Would Puerto Rico Be Better Off as a Freely Associated State?

Some supporters of sovereign free association for Puerto Rico have claimed that the Island would receive more support from the U.S. government as a freely associated state than as a territory. We can test this idea by looking back at an earlier case.

The American Rescue Plan dedicated unprecedented resources to the five territories of the U.S. and also included some assistance to the three former territory areas freely associated with the U.S.

Under the terms of the 2021 law, U.S. territories received much more generous economic assistance than the freely associated states (FAS) to address the health and financial implications of the coronavirus.

Residents of the U.S. territories were also poised to receive billions of dollars in federal assistance under the terms of the new law – both in the short term and for many years to come. Some of the economic provisions of the new law designed to benefit working families were made permanent.

The Freely Associated States

The U.S. has signed Compacts of Free Association (COFAs) with three sovereign nations that were administered by the United States for the United Nations after World War II.  The three nations – the Republic of the Marshall Islands, Federated States of Micronesia and Palau – currently receive limited Federal financial resources and provide the U.S. military with complete control over the land, sea and air routes in this strategically important area of the Pacific. The Free Association relationships are viewed as especially important relative to China’s growing influence in the area.

The American Rescue Plan continued the eligibility of residents of the Freely Associated States for U.S. unemployment payments as initially provided in the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed in March of 2020.  Under the terms of the new law, FAS residents continued to qualify for the $300/week benefit until September 6, 2021.

In addition, the U.S. Senate included the Freely Associated States in its Coronavirus Capital Project Fund on equal footing with neighboring U.S. territories in the Pacific and the U.S. Virgin Islands.  The seven entities (the FAS, USVI, Guam, American Samoa and Commonwealth of the Northern Mariana Islands) were granted a $100 million fund to evenly split, leaving each territory or Freely Associated State with roughly $14.3 million.

U.S. Territories

The U.S. territories, on the other hand, were significantly included in the provisions of the coronavirus relief bill, often even defined as a “state” to receive equal assistance.  Federal resources made available nationwide for coronavirus testing, state governments, rental and businesses assistance, food/nutrition, vaccines, transit, and education were provided to the U.S. territories at a level equal or comparable to that of the states.

Individuals in the territories were eligible for the $1,400 recovery rebates then being distributed to qualifying individuals in the fifty states and were included in the federal Earned Income Tax Credit (EITC) and Child Tax Credit (CTC) programs.  These tax credits were substantially increased in the new law for 2021 and brought billions of dollars to people who live in the U.S. territories.

Residents of the Freely Associated States are ineligible for the recovery rebates, EITC, or CTC.

The Coronavirus Capital Project Fund that provided almost $14.3 million to each Freely Associated State and the four smaller territories includes $100 million for Puerto Rico and $100 million for the District of Columbia, the same amount provided to states.

Nowhere in the legislation were the territories or the freely associated states treated more generously than states.