By The Star Staff
At a time when towns are fiscally ailing, the Financial Oversight and Management Board has ordered the island government to refrain from distributing $78 million to municipalities to respond to damages caused by Hurricane Fiona.
The oversight board said a legislative resolution allowing the funding is significantly inconsistent with the fiscal plan and proposed that the government withdraw the funds from the American Rescue Plan Act allocation instead of the commonwealth emergency reserve stipulated in the legislation, the letter sent by the oversight boards executive director, Robert Mujica to Fiscal Agency and Financial Advisory Authority (AAFAF by its Spanish initials) Executive Director Omar Marrero DÍaz said. Joint Resolution (JR) 4 assigns $78 million to the municipal emergency assistance fund (MEAF) from the Act 91-1966 emergency fund to be distributed among the 78 municipalities of Puerto Rico to finance the government’s response to Hurricane Fiona. In its submission to the oversight board, the government instead suggests the $78 million be covered by funds from the emergency reserve established under the certified fiscal plan for Puerto Rico.
“Fiona was devastating, and the [oversight board] continues to support the government so that Puerto Rico recovers,” the letter notes. “The emergency reserve ensures that the government of Puerto Rico has the necessary funds to help the people of Puerto Rico in natural disasters and other emergencies fast and effectively, and that is why the emergency reserve has strict rules to ensure the government can use the funds only for such emergencies.”
As outlined in the certified fiscal plan, the appropriate funding level for the emergency reserve is $1.3 billion. Amounts approved by the oversight board and disbursed to the emergency reserve recipients need to be replenished no later than the following fiscal year. Nevertheless, in February, the emergency reserve had a current balance of $355.5 million, a significant shortfall of $900 million that must be replenished to adequately provide an expedited response during future disasters, the board said.
“JR 4 purports to spend funds without sufficient offsetting revenues or decreased expenditures,” the board pointed out in the letter. “In addition, withdrawing funds from the emergency reserve as proposed by the government would leave Puerto Rico without the commonwealth funds necessary to respond to future hurricanes or other natural disasters. Therefore, the [oversight board] concludes that JR 4 needs to be more consistent with the certified fiscal plan and budget.”
The ARPA awarded Puerto Rico significant eligible federal funding. Specifically, Puerto Rico would receive $4.02 billion; that is, $2.47 billion to the commonwealth central government and $1.55 billion to the municipalities.
“Therefore,” the oversight suggests in the letter, “the government should examine the availability of ARPA funds to cover the expenditures and purposes contemplated by JR 4 as this may be a more appropriate resource.”
The oversight board said it cannot approve the government’s suggestion that the resolution’s proposed allocation can be covered with funds allocated in the emergency reserve because the emergency reserve has not been replenished as provided by the certified fiscal plan. Funds were already made available and allocated to the 78 municipalities to support recovery efforts related to the effects of Fiona, the board noted.