devastated Puerto Rico, the territory’s federally-named Financial Oversight and Management Board has dropped its demand that Governor Ricardo Rossello Nevares (New Progressive Party-NPP) cut the working hours of all territorial Executive branch employees and pensions by 10% during insular Fiscal Year 2018, which ends next June 30th.

The action changes the territorial government budget and may signal other changes in the islands’ 10-year fiscal adjustment plan.

The Board also publicly urged the Trump Administration and the Congress to increase financial assistance to the islands, including for repair and replacement of damaged infrastructure and in Federal programs in which funding for the territory is capped.

Under President Trump’s disaster declaration for Hurricane Maria, Puerto Rico is eligible to have 75% of infrastructure repair and replacement costs paid for by the Federal Emergency Management Agency (FEMA), the standard amount given States and localities for major disasters. The President has the authority, however, to eliminate the local matching funding requirement, although FEMA policy is that a State, territory, or locality should pay at least 10% of the cost.

In his disaster declaration, Trump, however, already waived all of the 25% matching funding requirement for Puerto Rico for emergency relief and debris removal for 180 days — which should be more than sufficient for that work (even at the controversially slow pace on which it is proceeding). The time allotted for full Federal funding for these phases of the response to the disaster was far more generous than that recently provided Texas communities for Hurricane Harvey and to a large part of Florida for Hurricane Irma (a fact that has received almost no public attention).

A prime example of a program in which funds are capped for Puerto Rico is Medicaid. Under it, unlike the States, Puerto Rico can only receive a limited amount of funds even if it were willing to provide a greater amount of local matching funds. Currently Puerto Rico is spending nearly $1.6 billion a year in Federal Medicaid dollars, which are provided on a 55% Federal/45% territorial funding basis. Under current law, the cap on Federal contributions will be reduced to not much more than $400 million next April 1st.

The Governor wants a U.S. Treasury Department and Federal Reserve assistance for $30 billion in territorial financing. Financial assistance could also be provided otherwise, including through reinstatement of the granting of $13.25 per proof gallon of the $13.50 tax on rum produced in the territory and in foreign countries. The grant was reduced to $10.50 per proof gallon as of last December 31st. It was first increased to $13.25 after the last major disaster in Puerto Rico of a scope near that of Hurricane Maria, Hurricane Georges in 1998.

The Financial Board also requested that the Trump Administration assign to it staff from a number of Federal agencies for several months to help it handle demands created by the disaster.

The Board decisions were taken just after Chairman Jose Carrion, Member Ana Matosantos, and Executive Director Natalie Jaresko met with: Trump Administration officials; aides to U.S. House of Representatives Speaker Paul Ryan (R-WI) and U.S. Senate Majority Leader Mitch McConnell (R-KY); Senator Marco Rubio (R-FL), who has been very active on the Puerto Rico Hurricane Maria response issue, and Puerto Rico’s Resident Commissioner in the  U.S. House, Jenniffer Gonzalez-Colon (R/NPP). It would be unusual if the Board had not consulted with the Federal officials before making the decisions that it has now announced.

Carrion was appointed to the Board at Ryan’s recommendation. Matasantos was recommended by Democrats. Rubio joined Gonzalez-Colon in a meeting with Vice President Pence last Tuesday after a trip that the two made to the islands the day before with top Trump Administration officials working on the disaster. Gonzalez-Colon also met with Ryan first thing Tuesday and he arranged for her to describe the situation in Puerto Rico to the entire House Republican Conference that day.

Trump is scheduled to visit Puerto Rico tomorrow, although he was reportedly rethinking that this morning. Administration officials scheduled the visit for October 9th but he had moved the date up a week.

Pence plans to go to the islands Friday.

In other developments, the House passed legislation Thursday that would give the Governments of Puerto Rico and the U.S. Virgin Islands money to subsidize wages of private sector workers while their employers’ business operations are inoperable due to Hurricanes Irma and/or Maria.

The subsidy to encourage employers to continue paying the employees while businesses are shut-down would be 40% of wages paid up to $6,000 per worker.

The provision sponsored by Representative Carlos Curbelo (R-FL), Gonzalez Colon, and U.S. Virgin Islands Delegate Stacey Plaskett (D) was added to a bill by Ways and Means Committee Chairman Kevin Brady (R-TX) by the Rules Committee late Wednesday.

Representative Jerrold Nadler (D-NY) unsuccessfully tried to add $1 billion for Puerto Rico and the Virgin Islands onto the bill before it passed the House.




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