PROMESA Implementation During the Pandemic

The House Committee on Natural Resources held a remote hearing on the implementation of PROMESA during the coronavirus pandemic. The hearing took place on June 11th, 2020, and included testimony by Ms. Natalie Jaresko, the Executive Director of the Financial Oversight and Management Board, and Mr. Omar Marrero, the Executive Director of the Puerto Rico Fiscal Agency & Financial Advisory Authority.

The full meeting can be seen in the video below.

Resident Commissioner Jenniffer Gonzalez Colon spoke firmly about the continuing unequal treatment of Puerto Rico. She said that Congress should  “resist the temptation to cater to those who would use the island as a political talking point to push impractical solutions that will never happen.” Instead, she asked that Congress should focus on eliminating the red tape that is preventing the disbursement of federal funds already allocated to Puerto Rico but not yet delivered. She also asked that an environment supporting economic growth should be a priority, and stated that the Island’s current political status is the source of its economic problems.

The hearing suffered from multiple technical issues, including committee members who were unable to connect with the meeting. Members of the committee sometimes failed to unmute their microphones or spoke over one another. Early in the hearing, the chair was surprised by a demand to adjourn the virtual hearing and take it back up face to face. At one point, a member suggested that only Republicans were being affected by the technical glitches.

“There’s no conspiracy,” Rep. Grijalva responded.

Both of the expert witnesses submitted written copies of their testimony.

Jaresko’s testimony

Jaresko reported that Puerto Rico’s economy was expected to contract further over the next five years, but she spoke positively about the Board’s collaborative relationship with Governor Vazquez. She also explained that efforts to cut government spending further will be delayed. “The 2020 Fiscal Plan reflects a one-year delay in most categories of budgetary reductions to allow the Government to focus on implementation,” she said. “This pause in rightsizing includes maintaining the subsidies to the University of Puerto Rico and the municipalities at current fiscal year levels. Most agencies will maintain their fiscal year 2020 budgets in fiscal year 2021.

Jaresko’s testimony also spoke positively about the results of the Board’s work.

“Since the inception of PROMESA, the Board has played a critical role in helping Puerto Rico respond to crises,” she reported. “Moreover, it has worked with the Government to institute much more effective fiscal management after decades of mismanagement. The fiscal plans that the Board has certified have walked a very prudent balance between driving more effective and sustainable Government, while investing in critical needs on the Island. Lastly, the Board has articulated a detailed and comprehensive roadmap of the actions that must be taken to restore growth through economic development, with structural reforms being particularly critical.”

Some of the areas where the Board plans to focus in coming years are education, EITC reform, and strengthening Puerto Rico’s technology sector. With some criticisms of the Island government and some demands of Congress — for example, to extend the Child Tax Credit and the EITC to Puerto Rico — the Board also had some optimistic things to say. “[I]f federal policymakers consider actions to require increased manufacturing within the U.S., the Board strongly believes that Puerto Rico is a center of excellence within the nation and can play a leading role in the national portfolio of locations where this manufacturing re-locates. The physical infrastructure, human capital, and regulatory processes are already established and well positioned. Moreover, this is a valuable opportunity to expand investment, jobs, and ultimately prosperity on the Island.”

Marrero’s testimony

Marrero, who is the governor’s representative on the Board, recapped the governor’s plan for coronavirus stimulus spending on the Island. The funds are currently being disbursed.

Marrero also mentioned the positive relationship between the governor and the Board. However, he also said, “Despite our best efforts to minimize disagreements, the language and structure of PROMESA as currently adopted by Congress, allows the Board to blur the delineation of power between the Government and the Oversight Board. Because the respective roles of the Government and Oversight Board often overlap, the lack of clarity in the statute creates too many opportunities to waste time jockeying for power rather than creating and implementing meaningful solutions for the people of Puerto Rico.”

Just as the Board complained about the government, the government complained about the Board, using words like “subvert,” “seize,” and “draconian.” Accusing the Board of micromanaging many areas government, Marrero wrapped up the complaint with, “In addition to imposing its own policy preferences, the Board has also used its fiscal plan and budgetary authority to impede the Government’s own public policies by seeking to nullify new laws. Over the last several months, the Board has sent an excessive amount of correspondence to the Government asserting rights and powers that the Government believes exceeds the Oversight Board’s capacities under PROMESA and which the Government has spent considerable time and energy responding to.”

The testimony ended with a request to make a clearer delineation between the powers of the board and the powers of the Puerto Rico government.

A number of members of Congress asked a wide range of questions about Puerto Rico and its financial situation.

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