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Velasquez and Serrano Express Concern About Austerity Measures to PROMESA Board

Rep. Nydia M. Velázquez (D-NY) and Rep. José E. Serrano (D-NY) have written to the PROMESA fiscal oversight board to encourage caution about implementing austerity measures.

“We are pleased,” they wrote in the May 11 letter “that last week the Financial Oversight Management Board for Puerto Rico took advantage of the powerful court-supervised restructuring tools provided by the Puerto Rico Oversight Management and Economic Stability Act (PROMESA) of 2016. The Board should seize this as an opportunity to revise the Fiscal Plan in a manner that would ease the burden on working families and students, while also prioritizing economic growth.”

In April, Sen. Tom Cotton (R-AR) and Sen. Thom Tillis (R-NC) wrote to the board expressing concern that certain creditors were being treated unfairly and calling for greater austerity measures. Velazquez and Serrano took the opposite view.

“The Island’s unsustainable debt has been a result of decades of poor government accountability – the overstatement of revenues, the understatement of expenses – and debt-fueled economic promises, as well as the unequal treatment it receives under many federal programs,” Velazquez and Serrano wrote. “Unfortunately, we fear the Board has gone too far with the imposed austerity measures.”

The letter gave some examples of excessive cost cutting:

  • $450 million reduction to the University of Puerto Rico system… more than half of the total funding, $833.9 million, that the university system has received annually in the past four years.
  • The 10-year reduction of $6.1 billion in health care spending
  • A 10 percent reduction in pension payments

“Taken together,” the Velazquez and Serrano wrote, “these cuts will result in lower rates of job creation and less money in the pockets of those that fuel the island’s economy.”The letter continued with a call to “prioritize economic recovery – not austerity.” The Puerto Rican-born New York representatives suggested that this would improve the long-term economic position of Puerto Rico. They also described it as “the right thing to do.””It is only fair that after decades of succumbing to unsustainable debt agreements, Puerto Rico refrain from paying debt service for the next five years, or until the economy has returned to growth.  This will give the Island the necessary space to implement structural reforms, reorganize expenses, and meet operational obligations.  The people of Puerto Rico must be assured that the process unleashed by the adjustment of debts in PROMESA will not be tarnished by creditor influence and that any liquidity influx will not be deviated towards the debt service.”

The letter reminded the board of the number of people leaving the Island for the States and spoke of the current “pivotal time in Puerto Rico’s history.”

Congressman Serrano made a statement last week in favor of the Title III agreement passed by Congress, saying, “The only ones suffering the effects of not being able reach an agreement to successfully tackle the debt and economic crises are the people of Puerto Rico.  I applaud both the Governor and the Board for recognizing the need for immediate action-  the people of Puerto Rico were unable to wait any longer.”

Velazquez has a long history of supporting federal funding for Puerto Rico’s needs.

The two joined together to speak for the people of Puerto Rico, concluding their letter with, “Any actions that favor creditors will only serve to undermine this recovery, while also escalating social tensions and pushing people to leave the Island.  The people of Puerto Rico are resilient, but they need to be treated fairly and equitably.”

Read the Velazquez-Serrano letter

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