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Gov’s Rep To Congress: Gov’t Finances, Economy Doing Well

The Puerto Rico Federal Affairs Administration (PRFAA) has told members of Congress that the territory’s economy and the insular government’s finances are doing very well.

PRFAA Executive Director Juan E. Hernandez sent them a letter last month with “a summary of the progress” he wrote Governor Garcia Padilla “has made on economic and fiscal issues.” (You can see his ‘fact sheet’ after the end of this article.)

The rosy picture painted by the former “commonwealth status” party senator is at odds with most assessments of the territory’s economy and the Commonwealth government’s budget and financial position. These includes the views of the vast majority of Puerto Ricans, according to scientific opinion polling, and the analyses of all independent economists and national credit rating agencies that have studied the situation.

Many of the specific ‘facts’ cited by the head of the Governor’s offices in the States in what he sent members of Congress are also wrong or misleading.

Additionally, it is curious that the Commonwealth government agency headquartered in the nation’s capital would deliberately give members of Congress the impression that the territory is doing so well that more Federal government assistance is not needed.

Asked to review the claims in the PRFAA paper, an expert in government who has been closely observing developments in the territory pointed out a number of factual distortions.

Two glaring ones were in the account on government pension system ‘reform’ proposals.

The paper asserts that, “the Puerto Rico Supreme Court found the judicial pension reform measures signed into law at the end of 2013 to be constitutional.” In fact, the Commonwealth’s highest court found the attempt to cut back the retirement benefits of members of the judiciary in office and retirees to be unconstitutional.

Additionally, the paper omitted mention of the third pension system that the Governor tried to change: the retirement plan the public education system. The Supreme Court similarly struck down most of that law enacted at the same time as the judicial system legislation.

Also very misleading was a boast that “The Garcia Padilla administration has presided over the creation of 55,305 new jobs in Puerto Rico … exceeding the Governor’s pledge of creating 50,000 new jobs in 18 months.” According to U.S. Bureau of Labor Statistics numbers, there were 1,030,603 people employed in the territory when the Governor took office and 983,281 when PRFAA wrote its ‘fact’ sheet, 47,322 fewer people working.

The paper reports that government revenue in Fiscal Year 2014 exceeded collections during the previous year. It did not explain that the amount was several hundred million dollars below the government’s estimates and what was required by the budget — or that the increase from the previous year was due to extensive tax hikes.

It was also pointed out that revenue for the first quarter of Commonwealth Fiscal Year 2015 — July through September of last year — was $75 million greater than for the first quarter of Fiscal Year 2014 but not that it was $36.4 million below what was needed — or that the increase reflected additional tax increases.

A chart in shows “potential” tax revenue in Commonwealth Fiscal Year 2014 from the “strategic initiatives” of an “Economic Development Roadmap” — but not whether the “potential” revenue materialized even though the paper was sent a full five months into Fiscal Year 2015.

More striking is what is not noted in the apparently promotional bullet points. The Government Development Bank calculation of the territory’s economy was about 20% below its high at the end of 2005. It had fallen to its mid-1994 level. The decline during the current administration was a full five percent, a quarter of the drop over the nine year period.

Nor was it pointed out that Puerto Rico had 23% fewer people working when the paper was sent than eight years before. The 294,278 less people took employment in the territory down to its April 1991 level.

It was also not explained that the Commonwealth government’s credit was downgraded to ‘junk’ status (non-investment grade) by all of the major national credit rating agencies last year or that the government owes more than $72 billion — more than any State other than much more populous California and New York.

The paper contains several points about the government’s Electric Power Authority, but additionally ignored was that the agency became unable to meet its financial obligations last year and is developing a plan to renege on its commitments.

It was, further, not mentioned that the territory’s Highways and Transportation Authority also became unable to pay its debts at about the very time that the paper was sent to members of Congress.

Read the document.



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