In its newest proposed fiscal plan (released May 30), Puerto Rico’s fiscal oversight and management board appears set to use disaster relief funding to finance debt, while proceeding with spending cuts and an austere fiscal plan.
“The Board certified a fiscal plan that makes steep cuts to public services in the pursuit of a budget surplus that can be used for debt repayment,” a new report from the Center for Economic and Policy Research (CEPR), which analyzes the plan, concludes, “despite clear instructions that none of the [hurricane relief] support received can be used for debt repayment.”
“The people of Puerto Rico continue to receive little support from their elected officials; rather, they are being asked to shoulder a greater burden, despite the hardship imposed on them, with an estimated thousands of people likely dying due to Hurricane Maria, and thousands more left without power for months after the hurricanes hit last September,” CEPR researcher Lara Merling, who coauthored the report, said.
The CEPR report examines the new fiscal plan proposed by Puerto Rico’s Financial Oversight and Management Board (the Board), as well as a previous plan (released April 19). It finds that “The labor reforms that are at the center of this plan will surely erode labor rights in Puerto Rico,” and that wages, even with mandated benefits included, are lower than on the US mainland, even with a comparable cost of living. “It is unlikely that in the context of Puerto Rico’s depressed economy this approach will lead to an increase in employment,” the paper concludes.
The Board is also requesting work requirements be added for Puerto Rico’s welfare recipients, despite the high unemployment rate and weak labor market. The Board’s fiscal plan calls for further cuts to other government agencies, especially to education and health care. The plan also targets municipalities and local governments for budget cuts, despite that these are increasingly burdened with providing essential services. The Board’s plan mandates expenditure cuts of $9.5 billion, or 2.2 percent of GNP, and would privatize utilities.
These cuts, the report notes, may result in greater out-migration from the island to the mainland US, where Puerto Ricans could influence elections and the political climate in Washington. Greater out-migration would also prolong the island’s economic downturn, as a number of prominent economists have warned in an open letter.
“The Board sadly does not appear to have Puerto Ricans’ safety and well-being as its top concern,” Merling said. “Puerto Rico remains in a serious humanitarian crisis, one that has already claimed thousands of lives. Preventing more needless deaths and economic deprivation should be the priority of all responsible authorities, including the governor and up to the president of the United States.”
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