Written Statement – Hon. Ricardo Rosselló Governor of Puerto Rico – Committee on Natural Resources Hearing, "The Status of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA): Lessons Learned Two Years Later"
The Honorable Governor Ricardo Rosselló
House Natural Resources Committee Hearing
PROMESA The Status of the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA): Lessons Learned Three Years Later
May 2nd 2019
Chairman Grijalva, Ranking Member Bishop, and Members of the Committee:
• Thank you for the opportunity to appear before you to discuss the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) and to address the lessons learned in the two years since its enactment. Congress intended PROMESA to provide Puerto Rico tools that could be used to restructure its debts, achieve fiscal stability, and spur economic growth, under the public policy direction of the elected government of Puerto Rico.
• Those tools were necessary because, due in large part to its unequal treatment under federal laws as a U.S. territory as well as years of mismanagement both on and off the Island, Puerto Rico and certain of its instrumentalities accrued over $70 billion in public debt and over $50 billion in unfunded pension liability that could not be satisfied with available revenues.
• There is however a naïve and problematic narrative that the Government is not doing its job, that we refuse to make structural reforms, and that the oversight board is the solution to address said mismanagement.
• Allow me to clear and correct that notion.
• When I ran for governor, there was no oversight board. It wasn’t even an idea in the public discourse. Notwithstanding, my team and I developed a platform with a public policy road map that included, structural reforms, expense reduction and government downsizing measures, the renegotiation of our debt, and economic and social reforms.
• With obstacles, both natural and manmade, our government has followed our policy roadmap, achieving the following:
1) The biggest operational budget cuts from one year to the other in the history of Puerto Rico, and of any state in the past couple of decades at least. We reduced 1.4 Bn or 17% of the operational budget on FY 18.
2) Saved the payment of retiree pensions: Pension funds were essentially depleted. Our government assumed the responsibility to pay for pensions, implementing a new PayGo system. Simply put, if we had not made the budgetary cuts above, we could not meet our obligations with pensioners – something we have not failed to do.
3) We moved forward and implemented structural reforms from our government platform. Some of these include:
a. Education reform
b. Local earned income tax credit
c. Energy transformation at PREPA and new energy public policy statutes
d. The creation of entities external to government to promote investment and tourism known as Invest Puerto Rico and Discover Puerto Rico
e. Labor Reforms
f. Commenced a reform of our public service system
g. Tax Reform
h. A new public health care model for the medically indigent
i. Promoting new markets, such as medical cannabis, e-gaming, amongst others
j. We commenced government agency rightsizing to reduce the amount of agencies and increase accountability.
4) Some of our results include:
a. Reduced over 20,000 employees without layoffs
b. Reduced 20% of our agencies
c. Reduced 17% of our operational budget expenditures
d. We arrived at a Title VI agreement with creditors of GDB to restructure its liabilities outside of court.
e. Unemployment has been at an all-time low in Puerto Rico.
f. Created over 18,000 jobs within a year.
g. The PREPA transformation is on its way, and we expect to have a concession of the transmission and distribution system by December 2019.
h. Worked together with the board to restructure 21 billion dollars of our debt.
i. All of this without furloughs, decreased or impaired access to healthcare, without layoffs, or further reducing pension benefits.
• On the other hand, the FOMB’s scoreboard:
1) Proposal of austerity measures that hindered economic growth and would have devastating social impact.
2) Complete failure on Title V economic development projects.
3) Insistence on overstepping their boundaries such as:
a. Attempting to take over PREPA
b. Constant intromission into our policy development process
4) Constant operational delays on budget reapportionments; it takes the oversight board sometimes 1-3 months to approve budget reallocations that are minor amounts
5) A continuous reformulation of fiscal plans that delays proper execution of measures. Note that no fiscal plan certified by the board has lasted more than 6 months.
6) Zero results on their objectives to identify economic development initiatives for Puerto Rico, particularly federal initiatives.
7) Spending twice as much on lobbying in DC than the Government of Puerto Rico invests in its Washington DC office and to this day, no one knows what they are lobbying for.
8) While the elected government must face scrutiny, and is accountable to the public, the oversight board conducts all of its business in secret executive meetings where the public and the government are denied access.
• Clearly, the Oversight Board has not achieved the objectives for which it was created, and – worse of all – has overstepped its boundaries, making it an even more undemocratic entity.
• To add insult to injury, the Oversight Board has gone out of its way to create uncertainty in Puerto Rico. It takes actions and makes public pronouncements that are not supported by PROMESA and then refuse to recognize their mistakes. Two days ago, alone, the Oversight Board sued hundreds of local Puerto Rican suppliers. This included health clinics and centers for education for our most vulnerable children. How is the Puerto Rican government supposed to receive goods and services if everyone must fear litigious harassment?
• Therefore, with regard to PROMESA, I recommend that Congress consider the following changes:
• The Oversight Board should not infringe on the day to day operations of government: It is critical to the legitimacy of this process that the Government of Puerto Rico always retain its democratically derived powers for setting public policy, operating the government and implementing solutions. Budget reapportionments should be handled by the Government of Puerto Rico, complying with a commitment NOT to increase the set overall budget expenditure goals.
• Eliminate the Role of the Oversight Board as exclusive Title III Representative
• Revise Fiscal Planning Process
• Address Professional Costs and expenses of the oversight board.
• Require Oversight Board Transparency: The Oversight Board must be held accountable for its use of public funds and decision-making. Reports of a lack of transparency and potential conflicts of interests of the Oversight Board’s consultants are deeply concerning and not surprising given the way the Oversight Board has conducted itself throughout the process. Our Government also supports efforts to apply basic transparency principles to the Oversight Board through federal legislation.
• I also call upon Congress and the federal government to address the following:
• Cure the Inequity in Disaster Recovery Funding, including FEMA cost share considerations.
• Fully Fund the Nutritional Assistance Program (NAP)
• Create Equality in Federal Programs & Tools for Economic Growth
• Saving the Healthcare System by solving Medicaid and Medicare severe inequalities and unsustainable cliffs
• Resolve Undemocratic & Unequal Territorial Status: The question of Puerto Rico’s ultimate political status and relationship with the federal government is intimately linked to the island’s prospects for economic growth, fiscal stability, and successful disaster recovery. Congress must resolve Puerto Rico’s status to unleash its full potential and should implement the democratically expressed will of voters who have expressed twice in the last six years a clear desire to end the current territory status and to achieve statehood for Puerto Rico. This is the most crucial structural reform for Puerto Rico and one that is critical to our future success.
• If we work together to address these long-standing issues that stem from inequality and address very troublesome obstacles related to undemocratic treatment, we will blaze a path forward to rebuild a better Puerto Rico.