Puerto Rico board requests fed help for economic development

The Puerto Rico Oversight Board is requesting the federal government help the island with certain economic development and tax issues, deal with Medicaid and Medicare contributions, and help with small business growth.

The board made the requests in “Annual Report: Fiscal Year 2021,” which it delivered to Congress, President Joe Biden, and posted to its website on Saturday, as required by the Puerto Rico Oversight Management, and Economic Stability Act.

The board recommended federal policymakers talk with Puerto Rico’s government about ways to increase pharmaceutical and medical products manufacturing on the island to expand economic development. It requested the U.S. Secretary of Commerce appoint at least one member with Puerto Rico tourism expertise to the United States Travel and Tourism Advisor Board.

The board asked for a Manufacturing USA institute to be set up on island to give it the partnerships and resources to become a world-class pharmaceutical manufacturing center. Finally, it asked the Biden administration to direct the federal agencies to reduce red tape and increase access to credit for island infrastructure projects.

The board warned that recent moves to increase the minimum tax rate on Global Intangible Low-Taxed Income would harm the “competitiveness” of 300 multinational enterprises in Puerto Rico. The companies paid more than $2.5 billion in local income and other taxes. The board asks Congress to develop a support mechanism for these enterprises.

On federal healthcare programs, the board asked for a long-term solution to the so-called annual Medicaid fiscal cliff. For several years each fall Congress has allocated additional funds in the federal budget for Puerto Rico’s Medicaid program. The board wants the funding to be promised on a long-term basis.

The board asked that island Medicare beneficiaries be automatically enrolled in Medicare Part B with the option to opt out of coverages, as is done in the 50 states. It also called for Medicare to provide healthcare providers with the same level of payments as found state-side.

Among other things to promote labor participation, the boards urged to “begin using the Department Health and Human Services Poverty Guidelines to set the income limits that determines who is eligible for the U.S. Department of Housing and Urban Development’s housing assistance in Puerto Rico, as it does in most mainland states.

:If this change were to be applied, more people could enter the formal labor market without the risk of losing housing assistance in the process,” the board said.

For benefits reform, the board called for the transition of the island into the federal Supplemental Nutrition Assistance Program to ensure equitable federal food nutrition assistance. A local government food aid program, subsidized by the federal government, currently provides less generous aid.

The board also wants the Small Business Administration to take several steps to help island small business owners.

Finally, the board said it supports 24 bills in Congress that would affect Puerto Rico.

Elsewhere in the report the board pointed out problems it sees in the local government. It said there "continues to be an insufficient political will to drive the types of structural reforms that are needed to create sustainable economic growth and an inability to implement even reforms that have been nominally agreed upon."

Currently the board expects the central government to start to experience deficits in fiscal 2036, even if the government does implement the board’s fiscal plan measures.

The board said further reforms to the island could be implemented to avoid these future deficits.

On the Puerto Rico Electric Power Authority, the board said the authority had made modest improvements in its operational performance, driven mostly by the Oversight Board’s continued and periodical oversight.

"PREPA has initiated procedures to improve workplace management and reduce overtime, conducted studies to identify obstacles preventing optimal economic dispatch of its generation units, has instituted policies aimed at promoting the use of competitive procurement processes for a majority of contracting needs, and has made progress in designing plans for addressing non-technical losses (i.e., theft and faulty metering) and vegetation management,” the report said.

However, “PREPA’s main challenge continues to be an inability to execute on its operational improvement plans on a timely and cost-effective manner," the board said. "PREPA also continues to struggle with excessive politicization, even though the presence of independent and experienced governing board members has improved decision making at the governing board level.”

News, commentary and research reports are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.