Fiscal board report urges more cooperation between US, PR gov’ts

By The Star Staff

The Financial Oversight and Management Board for Puerto Rico presented its progress report for fiscal year (FY) 2021 over the weekend, describing the year as one of significant progress but also making numerous recommendations to the U.S. Congress to bring fiscal stability and growth to the island.

Oversight board chairman David Skeel said FY 2021 was one of significant progress. The year started in the midst of a global health crisis that further jeopardized Puerto Rico’s recovery from the fiscal and economic crisis that has plagued the island for too long, he said.

However, by the time the year ended, the oversight board had succeeded in renegotiating the Plan of Adjustment to reduce Puerto Rico’s debt even more than in the proposed plan the board had filed a year earlier, right before the COVID-19 pandemic began.

“We also were able for the first time to certify as compliant a budget submitted by the Legislature and signed by the governor,” Skeel said. “These two accomplishments are major progress toward fulfilling the oversight board’s responsibilities under PROMESA [the Puerto Rico Oversight, Management and Economic Stability Act].”

In the recommendations made to Congress, the oversight board called for engagement by the federal government that is manifested not only in adequate levels of funding, but also in the form of support for key structural reforms. “Bold, new approaches are required in many areas, including: the participation of labor in the economy, K-12 education, workforce development, increased efficiency and competitiveness across all commercial sectors and the development of new infrastructure improvements, including low cost, clean and reliable electricity,” the board said.

In the area of economic development, the oversight board said there is a need to encourage proactive dialogue between the Puerto Rico government and federal policymakers to find mutually acceptable solutions to enable and attract increased manufacturing of pharmaceuticals and medical products within the United States, and in particular Puerto Rico.

The board requested that the U.S. secretary of commerce, Gina Raimondo, appoint at least one member who has special expertise on tourism in Puerto Rico to the U.S. Travel and Tourism Advisory Board.

The board also urged Congress to establish a Manufacturing USA institute in Puerto Rico to equip Puerto Rico with the partnerships and resources necessary to continue developing as a world-renowned pharmaceutical manufacturing center and to become a global biotech innovation hub.

It also called for a temporary Jones Act waiver for shipment of liquified natural gas within the U.S, and to direct relevant federal agencies to support bankable infrastructure projects through reduced red tape, targeted investments, and increased access to credit, and to keep Puerto Rico top-of-mind for infrastructure funding and improvements.

In the area of taxes, the oversight board warned Congress that recent efforts to increase the minimum tax rate on Global Intangible Low-Taxed Income would significantly diminish the competitiveness of more than 300 U.S. multinational enterprises operating in Puerto Rico.

As a consequence, the board said it strongly supports all efforts to work with Congress on the development of a support mechanism that would provide Puerto Rico with the ability to protect the American jobs in Puerto Rico and adequately offset the negative consequences the proposed changes in global taxation would have on the island.

The oversight board also asked for legislation toward a long-term Medicaid program solution to mitigate the drastic reduction in federal funding for healthcare in Puerto Rico that will happen when the temporary extension expires on Sept. 30. They also asked for equal treatment in all Medicare programs.

In the area of labor participation, the board asked that the U.S. Treasury confirm the advancement of the federal portion of Earned Income Tax Credit funds made available in the American Rescue Plan Act of 2021. The board also asked for measures to institute a work/volunteer requirement to be implemented by July 1, 2023 for able-bodied participants aged 18-59 without dependent children in their household to receive the Nutritional Assistance Program (known on the island as PAN, by its Spanish acronym), which is Puerto Rico’s largest public assistance program.

The oversight board also asked for help for small businesses by giving the Small Business Administration (SBA) greater flexibility in its programs to help Puerto Rico’s small business owners during the prolonged economic crisis.

“This includes many of the recommendations included in the Congressional Task Force Report: enact legislation to increase the guaranty rate and require a separate subsidy calculation for 7(a) loans made in Puerto Rico; consider reducing the small business contribution and increasing the Certified Development Companies (CDC) contribution; consider increasing that aggregate limit for the Microloan program in the case of intermediaries located in Puerto Rico; authorize an intermediary in the Microloan program to use more than 25 percent of its SBA-provided technical assistance grants on pre-loan assistance if the intermediary provides at least 25 percent of its loans to small business,” the board said.

The report also includes recommendations to improve financial institutions and the compilation of statistics, along with several pages of legislation for Congress to pass that seek to help Puerto Rico.

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