The Puerto Rico Oversight Board recommended shifting federal funding to an earned income tax credit from welfare programs on the island.

The board called for the shift as part of a larger set of recommendations for changes to federal policy towards the island, which was made in an annual report released Monday. The Puerto Rico Oversight, Management, and Economic Stability act requires the board to release the report each year. The recommendations were directed at the U.S. President, Congress, the island's governor, and the Puerto Rico legislature.

U.S. Rep. Nydia Velázquez said the Oversight Board's recommendations were worth discussing.

Puerto Rico’s economy has contracted nine out of the last 10 years and its local government is scrapping for money. The board’s recommendations were aimed at addressing these issues.

In the report, the board calls for the U.S. government to pass waivers from federal law so that funding for Supplemental Nutrition Assistance Program (food stamps), Temporary Assistance for Needy Families (welfare), and Section 8 rental subsidies for low-income families could be used for a new earned income tax credit. Currently, Puerto Ricans aren’t eligible for the earned income tax credit program. Changes should be made “while maintaining a responsible safety net for children, people with disabilities, and seniors.”

The board said Tuesday it wasn’t calling to eliminate the federal programs. Rather, the “proposal included in the report only suggests that particular exemptions to those programs are allowed in order to provide the government of Puerto Rico with the needed flexibility to make reforms that will incentivize work and increase labor force participation in the island, while safeguarding the necessary assistance for the citizens who need it most.”

Rep. Nydia Velázquez, D-N.Y., responded, saying: “While the recommendations put forth by the board lack specificity, at this early stage, all ideas merit discussion. Congress must evaluate a broad range of proposals that would stimulate economic activity and move swiftly to put Puerto Rico on a path toward sustainable growth.”

The board said the federal government should take action to provide economic development initiatives for Puerto Rico, limit the reduction of federal healthcare spending, as well as overhaul its benefits programs to encourage people to work.

The board called for Washington to provide waivers to the island from the Jones Act, which requires that ships operating between U.S. ports be owned by U.S. citizens or companies, have been constructed in the U.S., and be operated by U.S. citizens. Many economists have said the Jones Act has raised the cost of imported goods in Puerto Rico.

The board also urged the repeal of the Century of Aviation Reauthorization Act, which bars foreign-flagged aircraft from exchanging cargo in Puerto Rico.

The feds should also eliminate an electronic export information filing requirement for goods sent between the mainland and Puerto Rico, the board said in its report.

The federal government should direct the U.S. Department of Labor to introduce an apprentice program in the commonwealth to link education with marketable skills and employment.

The board also asked the federal government to provide technical assistance to the Puerto Rico Electric Power Authority to improve operations and provide technical assistance to local businesses to help them access General Services Administration contracts.

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