Obama Budget Proposes $32.5 billion for Puerto Rico

President Obama released today a budget for the fiscal year that begins October 1st that includes new assistance for Puerto Rico estimated to be at least $32.5 billion over 10 years. The amount in the Fiscal Year 2017 Budget proposal sent to the Congress today could be as much as more than $34 billion, depending upon a formula still to be released.

The main Budget document discusses four elements of the assistance plan that the White House outlined last October 21st:

* A proposed regime for restructuring all of the debt of the five U.S. territories that would not be available to States;

* Strong fiscal oversight and help in strengthening Puerto Rico’s fiscal governance, while also respecting Puerto Rico’s local autonomy.

* Funding Medicaid in the territories more equally with the States; and

* Funding an Earned Income Tax Credit (EITC) program in Puerto Rico.

The budget also proposes a $10 million a year increase for Puerto Rican hospitals beginning in Fiscal Year 2020 in a Medicare program under which they are treated unequally with hospitals in the States.

In a written statement, Puerto  Rico Resident Commissioner Pedro Pierluisi expressed his support for the President’s plan: “I intend to work with my colleagues in Congress, both Republican and Democrat, in an effort to enact legislation for Puerto Rico that provides debt restructuring authority, institutes an independent and temporary board to help the Puerto Rico government better manage its finances, and grants the territory more equitable treatment under federal programs, including Medicaid, Medicare, and the EITC.  I thank the Administration for including these proposals in its budget request.”

The funds that the Government of Puerto Rico itself would receive would be in increased Federal contributions to its Medicaid program. The budget includes increased funding of $320 million in FY17 for Medicaid in the territories, $1.433 billion in FY18, $2.791 billion in FY20, and $5.347 billion in FY26. Puerto Rico’s share of the monies was not specified but Puerto Rico received 87.1% of the funds specified for Medicaid in the 2010 Federal healthcare reform and 92.5% of ‘Obamacare’s’ territories funding for health insurance exchanges that could be used for Medicaid — which is how the territories have used the money.

The 2010 law provided additional funding for Medicaid in the territories through the end of fiscal year 2019 and monies for either territorial health insurance exchanges or Medicaid through the end of calendar year 2019  in lump sum amounts. The administration of Puerto Rico Governor Alejandro Garcia Padilla, however, has spent the funds at a rate that would use all by late 2017 or early 2018 rather than apportioning the monies to last through the 2019 expiration dates. That would leave Puerto Rico with its previous level of assistance of about $329 million a year if no greater assistance is provided.

The President’s budget proposes to eliminate caps on the amount of Federal Medicaid grants to territories that do not exist for States; phase in equal Federal matching percentages for local spending; and expand eligibility for individuals up to the poverty level. In addition to dollar caps, Federal contributions to territorial Medicaid programs are limited to 55% of the total cost. Contributions to State programs for individuals eligible before Obamacare can increase up to 83% in a State with a low per-capita income and are 100% for individuals made eligible by Obamacare, although the contributions to the States are to be reduced to 90% over time. Individuals in the States who earn a third more than the poverty level are eligible for Medicaid.

The Administration’s earned income tax credit program for Puerto Rico would provide low income workers in Puerto Rico with $601 million in FY17 and $6.642 billion over 10 years.

The additional Medicare funding is for hospitals that serve large numbers of low-income patients. The program’s formula bases the funding in part on a hospital’s number of patients receiving Supplemental Security Income aid to impoverished aged and disabled individuals but SSI has not been extended to Puerto Rico.

Senate Finance Committee Chairman Orrin Hatch (R-UT) and Senate Energy and Natural Resources Committee Chairwoman Lisa Murkowski (R-AK) questioned the Obama increased assistance proposals for Puerto Rico last fall when the ideas were not defined as to amount but their primary question was the source of the funding for the spending. They and Senate Judiciary Committee Chairman Chuck Grassley subsequently proposed a $3 billion grant to Puerto Rico — to be taken out of Obamacare funds not destined for the islands.

The budget document also recognizes that the people of Puerto Rico voted in 2012 to resolve the question of the territory’s ultimate political status, i.e., whether Puerto Rico will become a U.S. State or a nation, and that Congress and the Administration have a role to play in the process. In the 2012 plebiscite under local law, a majority voted against the current status and 61.2% voted for statehood among the alternatives.

Two years ago, the Congress passed legislation proposed by the President for a plebiscite under Federal auspices after Gov. Garcia Padilla disputed the 2012 vote but the Governor later could not get nationalists within his Popular Democratic Party (PDP) to support his proposal for Puerto Rico to have a “commonwealth” territory status that the Federal government has said is impossible and the plebiscite has not been scheduled. The issue has been a major factor in Garcia Padilla’s failures to pass bills in the Legislative Assembly, loss of public support, and, ultimately, his abandonment of his campaign for re-election this year.