Washington Watch Special: Puerto Rico Fiscal Update

Junta de Control Fiscal

By Jennice Fuentes / Fuentes Strategies

Fiscal Oversight Board approves fiscal plans for public corporations

This morning the Fiscal Oversight Board (FOB) held its seventh public meeting to approve, and in some cases amend, fiscal plans for critical public corporations. Specifically, the Board approved fiscal plans for the Aqueduct and Sewer Authority (PRASA), the Government Development Bank (GDB), and the Highway and Transportation Authority (PRHTA). Regarding the Electric Power Authority (PREPA), the Board required that the electricity rate be 21 cents per kilowatt-hour by 2023, to enter into Private Public Partnerships (P3s) or full privatization. The Board also required PRASA to have a five-year plan for rate revisions ready in 30 days. According to the FOB, the water utility will have a projected deficit of $3.5 billion over 10 years. As of right now the approved fiscal plans are not available.

Government Development Bank (GDB) will be liquidated

Today the FOB approved the Government Development Bank’s (GDB) fiscal plan, which would essentially sell-off its assets within 2-3 years’ time. The GDB’s President, Christian Sobrino, did not provide updated internal financial numbers but the FOB moved quickly to approve the GDB’s liquidation plan. The 50-year plus institution was once considered crucial to the Island’s economic development. The recommendation to phase out the bank was made by the effective replacement of the GDB with the Financial Advisory and Fiscal Agency Authority (AAFAF, in Spanish).

Trump’s tweets shake up Puerto Rico’s efforts to avoid Medicaid cliff

This week President Trump set off a firestorm in Puerto Rico and in Washington, D.C. when he sent out a series of Tweets accusing Democrats of supposedly provoking a government shutdown over a “bailout” for Puerto Rico’s health insurance companies. The odd reference to what policy wonks have dubbed the “Medicaid cliff,” cast a shadow over what appeared to be significant progress in the Government of Puerto Rico’s Congressional outreach efforts to extend current Medicaid funding for the Island. Under Obamacare, the cap on Puerto Rico’s block grant Medicaid program was temporarily raised and Puerto Rico received approximately $1 billion a year in addition to the funding it already received for Medicaid. That money is set to run out in October. Puerto Rican authorities had hoped that a temporary budget stopgap measure would include a one-time Medicaid patch for Puerto Rico. Health and Human Services (HHS) Secretary Price ironically sent out a letter just a few hours prior to Trump’s tweet, where he recognized the need for the Island to receive at least $900 million in federal health care funding for Medicaid.

Bondholder groups condition Medicaid for Puerto Rico?

Several media outlets in Puerto Rico published stories on rumors that unknown creditor groups were pushing the House Freedom Caucus’ members to stop the Medicaid extension for Puerto Rico, unless PROMESA was amended to delay inclusion of Puerto Rico’s bonds in Title III court-supervised debt restructuring. Former Senate President, Senator Eduardo Bhatia, who was in D.C. this week lobbying Members for the Medicaid extension, named Congressman Raúl Labrador (R-ID) as being one of the Members of Congress behind the plot.

House Natural Resources Committee’s Democrats to hold briefing focusing on humanitarian crisis in the Island

House Resources Committee Ranking Member, Raúl Grijalva (D-AZ), and Congressional Hispanic Caucus Chair, Michelle Lujan Grisham (D-NM), will be hosting a forum next Tuesday, titled Puerto Rico’s Ongoing Financial and Humanitarian Crisis: Economy, Debt-Restructuring, and Options for Recovery. The event will be held on Tuesday, May 2, 2017 from 2:00 p.m. to 3:00 p.m. in 1310 Longworth House Office Building. You may watch the event via live stream here. Invited witnesses include: Eric LeCompte, Executive Director of Jubilee USA Network; Simon Johnson, Professor of Entrepreneurship at the MIT Sloan School of Management; Iram Ramirez, Secretary Treasurer of the PR Federation of Labor AFL-CIO; Steve Kreisberg, Director of Research and Collective Bargaining Services at AFSCME International; and Frankie Miranda, Senior Vice President, Hispanic Federation.