Puerto Rico Recovery Fund – Week 6 Update

Puerto Rico Recovery Fund - Week 6 Update

Published on November 4, 2017

Center for a New Economy


As we continue working on all three simultaneously,
on the ground in Puerto Rico and in DC, in this week’s update
we share advocacy objectives and recommendations
for the resilient rebuild of Puerto Rico.

TREAT PUERTO RICO FAIRLY – Puerto Ricans are US citizens by birth. Funding provided through FEMA and the Community Development Block Grant-Disaster Recovery program should be allocated to Puerto Rico on terms and conditions no less advantageous than those applicable to the fifty states, including funding for hazard mitigation to ensure we minimize harm from similar events in the future.

LEVERAGE PRIVATE SECTOR FUNDS – In addition to providing Puerto Rico with its fair share of disaster recovery funding, Congress should legislate to encourage the private sector to actively participate in the creation of the new Puerto Rico. This could be accomplished by enacting a special private activity disaster recovery bonds program, similar to the Liberty Bonds program enacted after 9/11 and after hurricane Katrina. These bonds would be exempt from federal taxes on interest, including the Alternative Minimum Tax, which allows issuers to offer the bonds at lower interest rates. Proceeds from these bond offerings have been used in the past to finance broad reconstruction activities, including the rebuilding of utilities, hospitals, hotels, residential housing, and commercial real estate, among other uses. The private entity issuing the bonds is entirely responsible for their repayment.

SUPPORT A LOCALLY-LED RECOVERY AND PLANNING INITIATIVE – Congress should require that federal investments for recovery efforts are tied to a long range, comprehensive planning effort led by public, private and NGO stakeholders. Much like the efforts undertaken by the Louisiana Recovery Authority in the aftermath of hurricane Katrina, a task force should be established to oversee a series of planning exercises that define the guiding principles and policies for local redevelopment. Through such a coordinated planning platform, funding could be provided Puerto Rican civil society organizations to address the immediate and long-term needs of local communities, including improving local risk mitigation capabilities and fostering sustainable economic development.

ENCOURAGE LOCAL HIRING – Congress should direct federal agencies to hire residents of Puerto Rico and local organizations on a priority basis to ensure that disaster survivors participate in recovery activities and directly benefit from recovery funds. This is especially important given Puerto Rico’s high unemployment rate and low labor force participation. Furthermore, maximizing local hiring reduces the need to bring workers from the mainland, which is relatively expensive, and generates local economic activity that eventually leads to tax revenues for the government of Puerto Rico.

BUILD A 21st CENTURY ELECTRICITY GRID – As is already well known, Hurricane María devastated Puerto Rico’s electricity grid. The island’s government faces a monumental task: Puerto Rico has to reconstruct in a matter of months a complex transmission and distribution network that took seventy years to build. In this environment, it is foreseeable there will be pressure from different stakeholders to “turn on the lights” as quickly as possible and forget about improving the network or rebuilding it stronger to withstand future shocks. In our view, this short-term perspective, while understandable from a humanitarian perspective, runs against the best interests of the island. The President should approve and the Congress should fund the use of FEMA funds under Section 404 of the Stafford Act to substantially improve the electricity grid.

MEDICAID – In the short run, to help Puerto Rico address its urgent liquidity crisis, the federal government should assume full responsibility for Medicaid funding on the island by waiving the local matching requirement. Federal funding for Puerto Rico’s Medicaid program is currently capped, resulting in a far lower effective federal matching share than would be the case if Puerto Rico were treated like a state. On a more permanent basis, increasing the federal match for Medicaid would provide much-needed budgetary relief to the government of Puerto Rico. While the Affordable Care Act (ACA) provided additional Medicaid funds for Puerto Rico, those funds are projected to run out in federal FY 2018, leaving a significant shortfall in the island’s Medicaid budget. Setting the federal share (FMAP) at 83%, what Puerto Rico would likely be entitled to as a state, would permanently eliminate any future funding “cliffs” and stabilize the finances of the Puerto Rican government.

SOCIAL ASSISTANCE PROGRAMS – Puerto Rico is an extremely poor territory of the United States, 45% of its population lives under the federal poverty threshold and its income per capita is approximately one-third of the mainland’s and one half of the poorest state. However, the Nutritional Assistance Program, Puerto Rico’s version of the Supplemental Nutrition Assistance Program (SNAP), is funded as a block grant, rather than as an entitlement. Temporarily extending full SNAP benefits to Puerto Rico would help thousands of poor Puerto Rican families to obtain the nutrition assistance they need in the midst of this emergency. Similarly, Puerto Ricans living on the island do not qualify for the Supplemental Security Income (SSI) program. Extending this program to Puerto Rico would provide necessary help to an increasing at-risk elderly population.

TAX CODE PROPOSALS – Congress should enact the recommendations made by the Congressional Task Force on Economic Growth regarding the Child Tax Credit and the Earned Income Tax Credit. The Child Tax Credit (CTC) currently applies only to Puerto Rican families with three or more children. Extending the CTC to families with 1 or 2 children would provide a much needed boost to approximately 355,000 working families and 440,000 children. Second, most Puerto Ricans do not currently qualify for the Earned Income Tax Credit, perhaps the most successful anti-poverty, pro-work program in the history of the United States. Congress should authorize the extension of this program to residents of Puerto Rico, which would lift thousands of working families from poverty. Together these two programs would increase the economic well-being of thousands of low-income Puerto Ricans and curtail migration to the mainland.