Promesa Implementation During the Coronavirus Pandemic, House hearing transcript (June 11, 2020), GovInfo CHRG-116hhrg40637, PDF

Summary

The House Committee on Natural Resources convened this oversight hearing on June 11, 2020, on PROMESA implementation during the coronavirus pandemic; Raúl M. Grijalva chaired it. Witnesses were Natalie Jaresko, Executive Director of the Financial Oversight and Management Board for Puerto Rico, and Omar Marrero, Executive Director of the Puerto Rico Fiscal Agency and Financial Advisory Authority. The Board's testimony says that before the CARES Act it and the Government delivered a $787 million package of measures, including $213 million in hazard pay for front-line workers. It says the Board proposed an amended Plan of Adjustment in February 2020 to restructure $35 billion of debt and other claims against the Commonwealth. This is the GovInfo PDF; the record includes a Hispanic Federation letter dated June 15, 2020.

Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used

Full text

PROMESA IMPLEMENTATION DURING THE
CORONAVIRUS PANDEMIC

OVERSIGHT HEARING
BEFORE THE

COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION

Thursday, June 11, 2020

Serial No. 116–35

Printed for the use of the Committee on Natural Resources

(

Available via the World Wide Web: http://www.govinfo.gov
or
Committee address: http://naturalresources.house.gov

U.S. GOVERNMENT PUBLISHING OFFICE
40–637 PDF WASHINGTON : 2020
COMMITTEE ON NATURAL RESOURCES

RAÚL M. GRIJALVA, AZ, Chair
DEBRA A. HAALAND, NM, Vice Chair
GREGORIO KILILI CAMACHO SABLAN, CNMI, Vice Chair, Insular Affairs
ROB BISHOP, UT, Ranking Republican Member

Grace F. Napolitano, CA Don Young, AK
Jim Costa, CA Louie Gohmert, TX
Gregorio Kilili Camacho Sablan, CNMI Doug Lamborn, CO
Jared Huffman, CA Robert J. Wittman, VA
Alan S. Lowenthal, CA Tom McClintock, CA
Ruben Gallego, AZ Paul A. Gosar, AZ
TJ Cox, CA Paul Cook, CA
Joe Neguse, CO Bruce Westerman, AR
Mike Levin, CA Garret Graves, LA
Debra A. Haaland, NM Jody B. Hice, GA
Joe Cunningham, SC Aumua Amata Coleman Radewagen, AS
Nydia M. Velázquez, NY Daniel Webster, FL
Diana DeGette, CO Liz Cheney, WY
Wm. Lacy Clay, MO Mike Johnson, LA
Debbie Dingell, MI Jenniffer González-Colón, PR
Anthony G. Brown, MD John R. Curtis, UT
A. Donald McEachin, VA Kevin Hern, OK
Darren Soto, FL Russ Fulcher, ID
Ed Case, HI
Steven Horsford, NV
Michael F. Q. San Nicolas, GU
Matt Cartwright, PA
Paul Tonko, NY
Jesús G. ‘‘Chuy’’ Garcı́a, IL
Vacancy

David Watkins, Chief of Staff
Sarah Lim, Chief Counsel
Parish Braden, Republican Staff Director
http://naturalresources.house.gov

(II)
CONTENTS

Page
Hearing held on Thursday, June 11, 2020 ............................................................ 1
Statement of Members:
González-Colón, Hon. Jenniffer, a Resident Commissioner in Congress
from the Territory of Puerto Rico ................................................................ 3
Prepared statement of ............................................................................... 4
Grijalva, Hon. Raúl M., a Representative in Congress from the State
of Arizona ...................................................................................................... 2
Statement of Witnesses:
Jaresko, Natalie, Executive Director, Financial Oversight and Manage-
ment Board for Puerto Rico ......................................................................... 9
Prepared statement of ............................................................................... 12
Supplemental testimony submitted for the record ................................. 22
Questions submitted for the record ......................................................... 27
Marrero, Omar, Executive Director, Puerto Rico Fiscal Agency and
Financial Advisory Authority ....................................................................... 49
Prepared statement of ............................................................................... 51
Questions submitted for the record ......................................................... 58
Additional Materials Submitted for the Record:
Hispanic Federation, Letter dated June 15, 2020 to Chair Grijalva ........... 101

(III)
OVERSIGHT HEARING ON PROMESA IMPLE-
MENTATION DURING THE CORONAVIRUS
PANDEMIC

Thursday, June 11, 2020
U.S. House of Representatives
Committee on Natural Resources
Washington, DC

