Organizations Demand Congress Take Urgent Action for PR Recovery
Dear Members of Congress:
We write to you as Puerto Rican community organizations, U.S. based organizations with significant Puerto Rican memberships throughout the diaspora, and allies. Together, we are working to mitigate Hurricane Fiona’s damage in Puerto Rico and make sure that funds allocated for recovery actually reach affected communities. As of today, nearly two months after landfall, too many of us and our loved ones remain without reliable access to electricity, water, and other basic necessities, particularly outside of the San Juan metro area. As we continue to focus on our communities’ needs after the storm, we believe it is equally important to address the underlying conditions that predated and exacerbated Hurricane Fiona’s impact in Puerto Rico. We are particularly concerned about the role of the Financial Oversight and Management Board (FOMB) at this critical moment.
The unelected and unaccountable FOMB, or “Board” was created by Congress’ own 2016 PROMESA legislation. The PROMESA law gives the FOMB power to develop Puerto Rico’s budget, and to have final say on budget priorities within the archipelago. Since its inception, the operating costs and skewed priorities of the FOMB have resulted in unsustainable economic losses for the Puerto Rican people, curtailing their ability to recuperate from the damage caused by Fiona and other climate and public health crises. The FOMB’s austerity measures have meant significant funding cuts to Puerto Rico’s municipalities, schools and healthcare facilities, among others - the very entities that traditionally serve as first responders and front-line support during emergencies.
Additionally, the FOMB has consistently championed the privatization and sale of natural resources and essential services throughout the archipelago - including Puerto Rico’s electrical grid - rendering them inaccessible and unaccountable to the people of Puerto Rico. The decision to privatize Puerto Rico’s electrical grid is especially concerning in light of the importance of this essential utility. Hundreds of millions of federal dollars have been designated for Puerto Rico’s electrical system, now managed by private company LUMA Energy. On LUMA’s watch, Puerto Ricans have faced frequent power outages that are nearly double the length of power outages before the grid was privatized. Puerto Ricans already pay almost twice as much for electricity than US customers, due largely to the impact of the Jones Act. Yet, the Board has consistently pushed for steep utility rate increases. In a period of just one year, LUMA enacted seven rate increases for Puerto Rican customers.
A perhaps lesser known aspect of the Board’s record is its role in the use of federal disaster funds. In the devastating aftermath of Hurricanes Irma and Maria, it was the FOMB who certified Puerto Rico’s recovery plan. The FOMB also retained the authority to review contracts related to post-hurricane reconstruction. At the same time, the FOMB adjusted its fiscal plan and reversed its predictions of a deficit with a strong projected fiscal surplus, due in part to increased federal support for disaster recovery funding. Hedge funds began buying large amounts of distressed bonds for cheap on the assumption that disaster relief funds could be used, in part, to pay back bondholders. This was despite the fact that federal aid was designed to support relief and recovery efforts, not to create a fiscal surplus for creditors to access.
In the years following Hurricanes Irma and Maria, the pace of reconstruction on the archipelago remained concerningly slow. While Congress allocated approximately $64 billion for disaster relief and recovery operations, as of June 30, 2021, only $18.6 billion, or approximately 29%, had been spent, with the bulk of the funding scheduled to be disbursed over a ten year period beginning in 2025. The FOMB’s most recent restructuring plan, approved in January of 2022, further locks Puerto Rico into decades of unsustainable debt payments, cuts to future retirement benefits of current public servants, and limited means to invest in public services and institutions Puerto Ricans need to thrive. In its plans for Puerto Rico’s economic recovery, the Board continues to ignore both the detrimental impacts of its own austerity measures and Puerto Rico’s urgent need to adequately prepare for climate emergencies.
Recommendations
It is imperative that we not repeat the same mistakes that were made after hurricanes Irma and Maria in Puerto Rico. To this end, the first priority must be to ensure that resources are allocated to directly affected communities in Puerto Rico as quickly as possible. A disaster recovery model that takes years to make needed improvements is doomed to fail, as Hurricane Fiona’s impact has shown. Additionally, when Congress appropriates money to rebuild infrastructure after natural disasters, federal agencies should prohibit any potential secondary effects the funds may have on the local economy from being used to service legacy debt held by wealthy creditors outside the archipelago. There is also a need for increased federal funding for sustainable energy development in Puerto Rico. It is not enough to continue funding repairs for the deteriorated electrical grid, it is also necessary to invest in a sustainable energy future for the archipelago that acknowledges the reality of climate change and its disproportionate impact.
Additionally, we are continuing to call on Congress to advance the “Territorial Relief Under Sustainable Transitions for Puerto Rico Act” (TRUST for PR Act), H.R.7409, which would phase out the FOMB and put Puerto Rico in charge of its own economic future, with amendments to ensure accountability for the unelected FOMB’s actions. We are also continuing to advocate for a permanent exemption for Puerto Rico from the Jones Act, as well as supporting the “Puerto Rico Recovery Act,” a recently introduced bill to temporarily waive the Jones Act for vessels or operators providing disaster relief post-Fiona. Finally, we ask that Congress address Puerto Rico’s imminent Medicaid funding cliff. Though this may seem unrelated to disaster recovery, the disparity in federal funding for Medicaid is an example of unequal treatment that results in increased debt for Puerto Rico, further eroding its capacity to respond to crises. The funding cliff would also negatively impact Puerto Rico’s healthcare system, which is already struggling after massive austerity cuts imposed by the FOMB.
We hope to count on your support on these key issues affecting Puerto Rico. We are happy to meet to discuss these issues further or answer any questions you may have.
Sincerely,
Center for Popular Democracy Action
Construyamos Otro Acuerdo
Hedge Clippers
Taller Salud Inc.
