Dear Reader,
The Oversight Board’s singular focus right now is on supporting the Government of Puerto Rico to protect the people from the COVID-19 virus, and to help minimize and contain the resulting health and economic effects of the pandemic.
We hope that the situation stabilizes as quickly as possible and that the residents of Puerto Rico stay safe. Nevertheless, it is simply impossible to say how long the crisis might last, how much funding would be needed to help the people and businesses affected, and what the economic damage overall is going to be.
Let me assure you:
The Oversight Board will continue to act quickly when we know we can help Puerto Rico, just as we did after the earthquake earlier this year. Already, the Oversight Board and the Government agreed to provide about $1 billion in unprecedented financial aid in response to COVID-19, a remarkable outcome that illustrates how much more resilient Puerto Rico has become over the last two years. The Oversight Board will be monitoring the use of these funds carefully.
- On March 3, the Oversight Board made available an initial $5 million from the Emergency Reserve Fund to start increase public awareness and improve the public healthcare sector’s capacity.
- On March 13, the Oversight Board authorized the use of the remaining $160 million (including the above $5 million) Emergency Reserve Fund balance for preparedness and response.
- On March 23, the Oversight Board authorized an additional $787 million to help with the COVID-19 emergency. The Legislature passed the bill to finance this Emergency Measures Support Package on March 28, and on March 28 the Governor signed the bill and the Oversight Board certified it.
- On March 30, the Oversight Board urged the Puerto Rico Department of Education to create and implement a plan to provide student meals in line with the Federal Government’s allowed waivers.
- On March 23 and March 27, the Oversight Board asked the U.S District Court for the District of Puerto Rico to suspend until further notice the restructuring processes for the Commonwealth’s and PREPA’s debt, respectively.
- On April 6, the Oversight Board approved the request by the Government for a cash advance of up to $400 million to expedite the distribution of the federal transfers by using Commonwealth funds until the federal funds arrive.
The Cares Act
The Oversight Board has supported the Government’s efforts to ensure that Puerto Rico receives its fair share of funds from the Federal Government’s emergency programs, itemized to date in three landmark pieces of legislation. The Government of Puerto Rico, its residents, businesses, and non-governmental organizations across the economy are potentially eligible for some $10 billion from the $2 trillion Coronavirus Aid, Relief, and Economic Security Act (CARES Act) President Donald J. Trump signed on March 27, in conjunction with its two predecessor COVID-19 response bills. One large transfer will come from the $3 billion appropriated to support territories’ and Washington, D.C.’s unbudgeted expenses arising from the pandemic. Puerto Rico will receive the largest share of these funds, approximately $2.2 billion.
The CARES Act provides U.S. citizens and residents with adjusted gross income under $75,000 ($112,500 for head of household and $150,000 married) a $1,200 rebate, and an additional $500 per child. A typical family of four is eligible for a $3,400 rebate. Puerto Rico’s Hacienda is working with the U.S. Treasury Department to implement this element of the federal legislation.
The CARES Act also provides loans to businesses affected by COVID-19, under two programs at the Federal Small Business Administration (SBA). First, the law provides for Economic Injury Disaster Loans (IEDL), which includes advance grants up to $10,000 for entities eligible for a loan. Second, the law provides for the Paycheck Protection Program (PPP), to provide small businesses with funds to pay up to eight weeks of payroll costs including, benefits. Funds can also be used to pay interest on mortgages, rent and utilities.
For those who unfortunately become temporarily unemployed as a result of the COVID-19 situation, the CARES Act provides an additional $600 per week unemployment insurance – on top of what the Puerto Rico unemployment agency provides – for up to four months.
Oversight Board's Next Steps
The Oversight Board is analyzing each program carefully to assess how much Puerto Rico is eligible for under various parts of the laws, and from other emergency funding measures, including funds for research and development, prevention, supplies, testing, sick leave, education, and nutrition assistance.
The fiscal discipline of the last three years has left Puerto Rico in considerably better financial shape than many states
- First, we are benefitting from the Federal court-ordered stay on debt service in many institutions as a result of PROMESA.
- Second, we have instituted fiscal responsibility measures over the past few years which have resulted in setting aside funds for Emergency Reserves, and a budget surplus that provides a cushion in times like these. There was no Emergency Reserve Fund when Hurricane Maria hit, and Puerto Rico did not have a surplus that allowed us to respond with hundreds of millions in emergency funding.
The measures implemented in the last few years allow the Government to be prepared for unforeseen events like natural disasters or a pandemic like COVID-19.
Unfortunately, as I am writing this newsletter, the crisis shows no sign of abating, and the Oversight Board will continue to work closely with the Government of Puerto Rico to help find reasonable, comprehensive, and sustainable solutions to this emergency and then later, support for an economic recovery.
Nevertheless, COVID-19 brings immense uncertainty – about the economy and about Government finances. Our overarching mandate remains to achieve fiscal responsibility and access to the capital markets. That requires reducing Puerto Rico’s debt to a sustainable level and exiting bankruptcy, while ensuring necessary government services are delivered as efficiently as possible.
To reach those goals and fulfill our mandate under PROMESA responsibly, the Oversight Board is now in the process of stepping back and analyzing the fiscal and economic effect of COVID-19. We are in the process of updating the Fiscal Plan, as we do each year before the Government submits its new fiscal year budget. As always, we are working with the Government to find the best, most responsible solutions for Puerto Rico’s finances. Our budget and implementation teams, and our task force led by our economist work from home every day to complete this immense task under extraordinary circumstances.
What can you do?