Addressing Puerto Rico in the 116th Congress
Published on February 12, 2019
We are slightly over one month into the new year. Last week, President Trump gave his second State of the Union (SOTU) address, with little to no mention of Puerto Rico. Given all the public discourse on the recovery process and two recent court rulings with permeating long-term effects, this is an appropriate time to update you on Puerto Rico.
After weeks of stalemate and a 35-day lapse in appropriations, the U.S. Congress, with its 102 new members, is sluggishly crafting their position on other critical issues such as infrastructure and climate policy. All the while, Puerto Rico is ever-present in national media coverage. Rumored anticipation of an executive emergency declaration that could put at risk funds earmarked for Puerto Rico has triggered a political firestorm. Heated calls to evaluate the federal government’s immediate response to the hurricane foreshadow that Puerto Rico could once again become the unfortunate bystander of DCs gridlock. Or could it become an epitomized example of what is possible when political opposites engage in dialogue and find solutions to complex policy problems? Though members are increasingly aware about Puerto Rico, there are varying degrees of knowledge: most know about the hurricane, many know Puerto Ricans are U.S. citizens, some recall the painful process behind PROMESA. However, the contours in their understanding have a direct impact on how they will seek to address issues for Puerto Rico. As Washington considers solutions to Puerto Rico’s structural inequities, lawmakers should recognize that the most effective way to help Puerto Rico right now is to discard insufficient, piecemeal solutions and to enact a comprehensive, wide-ranging agenda to set up a platform that will provide fiscal stability and support future economic growth in Puerto Rico. Read an outline from CNE on what should be on the table as negotiations take place.
Social Security Income (SSI)
On February 4, Judge Gustavo Gelpí issued a ruling regarding United States v. Vaello-Madero, a legal dispute regarding the application of federal programs to residents of Puerto Rico. For 28 years, Vaello-Madero was a NY resident and received monthly SSI disability benefits. He moved to Puerto Rico in 2013 and for 3 years continued receiving the SSI payments to his NY bank account. In 2017, the Social Security Administration initiated a collection process for overpaid benefits, after his relocation to the US territory, where residents don’t qualify for the SSI. Vaello-Madero argues that the exclusion of Puerto Rico from the SSI benefits program violates the Fifth Amendment’s equal protection guarantees. The U.S. asserts that the denial of SSI disability payments to Puerto Rico does not violate the Fifth amendment. In his ruling, the U.S. District Court Judge granted Vaello-Madero a motion for summary judgment. He indicated: “Allowing a United States citizen in Puerto Rico that is poor and disabled to be denied SSI disability payments creates an impermissible second rate citizenship akin to that premised on race and amounts to Congress switching off the Constitution.” It is expected the case will be heard by the U.S. Circuit Court of Appeals in Boston. That same day, Resident Commissioner Jennifer González-Colón introduced a new measure, H.R.947 to extend the supplemental security income program to Puerto Rico, the United States Virgin Islands, Guam, and American Samoa. The Commonwealth of the Northern Mariana Islands (CNMI) is the only U.S. territory to participate in the Supplemental Security Income (SSI) program
On February 4, Judge Laura Taylor Swain of the US District Court for the Southern District of New York confirmed a Plan of Adjustment under the new Title III process under PROMESA to restructure debt issued by the Puerto Rico Sales Tax Corporation, known as COFINA. CNE has published a blog that carefully looks at the Judge’s Opinion and Confirmation of the Plan of Adjustment to explain the implications of this decision for Puerto Rico.
During the past two weeks, the U.S. Department of Housing and Urban Development (HUD) released funding for homeless assistance programs and rebuilding efforts; the Federal Emergency Management Agency (FEMA) awarded an additional $28.8 million to cover recovery costs; and the Department of Transportation’s (DOT) Federal Highway Administration (FHWA) announced $130,300,000 in funding for repairs to roads and bridges in Puerto Rico.
