After months of denouncing the federal government’s response to Hurricane Maria, Puerto Rican officials declared a rare victory when U.S. Senate leaders folded disaster relief funding into a two-year budget deal to avert a government shutdown.
Puerto Rico, along with the United States Virgin Islands, is scheduled to receive $4.8 billion to replenish dwindling Medicaid funds, $2 billion to restore the shredded power grid and $9 billion for housing and urban development projects.
But the funding falls tens of billions of dollars short of what Puerto Rico says it needs to come back from the devastating storm. In November, Puerto Rico estimated it would need $94.4 billion to rebuild the island and make its infrastructure more resilient to future natural disasters.
Puerto Rico wanted $17 billion for the power grid alone – $15 billion more than the Senate set aside.
Representative Jenniffer Gonzalez-Colon, Puerto Rico’s nonvoting delegate in the U.S. Congress, said “Receiving these funds is important, and that will demonstrate that Puerto Rico will use them wisely and with transparency…That’s an important issue here. We can be a model for how to invest in infrastructure on the island.”1
It Has Been an Uphill Battle for Puerto Rico
Puerto Rico is asking Congress for help with delayed disaster relief aid. The U.S. Treasury not only has delayed an approximate $4.7 billion loan approved for Puerto Rico by Congress in the wake of Hurricane Maria last September but has reduced the amount to $2.065 billion without providing an explanation. The resulting financial strain threatens to disrupt essential services Governor Ricardo Rosselló said in a February 26, 2018 letter asking U.S. congressional leaders to intervene.
Congress approved the community disaster loan last October as part of a larger relief package after Hurricanes Harvey, Irma and Maria devastated the island, which was already dealing with the largest government bankruptcy in U.S. history and an 11-year recession. As previously reported, the island has unpaid debt outstanding of $74 billion and an underfunded $50 billion pension fund.2
The Puerto Rico government “may be forced to cut deeply into its liquidity reserves and make the untenable choice of which essential services to cut so that it can maintain other essential services,” the Governor Rosselló wrote.
The risk of interruption to the island’s electric, water, sewer or other utilities is a direct result of Treasury’s “misguided delay and policy decisions,” he said.
Community disaster loans, which are usually forgiven, are just one form of disaster relief. The Treasury Department “intimated that the loans will not be forgiven under any circumstances” and focused more on repayment than on relief for the island’s residents, Governor Rosselló’s February 26, 2018 letter said.3
Officials from the Treasury Department and other agencies met in late February with the Puerto Rico Financial Oversight and Management Board to discuss terms under which the U.S. government will offer community disaster loans to Puerto Rico. The Treasury Department statement said that the conditions would include “important steps that will be taken to protect federal taxpayer investments while ensuring funding is available quickly when needed.” Treasury said Puerto Rico could use the money to make loans to Puerto Rico Electric Power Authority (PREPA) which had filed for bankruptcy.4
Hopeful Promising News
Five months after Hurricane Maria, Puerto Rico’s government is telling multinationals that the island is on the brink of “an economic transformation.”
One in five residents is still without electricity and about 200,000-300,000 of its 3.4 million population have left the island since the recent hurricanes, but Governor Rosselló has said that the U.S. territory was pushing “trailblazing” reforms to attract business. He said, “We are at least reaching levels of normalcy which allow us to look a little bit further ahead.”
Plans were announced in January to privatize the generation business of PREPA and to seek bidders to operate its transmission and distribution operations on a concession model. A new operator could potentially reduce power costs and turn the island, which has no federal taxes and lower labor costs than the mainland, into “a very competitive jurisdiction.”
The economy is expected to shrink 9.2 percent in 2018 but the hopeful $70.5 billion of disaster relief funding would help restore growth from 2019.
Puerto Rico’s lack of strong political representation in Washington has hindered it. Governor Rosselló said “It was always harder for us. Everything had to be battled through, and it’s because we don’t have political power.”5
- Mazzei, Patricia, “What Puerto Rico Is, and Isn’t, Getting in Disaster Relief,” The New York Times, February 8, 2018, and Brown, Nick, “Puerto Rico to receive $16 billion in federal disaster aid,” reuters.com, February 9, 2018.
- Coto, Danica, “Puerto Rico: Treasury cuts $4.7B disaster relief loan to $2B,” The Washington Post, February 27, 2018.
- Russ, Hilary, “Puerto Rico asks Congress for help with delayed disaster relief loan,” reuters.com, February 27, 2018.
- Endnote 1.
- Edgecliffe-Johnson, Andrew, “Puerto Rico upbeat on attracting investors after hurricane,” Financial Times, February 20, 2018.