A group of members from the U.S. House of Representatives has written to the Puerto Rico Financial Oversight and Management Board (FOMB) to clarify and emphasize that all federal disaster relief funding must be dedicated towards the Island’s recovery — not for payments to creditors.
Representative Nydia Velazquez (D-NY) and a spokesman for the senior minority party member of the House committee with jurisdiction over territorial relations, Raul Grijalva (D-AZ), were quoted last week as saying that the Congress was not appropriating disaster assistance for Puerto Rico to free up insular monies that could be used to make payments on bonds.
In addition, Governor Ricardo Rosselló submitted his second fiscal plan proposal for the Government, which projects a $2.8 billion dollar surplus by FY2023. When it was pointed out that surpluses could be used to pay debt, officials of Puerto Rico’s Fiscal Agency and Financial Advisory Authority said that the surplus numbers were for “illustrative purposes only.”
Velazquez reacted to the plan by saying that, “We have to be absolutely, unequivocally clear that Congress intended this Federal money to only be used for the reconstruction of Puerto Rico and helping its residents. Any money it replaces should not be used to pay creditors, but for recovery.”
Grijalva’s aide similarly stated, “Every penny of the supplemental appropriations is intended to help the people of Puerto Rico recover, not to free up local funds for payment to bondholders.”
The letter to the fiscal oversight board (FOMB) from Velazquez and Grijalva as well as Sean Duffy (R-WI), Robert Menendez (D-NJ), Tom MacArthur (R-NJ), Luis Gutierrez (D-IL), and Elizabeth Warren (D-MA, made the point with equal firmness. “Congress intended 100 percent of the funding to be used for rebuilding Puerto Rico and to help its residents recover from Hurricane Maria,” the bipartisan letter begins. “Any funds must not be used to repay creditors, but instead go towards the Island’s recovery.”
The letter goes on to express concern that recent media reports “have contributed to a growing attitude among bondholders that the influx of federal aid would enable Puerto Rico to begin servicing its debt in the near future.”
“This perspective is misguided,” the letter continues, “and completely disregards the continued suffering on the Island, almost five full months after Hurricane Maria.”
Among other measures, the recent disaster aid law appropriated $4.8 billion to pay the 45% territorial share of the cost of the insular Medicaid program through September 30, 2019 as well as the 55% Federal share.
In response to questions about whether the territorial government could use the $4.8 billion by the end of Federal Fiscal Year 2019, a U.S. Department of Health and Human Services spokesperson said that the funds could be used later but only if the territorial government then matched the monies with a 45% contribution.
“Puerto Rico stands at a critical crossroads in its history,” the letter to FOMB concludes,”and the way that post-Maria reconstruction is handled could determine the health and economic well-being of its people for decades to come.”