As negotiations on the appropriate amount of funding levels for the latest disaster supplemental took place, Governor Rosselló sent Congressional leadership a letter urging support for H.R. 268. He took the opportunity to express disagreement with FEMA’s interpretation of language in section 20601 of the Bipartisan Budget Act of 2018. On the Senate side, Senators Cortez-Masto and Menendez sent a letter to Appropriators urging support for the $600M for NAP, the 100 percent cost share for FEMA, additional CDBG funds and EPA’s clean water funds. On the House side, Resident Commissioner Jennifer Gonzalez-Colón joined Governor Rosselló on a letter to OMB urging them to speed up the rulemaking process for CDBG funds. On February 7, 2019, Gonzalez-Colón met with Acting Chief of Staff Mick Mulvaney to discuss the recovery process at length. During the meeting, she proposed the designation of a Recovery Czar to manage the reconstruction efforts. Governor Rosselló has publicly disagreed with that proposal. As of last night, the House and Senate reached an agreement on funding, but apparently Puerto Rico’s disaster funding has been left out of the mix.
CNE will be hosting its annual economic conference on March 21, 2019, focusing exclusively on Puerto Rico’s energy future. After Hurricane María, the island essentially had to re-activate its energy system from the equivalent of a system-wide “black start”. A new model for Puerto Rico’s 50-year-old energy sector is needed now. The first step in this complicated pathway is developing a new vision based on thinking beyond the confines of Puerto Rico. During Black Start: The Future of Energy Summit, to be held at the Puerto Rico Convention Center, we will discuss how new, cutting-edge technologies for the generation, transmission and distribution of electricity being developed right now can be deployed on the island to upgrade its electric system for the 21st century. The summit will gather a diverse public, including government officials, academics, as well as community, non-profit and private sector leaders. Register now before the Early Bird discount ends!
- | February 4, Washington Post
A U.S. judge said Monday that the federal government is violating the Constitution by prohibiting people who live in Puerto Rico from receiving Supplemental Security Income.
- | February 5, MuniNet Guide
On January 14, the Financial Oversight and Management Board, acting through its Special Claims Committee and the Official Committee of Unsecured Creditors, filed an objection to the validity and enforceability of more than $6 billion of Puerto Rico’s General Obligation Bonds. The purported reason for the invalidity was the asserted violation of the Commonwealth’s Constitutional Debt Service Limit, which provides that direct obligations of the Commonwealth “shall not exceed 15% of the average of the total amount of annual revenues…” This claim of invalidity was asserted long after the issuance of the General Obligation Bonds, in which the Commonwealth and its professional represented that the Bonds complied with the Constitution and laws of Puerto Rico and were a valid, binding and enforceable obligation, and released to the market a calculation of compliance of the issuance with the G.O. Debt Limit. In addition, there also is a claim by the objecting parties that issuance of the $6 billion of General Obligation Bond Debt violated the Balanced Budget Clause of the Puerto Rico Constitution providing “the appropriation made for any fiscal year shall not exceed total revenues including available surplus estimated unless the imposition of taxes sufficient to cover said appropriation is provided by law.” These claims of invalidity when carefully reviewed from a historic perspective should be rejected.
- | February 6, Bloomberg
“Puerto Rico’s bankruptcy is the latest to trigger a reassessment of which bonds are the most iron-clad in the $3.8 trillion state and local government debt market, a haven where bankruptcies are rare enough that each one is closely watched for possible clues to how creditors will be treated the next time a government goes broke.”
- February 6, CBS News
“The Center on Budget and Policy Priorities (CBPP), a Washington D.C.-based think tank, analyzed statistics from the U.S. Department of Agriculture (USDA) to find that Puerto Ricans enrolled in the Nutrition Assistance for Puerto Rico (NAP) — the island’s version of the Supplemental Nutrition Assistance Program (SNAP) — will begin to face deep food aid cuts in March unless the program receives more funding. According to the analysis, the maximum food assistance for a family of four could decline from $649 a month to $410.”
- | February 8, Caribbean Business
The administration of Puerto Rico Gov. Ricardo Rosselló does not support Resident Commissioner Jenniffer González’s proposal for the White House to appoint a “czar of recovery” for Puerto Rico.
A small group of hedge funds are being rewarded for backing an $18 billion restructuring of Puerto Rico’s sales-tax debt that saddled other investors with losses. Tilden Park Capital Management LP and GoldenTree Asset Management LP are among the credit-market specialists that have reaped hundreds of millions of dollars in paper profits on those revenue bonds and are poised to collect more under settlement terms that provide them with stronger claims to repayment than before, according a Wall Street Journal analysis of court records and trading information.
| February 9, Wall Street Journal