The Committee met, pursuant to notice, at 3:31 p.m., via Webex,
Hon. Raúl M. Grijalva (Chairman of the Committee) presiding.
Present: Representatives Grijalva, Napolitano, Sablan, Huffman,
Lowenthal, Gallego, Cox, Haaland, Cunningham, Velázquez,
DeGette, Soto, San Nicolas, Cartwright, Tonko, Garcı́a; Bishop,
Gohmert, McClintock, Gosar, Westerman, Graves, Hice,
Radewagen, Webster, González-Colón, and Hern.
The CHAIRMAN. Thank you very much. The Committee on
Natural Resources will come to order. The Committee is meeting
today to hear testimony on PROMESA Implementation During the
Coronavirus Pandemic.
Under Committee Rule 4(f), any oral opening statements at this
hearing are limited to the Chair and the Ranking Minority Member
or their designee. This will allow us to hear from our witnesses
sooner and help Members keep to their schedules.
Therefore, I ask unanimous consent that all other Members’
opening statements be made part of the hearing record if they are
submitted to the Clerk by 5 p.m. today or at the close of the
hearing, whichever comes first.
Hearing no objection, so ordered.
Without objection, the Chair may also declare a recess subject to
the call of the Chair. As described in the notice, statements,
documents, or motions must be submitted to the electronic reposi-
tory at hnrcdocs@mail.house.gov. Additionally, please note that, as
in-person meetings, Members are responsible for their microphones
and Members can be muted by staff only to avoid inadvertent
background noise.
Finally, Members or witnesses who experience technical prob-
lems should inform Committee staff immediately. At this point, I
will read my opening statement. Then I will recognize the designee
for the Ranking Member for her opening statement.
I want to thank my colleagues for taking time to join us in this
remote Natural Resources Committee oversight hearing on how the
coronavirus pandemic is impacting the implementation of the
Puerto Rico Oversight Management and Economic Stability Act,
also known as PROMESA. I want to welcome our witnesses, Ms.
Natalie Jaresko, Executive Director of PROMESA Financial
Oversight and Management Board, and Mr. Omar Marrero, rep-
resenting the Governor of Puerto Rico. Thank you so much, both
of you, for joining us.
(1)
2
STATEMENT OF THE HON. RAÚL M. GRIJALVA, A REPRESENT-
ATIVE IN CONGRESS FROM THE STATE OF ARIZONA
The CHAIRMAN. Some could say that the people of Puerto Rico
can’t seem to catch a break. First the island’s residents had to deal
with a debt burden that their governor declared in 2015 could not
be repaid, which led to the enactment of PROMESA in 2016 and
the imposition of the Oversight Board. While PROMESA was de-
signed to allow the island to restructure its debts, many Puerto
Ricans view it and the Oversight Board as an undemocratic
colonial takeover of the island’s government.
In 2017, Puerto Rico was hit not by one but two Category 5
hurricanes. Hurricanes Irma and Maria devastated the island,
leaving billions of dollars in damage and island-wide loss of
electricity lasting months and nearly 4,000 deaths.
Then in 2019 and 2020, as the residents of the island were
recovering from the hurricanes, they were hit with a series of
earthquakes that caused widespread damage in the south of the
island. And they are still experiencing aftershocks even as we
speak today. Puerto Ricans and the government of Puerto Rico
have been recovering from these natural disasters without
adequate Federal assistance, since the Trump administration has
delayed the disbursements and opposed that the appropriation of
much-needed disaster relief aid to Puerto Rico was included.
Finally, if that devastation was not enough, the island, like the
rest of the planet, was hit with COVID-19 pandemic, which put a
significant strain on the island’s already fragile healthcare infra-
structure and public services. Moreover, the coronavirus pandemic
is projected to severely affect Puerto Rico’s financial and economic
recovery for years to come.
Puerto Rico is in an extremely vulnerable financial and economic
position. It is against this backdrop that we scheduled today’s hear-
ing to better understand how the government of Puerto Rico has
been responding to the COVID-19 outbreak.
We also expect to discuss the recently certified 2020 Fiscal Plan
and discuss strategies to reduce the island’s debt burden, what
plans are there to grow the economy and create new jobs, how to
provide clean, affordable, and reliable electricity and an efficient
public sector. It is also important for us to hear which of the over-
sight and government of Puerto Rico’s policy and budget priorities
will include the quality of life for the residents of the island.
Has having to function under the supervision of the Oversight
Board led to delays and other complications in the Puerto Rican
government’s response to the pandemic? It is a question. Were
issues involving contracting and not being able to acquire sufficient
coronavirus testing equipment the result of having to jump through
too many hoops imposed by the Board, or were these simply the
result of poor performance on the part of the central government?
Question. I firmly believe that we will receive answers to these and
other questions from the witnesses today. We cannot condemn the
people of Puerto Rico in the wake of a debt crisis, devastating
storms, earthquakes to an inadequate response to the coronavirus
pandemic because they are ruled by an oversight board.
3

And now it is my pleasure to yield to the Ranking Member
designee, the Resident Commissioner of Puerto Rico, Ms. González-
Colón.
Madam Commissioner, the time is yours.

