2016 was a pivotal year for Puerto Rico. The three branches of the federal government took direct action related to Puerto Rico. The judicial branch, through two separate rulings issued by the U.S. Supreme Court, opined that Puerto Rico is not a sovereign territory and ultimately responds to the plenary powers of the U.S. Congress. The legislative branch authored and voted for the Puerto Rico Oversight Management and Economic Stability Act, known as PROMESA, which gave the island access to a comprehensive restructuring process and established an oversight board to oversee Puerto Rico’s finances. The executive branch signed the law and subsequently appointed members to the new Financial Oversight and Management Board.
Though the troubles of the island had long been researched by our experts at the Center for a New Economy (CNE), it was evident this turning point underscored the need for a think tank dedicated to the island’s issues to be present in Washington, DC. and lend its voice to federal policymakers and lead to better decision-making.
The work began in earnest in the summer of 2018 with the addition of a full-time Office Director. As I will highlight below, our accomplishments since then have ranged far and wide, exceeding even the goals laid out in CNE’s five-year strategic plan. Back in 2019, the objective was to provide strategic research and guidance for congressional staff and federal agencies on policies related to Puerto Rico’s recovery, economic growth, and long-term sustainability, as well as proactively develop opportunities to influence federal policies that advance long-term economic development for Puerto Rico.
In a short three years, CNE has not only elevated and persuaded Congress and the Executive to more adequately address Puerto Rico’s challenges, but it has achieved substantial changes in federal law.
Shaping Federal Policy
The political environment in Washington, DC. has become increasingly contentious, and for the most part, opposition to policy solutions emanates from ideological postures rather than empirical evidence. CNE has therefore been able to navigate this difficult environment by providing neutral evidence and research, thus allowing us to cultivate relationships and build bridges in DC.
As the first non-political representation from Puerto Rico in the federal capital, our unique expertise has allowed us to intimately shape and influence the policy discussions around Puerto Rico. In addition to contributing to the public debate on public policy questions through the publication of various pieces, the DC office has served as a key liaison between Puerto Rico, the White House, Congress, and other DC stakeholders.
Earned Income Tax Credit
After many years of documenting evidence on the need to address high poverty rates and low labor force participation through individual tax credits, CNE’s push in Washington for a robust federal expansion of the local earned income tax credit successfully materialized.
On March 11, 2021, President Biden signed into law the American Rescue Plan Act of 2021, which included federal funding to expand Puerto Rico’s local earned income tax credit. The federal supplement will help ensure the credit’s sustainability, provide a significant income boost to low- and moderate-income families, and serve as a powerful incentive to draw workers from the informal economy into the formal economy. CNE, along with our partners and policy experts at the Center on Budget and Policy Priorities (CBPP), worked on the design of the credit that was ultimately enacted into law.
Temporarily Averting a Medicaid Cliff
Puerto Rico’s Medicaid program runs on a grossly underfinanced block grant. For decades, Puerto Rico has received limited funding to run a bare-bones Medicaid program that provides only 10 out of 17 mandatory services. Congress’s unwillingness to provide adequate Medicaid resources on a consistent basis has furthered the exodus of healthcare providers and crippled services for patients, thereby increasing state Medicaid costs. In the past, temporary lifelines to Puerto Rico’s Medicaid program have prevented a total system collapse, but by the same token, these short-term extensions of supplemental funding have thwarted efforts to completely reform the system and make it more effective.
CNE has been carefully studying and working with government officials and partners on designing an adequate solution for Puerto Rico’s Medicaid program. Our solution brings Puerto Rico’s federal Medicaid funding into full parity with how states are treated over time, in the form of uncapped federal funding and a federal medical assistance percentage (FMAP) calculated on basis of Puerto Rico’s per capita income relative to national per-capita income. CNE’s advocacy has included an in-depth report on the need for ongoing, stable, and adequate funding for Puerto Rico’s Medicaid program, as well as multiple publications and videos on the need for permanent funding. In 2019, CNE successfully advocated for a generous two-year incrementally increasing financing package. The latest short-term funding extension will expire in September of this year. Absent Congressional action, Puerto Rico will likely be forced to make drastic cuts, reduce payment rates, and/or decrease the number of beneficiaries.
