In an opinion editorial published in the Washington Post, Fiscal Oversight Board (FOB) Chairman José Carrión and FOB member Andrew Biggs blamed the Government of Puerto Rico’s unwillingness to implement so-called “structural reforms” for unrealized economic potential. Carrión and Biggs cited their own projections of economic growth and budget surpluses due to federal hurricane assistance funding that is set to pour into the Island, but warned that once the “external stimulus” runs out Puerto Rico’s economy will shrink to its pre-Maria size.
The op-ed also mentioned that the PROMESA federal law, which established the Board and a debt restructuring mechanism for the Island, does not give the Board any legislative power to impose those reforms. Though the Board has the power to prevent the implementation of any law or regulation that it deems contrary to the Island’s certified fiscal plan, the Government has challenged the board’s authority to impose specific policy prescriptions on the Commonwealth.
Governor, FOB at Odds Over Work Requirement
The FOB called for the Government of Puerto Rico to speed up implementation of a work requirement for Nutritional Assistance Program (NAP or PAN in Spanish) recipients. The initiative was included in the recently revised 10-year fiscal plan. The Governor of Puerto Rico agreed but is pushing for the requirement to be implemented in phases, leading to full implementation by 2023. The Board wants the requirement to kick-in by Summer 2019 and wrote to the U.S. Department of Agriculture in disapproval of the Governor’s plan, stating that his implementation date is inconsistent with the fiscal plan.
According to the Puerto Rico Department of the Family, there are 931,000 Puerto Ricans that participate in NAP. Of these, 160,000 would have to fulfill the proposed work requirements. USDA data indicates that Puerto Rico received $1.929 billion in NAP funds in 2018.
PROMESA Amendment Gaining Steam
Congresswoman Nydia Velázquez (D-NY), a Puerto Rican who will have major influence over Puerto Rico issues in the newly Democratic House, confirmed to El Nuevo Día that she has drafted language that would amend PROMESA. Velázquez is seeking tighter conflict of interest rules, particularly regarding companies that own Puerto Rico debt instruments and are hired to work on the Island’s debt restructuring while, in addition, providing other services to the Puerto Rican Government and the FOB. This was the case with McKinsey & Company, according to a report by the New York Times. The bill would force lawyers, accountants, consultants, agents and other professionals related to the process of restructuring Puerto Rico’s debt to disclose connections with debtors, creditors, the FOB and employees of the Board, among others, to the Office of the Bankruptcy Trustee before receiving compensation.
The legislation would apply to debt restructuring processes under Title III of PROMESA. McKinsey & Company, considered the largest consulting firm in the world, advises the FOB, as well as one of its subsidiaries, and owns at least $20 million in Island bonds, according to The New York Times.