Washington – On Thursday, the Oversight Board - overseeing the financial decisions of the government of Puerto Rico - will defend its determinations before the House Committee on Natural Resources and affirm that four decades of “bad administration” cannot be resolved in three years.
At the same time, the Board’s executive director Natalie Jaresko will focus on the fact that the government of Ricardo Rosselló Nevares has not implemented many of the critical reforms proposed in the fiscal plans.
Before a Democrat-controlled House committee- which has questioned the austerity measures, particularly at the University of Puerto Rico (UPR), Jaresko will also defend the cuts and the increase in tuition fees for the island’s leading higher education institution.
She said that the reforms are focused on maintaining the ability of all students to access and benefit from an improved university system, indicating that contrary to the U.S., the government has subsidized the UPR by 70 percent.
Last night, El Nuevo Día obtained a copy of Jaresko’s presentation where she also lists what she considers as achievements regarding debt restructuring - which is just beginning - transparency measures and responsible spending.
Jaresko will be the second to testify today before the Committee on Natural Resources chaired by Democrat Raúl Grijalva (Arizona).
Rosselló Nevares, who has complained that the Board intends to dictate the government's public policy, will be the first to testify and will be followed by a panel including Jaresko and economist Martín Guzmán of Espacios Abiertos (Open Spaces); Amanda Rivera, executive director of the Youth Development Institute; Alex Pollock, financial affairs expert for the R Street group; and Professor Ana Cristina Gómez Pérez of the UPR Law School.
The Board’s limbo
The hearing titled “The Status of the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA): Lessons Learned Three Years Later” and comes at a time when a decision by the First Circuit Court of Appeals - which the Board has asked the U.S. Supreme Court to review - threatens to interrupt the entity’s operation on May 16.
On February 15, the First Circuit Court of Appeals ruled that the board had been unconstitutionally appointed because its seven members are principal U.S. officers and should have been selected by the President with the advice and consent of the Senate.
Jaresko warns in her presentation that the implications of the First Circuit’s ruling are immense. This, because if there is not an extension of the 90-day stay set by the appellate court or the appointments of current members are not confirmed - as President Donald Trump announced he intends to do - the Board will no longer operate and Title III (debt restructuring) cases could be dismissed, which would cause chaos in courts and on the island.
In that sense, she presents the Board's legal position that its members are territorial officers who do not require the U.S. Senate confirmation. And regarding President Trump's decision to send the nominations to the Senate, in view of the uncertainty in which they have remained, Jaresko urges the Senate to confirm them.
Regarding the Board's work, Jaresko recalls the advance in Cofina and the Government Development Bank (GDB) debt restructuring processes. She also mentions a preliminary agreement with a group of bondholders that would allow a 30 percent cut in the debt of the Puerto Rico Electric Power Authority (PREPA).
However, she stresses that achieving an efficient government is still a great challenge, and criticizes the emergency response on the island, including the Police, difficulties to start a business and government's problems to offer the necessary level of education to be on par with the United States. She even refers to traffic jams and the high rate of traffic accidents.
She said that unfortunately, three years later, the government has not implemented many of the critical reforms proposed in the fiscal plans and adds that the governor announced that he no longer intends to enact the health care reforms proposed in the fiscal plan. She says that this is just an example of the government's lack of action. “Fiscal plans are not a menu one can choose from,” she notes.
She also mentions the Legislature's refusal to include reforms such as “employment at will”.
Although she considers it unrealistic to think that the elected government and an oversight board will be 100 percent aligned, Jaresko says that, despite disagreements, the Board makes an effort to consult, advise and offer perspectives.
Meanwhile, Columbia University research associate Professor Guzmán will refer to a study in which he concluded that the Board has promoted restructuring agreements that are excessive in relation to Puerto Rico's ability to pay.
Using Cofina's restructuring agreement as an example, Guzmán said debt service will increase from $420 million annually in 2019 to nearly $1 billion in 2041, even though it is not reasonable to expect the economy will grow proportionally.
According to Representative Grijalva, the hearing should help to learn about the variety of ideas the Natural Resources Committee may have about the PROMESA and the possibilities to amend it.
Grijalva indicated that he thinks the Democratic majority may intend to review PROMESA, which he would like to do to reduce the powers of the Board over the government of Puerto Rico. However, he affirmed that this is an issue about giving a very specific recipe if the intention is to help the process.
Grijalva said Congress must understand that the fiscal and public debt crisis and the catastrophe caused by Hurricane María cannot be seen independently. He added that the possibility of legislating to impose a new federal authority on Puerto Rico's power grid is still under evaluation.
As for the Board, Grijalva was asked if he thinks the members of the entity act in good faith.
“We have to deal with the implementation (of the law). Its motivations are secondary. My confidence in them is secondary. PROMESA is a matter of cause and effect,” said Grijalva, who has asked the Senate to examine possible conflicts of interest within the Board when considering the appointments that President Trump promised to send.
Democratic Representative Nydia Velázquez (New York) announced that today she will reintroduce - along with Senator and Democratic presidential pre-candidate Elizabeth Warren (Massachusetts) - a bill seeking to cancel a good part of the public debt. At the same time, she seeks an amendment to PROMESA to correct what she believes has allowed conflicts of interest, in reference to the McKinsey company, that advises the Board despite the fact that one of its subsidiaries has Puerto Rico’s bonds.
Meanwhile, Resident Commissioner Jenniffer González considers that amendments to PROMESA will advance and added that she would like to work on a bill seeking to protect the pensions of the government's retirement systems.