September 18, 2018
Good Morning! In this morning’s eBlog, we report on the dismissal by the Trump administration for self-government in Puerto Rico, and await today’s PROMESA Board oversight hearing. We also examine pro-active efforts by the government to reduce future hurricane vulnerability on the island.
Is There A Second Class U.S. Citizenship? The Trump administration has dismissed complaints filed by pro-statehood supporters, emphasizing that nothing prevents anyone from Puerto Rico who wishes to participate in the electoral process from moving to the mainland—with Kevin Sullivan, the Deputy Chief of Mission for the U.S. to the Organization of American States coming in response to complaints filed 12 years ago by former Governor Pedro Rossello and attorney Gregorio Igartua. The complains are to be considered October 5th at an Inter-American Commission on Human Rights public hearing, as part of the 169th session of the OAS autonomous body, at the University of Colorado. According to Deputy Chief Sullivan’s communication with IACHR Executive Director, Paulo Abrao, nothing in the American Declaration (of Human Rights) suggests that OAS member states cannot maintain federal systems in which their citizens participation in local and federal elections is determined by their residence or the state of the federal entity where they reside. Mr. Sullivan asserted that Puerto Rico’s current political status is not inconsistent with the American Declaration of Human Rights, and he defended the quasi-colonial position by arguing that it allows a limited participation, because Puerto Ricans can participate in voting in Presidential primaries, and they have the right to elect a non-voting Member to Congress. Mr. Sullivan went on to note that although Puerto Rico does not have state sovereignty, he claimed it has a “distinctive, in fact exceptional, status” with a “broad base of self-government.” Just over a year ago, Puerto Ricans, by referendum, voted for statehood for the first time on June 11, 2017, effectively initiating what Mr. Sullivan deemed a “political process,” the outcome of which, he said, “cannot be predicted by the United States,” even as he admitted that other territories’ petitions have been accepted. He added that Puerto Rican residents, who are U.S. citizens, are also free to move to any state, if they wish.
Proactive Shelter from the Next Storm. Luis Burdiel Agudo, Puerto Rico’s President of the state-owned Economic Development Bank, has recommended making aid to homeowners rebuilding after Hurricane Maria contingent on their relocating out of flood-prone areas, with the President of the state-owned Economic Development Bank, warning: “We need to move families to a safe place.” Most local governments give homeowners the choice between raising their house or taking a buyout to move somewhere safer; however, elevating one’s home costs around $44,000, according to government estimates—an especially high bar in Puerto Rico, where the median income is $20,078, and the poverty rate is 43.5%‒the median home value is about $100,000. Those who remain in flood-prone areas also require flood insurance, which is difficult to obtain given the low-income rate in the Commonwealth. Nevertheless, Puerto Rico is withholding aid entirely unless residents move.
Federal Assistance & Hard Choices. The federal government is expected to provide $20 billion in federal funding to rebuild after Hurricanes Irma and Maria, and to better prepare for future storms—creating an almost Scylla versus Charybdis choice: thousands of the more than 100,000 homeowners on the island will have to choose between staying in their current property or rebuilding their homes.
Could There Be Promise in PROMESA? The PROMESA Oversight Board is soliciting feedback on its report on the causes and development of Puerto Rico’s debt crisis, the Board’s Special Claims Committee set to “pursue claims from the results” of a debt investigation, and a hearing set for today in San Juan—a hearing which will be streamed live on the Board’s website—with audio available in both English and Spanish. Board members Andrew Biggs, Arthur González, Ana Matosantos, and David Skeel are on the Special Claims Committee. The debt report includes a section which lays out numerous ways Puerto Rico’s municipal bonds and the steps that led to their issuance may have run afoul of laws and regulations. One issue which might or might not be addressed will be with regard to federal allocations promised to Puerto Rico to mitigate the devastation caused by Hurricane Maria—some $41 billion, especially because authorities estimate that less than a quarter of those funds have, in fact, been disbursed. Moreover, the promised, but unreceived amount appears to be less than half the projected level of $100 billion needed to complete reconstruction. According to the data offered by the US government and Puerto Rico, Puerto Rico’s El Nuevo Día has only been able to detail disbursements of approximately $7.640 billion to government entities, businesses, and families in Puerto Rico. Omar Marrero, the Director of the Central Recovery and Reconstruction Office (CRRO), noted: “The reimbursement process has been really hard, particularly when FEMA has imposed some requirements on us as if we were a risk jurisdiction, when we were not declared so.” At the same time, the government of Puerto Rico has not managed yet to get funds flowing from the permanent project program under §428 of the Stafford Act, which will guide most repairs and new constructions. Director Marrero argues that the continued “discriminatory treatment” is an example of Puerto Rico’s lack of political power due to its territorial status. If anything, in the wake of the Whitefish scandal, attention on the management of emergency funds has increased, and, as recently as last weekend, President Trump fanned the idea that the government of Puerto Rico is one of the most corrupt in the country.
