Rossello, House Democrats urge Puerto Rico Oversight Board to ease austerity measures

Register now

WASHINGTON — House Democrats and Puerto Rico Gov. Ricardo Rossello called on the commonwealth’s Financial Oversight and Management Board on Thursday to ease the austerity measures it has imposed on the island.

They also agreed congressional action is needed to provide more economic parity between the island and the rest of the United States in programs such as Medicaid, the food stamp program now known as SNAP and in tax breaks such as the Earned Income Tax Credit.

Rossello, for his part, agreed on the need for parity and pointed out that residents of the commonwealth have twice voted in favor of statehood.

Rep. Rob Bishop of Utah, the ranking Republican on the committee who served as chairman when the PROMESA law was drafted, said, “I am for absolute equality for the Puerto Rican people, but it must be achieved through statehood.”

The governor accused the Oversight Board of having “overstepped its boundaries, making it an even more undemocratic entity.”

Asked for examples of the Oversight Board overstepping by Rep. Michael San Nicolas, D-Guam, Rossello pointed to the effort by the board to take over the Puerto Rico Electric Power Authority known as PREPA.

The process of appointing the seven members of the Oversight Board recently was ruled unconstitutional by the 1st Circuit Court of Appeals because the members were not confirmed by the U.S. Senate. President Trump recently renominated the members who face a May 16 deadline for Senate confirmation.

Rossello told reporters Thursday he hopes the Senate examines their credentials and their record prior to voting.

“Austerity alone does not work and will only lead to further economic contraction,” said House Natural Resources Committee Chairman Raul Grivalva, D-Ariz., who convened the first oversight hearing on PROMESA by Democrats since they regained majority control of the House in January.

Thursday’s hearing brought together Rossello and Natalie Jaresko, the Oversight Board’s executive director, who has led the board’s success in restructuring $21 billion of the commonwealth’s more than $70 billion in publicly held debt and $60 billion in unfunded pension liabilities.

Jaresko, who defended the Oversight Board’s record, said that at the time of passage of PROMESA in 2016 the commonwealth’s largest pension system was 1% funded, “whereas states like New Jersey and Illinois, two of the states with the lowest funded ratios, are in the 30% range.”

The Oversight Board has focused on changing the “fiscal culture of the government of Puerto Rico, instituting long term fiscal planning and balanced budgeting,” she said.

Jaresko said the board is “administering the largest public entity restructuring in U.S. history and is a party to hundreds of lawsuits.”

Grijalva, for his part, said he hoped the hearing would persuade the Oversight Board to “strike a more agreeable deal with the people of Puerto Rico so that most of the severe budget cuts can be rolled back and significant debt relief can occur.”

Grijalva described the Oversight Board’s record as “mixed at best."

“There is no question that without PROMESA and the stay of lawsuits it provided, the government of Puerto Rico would not be seeing the positive cash flow … they are today,” Grijalva said.

However, he said that instead of pursuing economic growth for the commonwealth the Oversight Board has pursued a “program of crippling budget cuts, austerity measures and reforms that most economists say will only serve to worsen the economic crisis.”

Rossello received sympathy from Democrats and some Republicans when he complained that the Oversight Board has gone beyond setting top line government spending limits for the commonwealth by trying to micromanage its budget.

Rossello said his administration accepts the Oversight Board’s authority to limit overall spending, but it can take one to four months to gain approval of minor changes in spending.

If deeper budget cuts are needed, Rossello said he will implement them.

Rossello said his administration implemented $1.4 billion in spending cuts amounting to 17% of the budget for fiscal 2018. He also assumed a new pay-go system for paying pensions.

Rossello told Rep. Darren Soto, D-Fla., that the commonwealth’s audited financial results for 2016 will be released in the coming weeks followed by the audits for more recent years.

A couple of Republicans at Thursday’s hearing defended the Oversight Board and were critical of Rossello’s decision to not provide his written testimony in advance, which is customary at congressional hearings and helps lawmakers formulate their questions.

Rep. Tom McClintock, R-Calif., said the Oversight Board has had some positive accomplishments in addressing “the shattered trust that investors had.”

But as a result of Puerto Rico’s bankruptcy underwriters are going to have to price debt knowing that states might not follow their obligations, which means higher prices for municipal bonds everywhere, McClintock said.

For reprint and licensing requests for this article, click here.
PROMESA Distressed Debt Washington DC Puerto Rico