Ayuda Legal
CASA in Action
Hispanic Federation Communities United for Fair Housing (CUFFH)
New York Communities for Change (NYCC)
Action Center for Race and the Economy (ACRE)
Service Employees International Union (SEIU)
Strong For All
Open Society Policy Center
Action NC
Make the Road NJ
Make the Road NV
Make the Road CT
Make the Road PA
Make the Road NY
Florida Rising
People's Action
Boricuas Unidos en La Diáspora
La Clara
Power 4 PR
Americans for Financial Reform (AFR)
Public Accountability Initiative/LittleSis
Diáspora en Resistencia
Citizen Action of NY
Step Up Louisiana Frente Ciudadano por la Auditoría de la Deuda
UNETE Unión Nacional de Educadores y Trabajadores de la Educación
FAEGela
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1 For more information on the FOMB’s composition and history, see Natalia Renta, Maggie Corser, and Saqib Bhatti, “PROMESA Has Failed: How a Colonial Board is Enriching Wall Street and Harming Puerto Rico,” Center for Popular Democracy and Action Center for Race and the Economy, September 2021, https://www.populardemocracy.org/PROMESAHasFailed.
2 See e.g. FEMA Press Release, “Nearly $600 Million in FEMA Funding Injection to Rebuild Power Grid,” June 13, 2022, https://www.fema.gov/press-release/20220613/nearly-600-million-fema-fund....
3 Arelis R. Hernández and Douglas MacMillan, "An arrest warrant, a fugitive CEO: Puerto Rico’s effort to privatize its electrical grid is off to a rocky start," Washington Post (November 16, 2021), https://www.washingtonpost.com/nation/2021/11/16/puerto-rico-luma-energy/; Gloria Gonzalez, "Puerto Rico’s shattered power grid could become a ‘big experiment’ for Biden," Politico, (November 25, 2021), https://www.politico.com/news/2021/12/25/biden-puerto-rico-electricity-n....
4 U.S. Energy Information Administration, “Table 8.4 Puerto Rico- Average Price of Electricity to Ultimate Customers- Total by End Use Sector,” https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=epmt_5_6_a; U.S. Energy Information Administration, ”Table 5.6.A. Average Price of Electricity to Ultimate Customers by End-Use Sector, by State, May 2021 and 2020,” https://www.eia.gov/electricity/monthly/epm_table_grapher.php?t=table_8_04; Nicole Acevedo, “Puerto Ricans already pay high energy prices. They could go higher.,” NBC News (2019), https://www.nbcnews.com/news/latino/puerto-ricans-already-pay-high-energ....
5 US Government Accountability Office, “Characteristics of the Island’s Maritime Trade and Potential Effects of Modifying the Jones Act,” March 2013, https://www.gao.gov/assets/gao-13-260.pdf, 18-20; Jia Jun Lee, "Renewing Growth in Puerto Rico: Evaluating the Island’s Transition to Distributed Solar Energy," Journal of Public & International Affairs, Princeton University, Mary 20, 2022 https://jpia.princeton.edu/news/renewing-growth-puerto-rico-evaluating-i...’s-transition-distributed-solar-energy; CATO Institute, “The Jones Act Is Forcing Puerto Rico to Overpay for Energy,” (July 25, 2022), https://www.cato.org/blog/jones-act-forcing-puerto-rico-overpay-its-ener....
6 Alejandra O’Connell-Domenech,"Why are some Puerto Ricans demanding the island cancel its contract with power company LUMA Energy?," The Hill (September 10, 2022), https://thehill.com/changing-america/sustainability/energy/3636534-why-a....
7 Government Accountability Office (GAO) Report (March 2019), “Puerto Rico Hurricanes - Status of FEMA, Funding, Oversight and Recovery Challenges,” p. 17, https://www.gao.gov/assets/gao-19-256.pdf.
8 Rosanna Torres, “PROMESA, Four Years Later,” Center for a New Economy, 2 (Sept. 2020), https://grupocne.org/wp-content/uploads/2020/09/PROMESA-Policy-Brief_Fin....
9 Lara Merling, “Wall Street Is Trying to Embezzle Puerto Rico’s Hurricane-Relief Money,” Jacobin (Apr. 8, 2018), https://jacobinmag.com/2018/04/puerto-rico-debt-bonds-hurricane-maria.
10 Lara Merling & Jake Johnston, “Puerto Rico’s New Fiscal Plan: Certain Pain, Uncertain Gain,” 3-4, Center for Economic and Policy Research (2018), https://cepr.net/images/stories/reports/puerto-rico-fiscal-plan-2018-06.pdf.
11 Sergio Marxuach, “The Threefold Challenge to the Puerto Rican Economy,” Center for Economic and Policy Research, (2021), https://grupocne.org/2021/09/15/the-threefold-challenge-to-the-puerto-ri....
12 Financial Oversight and Management Board for Puerto Rico, “2021 Fiscal Plan for Puerto Rico: Restoring Growth and Prosperity,” 127 (April 23, 2021), https://drive.google.com/file/d/1reetKnfKsa1uR-A0u9l3FM6PfGamHCrx/view.
13 Press Release, “Velazquez Introduces the Bipartisan Puerto Rico Recovery Act,” (September 30, 2022), https://velazquez.house.gov/media-center/press-releases/vel-zquez-introd....
14 Center on Budget and Policy Priorities, “Puerto Rico Risks Health Care, Fiscal Crisis Without Medicaid Fix This Winter,” (September 29, 2022), https://www.cbpp.org/blog/puerto-rico-risks-health-care-fiscal-crisis-wi....