To date, the bulk of the federal assistance has come via Congressional resolutions, with the distribution mainly through HUD, FEMA, and the Department of Health and Human Services: half of the allocations were made through the CDBG Disaster Recovery program; however, not even the first $1.5 billion has been made available—funds which were to be allocated last month to assist with the reconstruction of houses destroyed or damaged by the hurricane. Director Marrero noted: “It is still necessary to sign the agreement between HUD and the Puerto Rico Department of Housing. Without that contract, the funds cannot be disbursed,” adding that second part of the CDBG-DR package, which would reach $ 8.2 billion, will not arrive until next year, which would delay its impact on the economy and the development of infrastructure projects. He added that the funds are more important, especially because FEMA did not approve granting federal assistance for permanent reconstruction work, “based on having a bad experience with that program.” The wait may be understood as especially stressful, because the potential aid package from Congress includes nearly $2 billion in CDBG funding which must be used to rebuild the power grid. With the hurricane season still vicious, there are obvious fears at the delay. Thus, Puerto Rico is pressing to reactivate exemptions in the payment of part of the cost for debris removal and taking emergency measures in the face of a natural disaster. The disaster has also re-demonstrated a double standard: in the Lone Star State, Texas, where Hurricane Harvey caused $125 billion in damage, according to the National Hurricane Center, FEMA claimed it provided $13.820 billion in “the pockets of survivors” via federal and state grants, and flood insurance programs ($ 8.8 billion). In Puerto Rico, however, the percentage of homes with FEMA insurance is minimal.
Stormy Fiscal Warnings. Moody’s has warned that a “large part of the money (FEMA assistance) will not remain on the island,” a fiscal storm warning which could undercut Puerto Rico’s expectations of 2019 6.5% economic growth. Some of that projection assumes the government will be able to efficiently take advantage of the $4.8 billion in extra Medicaid assistance it received—funds which can be used until next September without a local match. Nevertheless, Puerto Rico must plan on the resumption of its contribution to the Mi Salud plan—a plan which will be complicated by the apprehension that Medicaid emergency funds may run out during in FY2020—an exhaustion which could carry a price tag of as much as $1 billion.
Has There Been a Double Standard? In the wake of Hurricane Katrina, which sent a number of us from Arlington County, Virginia hurtling to Mississippi to try to assist in rebuilding, and which leveraged Congress to name a bipartisan committee, a mere seventeen days after the storm struck, to investigate the Bush Administration’s response to the storm, with, in the Senate, twenty-two FEMA oversight hearings in six months—and within eight months, the release of 500-plus-page investigations into the Bush administration’s handling of the crisis—investigations with dozens of recommendations for reform; there has been no comparable reaction from this Congress to a storm which caused a much greater loss of American lives—nearly 70% more. The U.S. Senate Homeland Security and Governmental Affairs Committee, which oversees FEMA, has held just two hearings; neither the House nor the Senate has issued any major reports. Hurricane Maria, according to George Washington University’s report, killed an estimated 2,975 Americans in Puerto Rico—an estimate which, last week, the President claimed was a fake number. Or, as Irwin Redlener, the Director of the National Center for Disaster Preparedness at Columbia University put it: “Puerto Rico is getting far less attention, in spite of it being one of the worst disasters in modern American history, than Katrina, and far less attention than we got for Superstorm Sandy…From the beginning, the handling of Maria’s consequences both from the White House and Congress has been abysmally inadequate.” Indeed, in the immediate aftermath of Katrina’s Gulf Coast devastation, House GOP leaders called for an investigation; they created a select committee to investigate the storm. That committee held nine public hearings; it reviewed more than 500,000 pages of documents, according to the 582-page report, titled “A Failure of Initiative,” which was released less than six months after Katrina struck. The Senate conducted its own investigation into the Bush administration’s response to Katrina, with the Senate Committee on Government Affairs holding nearly two dozen hearings with 85 witnesses; the Committee reviewed over 838,000 pages of documents; it heard testimony from 325 persons involved in the response. Many of the hearings focused on narrow issues, such as search-and-rescue efforts after the storm. In this Congress, in contrast, the House Oversight and Government Reform Committee has held two hearings related to the 2017 hurricane season, and it has reviewed more than 17,000 documents. Last week, Ranking House Oversight Committee Member Elijah Cummings (D-Md.) released a report complaining about a lack of hearings and responsible oversight—a report which might have triggered Chairman Tray Gowdy (R-S.C), Chairman of the House Committee on Oversight and Government Reform, to FEMA to request all communications from 13 FEMA officials related to 10 different aspects of FEMA’s response to the storm, including the lack of qualified personnel, wiring issues with the electrical system and problems with existing disaster plans. It was just the second letter requesting information about FEMA sent by the committee and the first since Oct. 11, 2017.