Assessing the Impact of the SSI
CNE was one of the first to raise the importance of the Supplemental Security Income (SSI), a program that provides cash assistance to the elderly, blind, and disabled individuals with limited resources to meet basic living expenses. After a deep policy dive, in June, we released a short brief on the impact the federal program could have in Puerto Rico. We complemented that effort with a short video that explained the benefits for a wider audience. We continue having conversations with the House Ways and Means committee educating them on the program, and the nuances of Puerto Rico policymaking. Acknowledging there are still a lot of unknowns on the extension and implementation of the program in Puerto Rico, CNE DC will continue to work with Congress and OMB to ensure the Social Security Administration has the necessary resources to extend benefits.
Important shifts in federal policy given the pandemic have placed Puerto Rico at the center of several “reshoring” proposals to ensure that U.S. supply chains in critical areas like medical supplies and pharmaceutical manufacturing, where the island has a sizeable footprint, are safer and not disrupted. As different actors sound the drum on the need to bring production back to Puerto Rico, CNE is uniquely equipped to spur a thoughtful reflection on the socioeconomic goals and objectives of pursuing such policies. Beyond satisfying immediate national production needs, Puerto Rico’s policymakers must be keenly aware that the most impactful development gains that can be achieved from attracting foreign investment are reaped through the creation of linkages to the local economy that foment positive spillovers and learning opportunities.
The process of rebuilding the island will take years and a full and sustained recovery will only be possible if Puerto Rico crafts a renewed development platform, renovates its productive, physical, and institutional infrastructure, and tackles long-standing structural inequities that have thwarted the advancement of economic opportunities for the majority of the population.
In an effort to examine the process to date, in 2019, CNE published Oversight that Works, a policy memo identifying key challenges in Puerto Rico’s recovery efforts, detailing the need for better accountability, transparency, and oversight practices in the island, and offering recommendations for effective oversight of federal disaster funds. Our work will be geared to ensure there is a space for elected officials, representatives of local communities, non-governmental organizations, academia, and other stakeholders to participate effectively in the reconstruction effort.
It is also necessary to ensure Puerto Rico has the ability to absorb and manage reconstruction funds so that the focus is less about the overall price tag, and more about where these monies are invested. As we look to the future, we need to focus on establishing the right processes and practices that ensure an effective reconstruction process. A successful recovery will remain elusive unless there is a collective commitment to develop a self-sustainable economy that can survive when disaster aid interventions cease.
Ongoing Work with the Administration
Shortly after the 2020 elections, CNE shared a Transition Memo with the new Administration, urging their focus on accelerating reconstruction efforts and providing the residents of Puerto Rico equal access to several federal programs — such as Medicaid, SSI, SNAP, and the EITC.
In addition to the expansion of Puerto Rico’s earned income tax credit (EITC) in the American Rescue Plan of 2021, President Joe Biden’s FY 2022 budget directly responds to our memo by including language specifically supporting full funding for Puerto Rico’s Medicaid program as well as “moving toward parity for other critical federal programs including Supplemental Security Income and the Supplemental Nutrition Assistance Program.”
Further, the DC office is repeatedly asked for their expertise and input. Most recently, the office has personally briefed the Secretary of Education and a member of the National Economic Council to offer credible and sustainable solutions to Puerto Rico’s multiple and ongoing challenges.
The Work Ahead
Without a doubt, the uncertainty caused by several crises, layered on one over the other, is detrimental for everyone and it is especially for populations – like Puerto Rico – that have few resources to make ends meet. This has been compounded by structural funding limitations in Puerto Rico that constrain its ability to address current challenges, and importantly, prepare for future threats.
CNE’s work today is more important than ever before. We have a unique opportunity to address widespread hardship and forge a path towards prosperity.