STATEMENT OF THE HON. JENNIFFER GONZÁLEZ-COLÓN, A
RESIDENT COMMISSIONER IN CONGRESS FROM THE
TERRITORY OF PUERTO RICO
Miss GONZÁLEZ-COLÓN. Thank you, Chairman. I am the Ranking
Member for the Republicans for this Committee, so it is not just,
obviously, me for today. Puerto Rico today shares with many other
parts of the Nation the challenge of facing COVID-19. In our case,
we have added complications and limitations: (1) First, rebuilding
from the 2017 hurricanes; (2) this year’s earthquakes; and (3)
PROMESA’s debt restructuring and other fiscal challenges.
The way Puerto Rico accesses and uses all its resources, both
emergency as well as regular obligations, everything is controlled
by PROMESA. Congress imposed PROMESA even though many,
like me, were opposed. Many of the Members who voted for it in
2016 are still in the Committee. After different legal challenges
ever since, it is here and it is what we have to build with.
That is why I think we need to focus on what the people I rep-
resent expect from Congress, Federal agencies, and local govern-
ment: (1) First, that the many tens of billions of dollars in Federal
aid that we have secured in Congress, including those recently
passed in response to the pandemic, but also those passed over the
last 3 years for disaster recovery, are disbursed and finally reach
those in need; (2) how to get rid of the unnecessary red tape and
bureaucracy in the disbursement of these funds; (3) concrete pro-
posals to create a government and business environment favorable
to growing our economy, creating well-paying jobs, and reducing
poverty levels on the island; (4) a true picture of the management
of both locally raised and federally allocated funds; (5) how the
pandemic has affected the plans for the territory’s budget, public
services and economy; and (6) last but also of course not least, the
efforts to improve Puerto Rico’s less than equal treatment in
Federal programs.
We should work in a bipartisan way and a pragmatic manner to
help Puerto Rico. Some people should resist the temptation to cater
to those who would rather use the island as a political talking
point, a weapon against an opponent or a platform for impractical
solutions that would never happen. We must focus on proposals
and legislation that could pass and get enacted into law, such as
the bipartisan Puerto Rico Recovery Accuracy in Disclosures Act,
which addresses the need for increased transparency in PROMESA
proceedings and between those employed by the Oversight Board,
among others.
Let’s become informed about what is happening on the ground,
on what challenges are pressing upon Puerto Rico’s fiscal resources
so we can address them in a bipartisan way, in a bicameral man-
ner, and with the input from the people of Puerto Rico. Targeting
supposed villains and announcing utopian proposals may get us
good retweets and engagement on social media but won’t help the
4

people of Puerto Rico. The people that I am honored to represent
in Congress do not have the luxury of those political gains.
I must point out that in June of this year, the Supreme Court
of the United States validated an appointment process of the
Oversight Board, reaffirming that we are a possession, a colony of
the United States, without any political power. And as long as this
is the case, we will continue to be treated as a second-class state.
The citizens I represent will only be able to have equal treatment
and opportunity by becoming a state. Today, actually, 65 percent
of all Puerto Ricans are living in a state. And Puerto Rico is obtain-
ing that equality individual by individual, family by family.
The island can never really prosper without equality and
democracy within the United States. This is the fundamental prob-
lem ignored by Congress, ignored by PROMESA, with the exception
of its recognition that the people of the territory have the right to
determine its future political status otherwise.
That is the reason we are here today in this hearing, and I look
forward for the testimony and questions of our witnesses, and say-
ing that with me today are Representative McClintock and
Representative Westerman. The three of us are here in Washington
in the Natural Resources Committee. With that, I yield back.
[The prepared statement of Miss González-Colón follows:]
PREPARED STATEMENT OF THE HON. JENNIFFER GONZÁLEZ-COLÓN, A
REPRESENTATIVE IN CONGRESS FROM THE TERRITORY OF PUERTO RICO
Thank you, Mr. Chairman.
Puerto Rico today shares with many other parts of the Nation the challenge of
facing CoVid-19. But, in our case, we have added complications and limitations: (1)
Rebuilding from the 2017 hurricanes, (2) this year’s earthquakes, and (3)
PROMESA’s debt restructuring and other fiscal challenges.
The way Puerto Rico accesses and uses ALL its resources, both emergency as well
as regular obligations, is controlled by PROMESA. Congress imposed PROMESA
even though many like me were opposed. Many of the members that voted for it
in 2016 are still here. After different legal challenges ever since, it’s here and it is
what we have to deal with.
That is why we need to focus on what the people I represent expect from their
Federal and local governments:
1. First, that the many tens of billions in Federal aid we’ve secured in Congress,
including those recently passed in response to the pandemic, but also those
passed over the last 3 years for disaster recovery, are disbursed and finally
reach those in need;
2. Second, how we get rid of unnecessary red tape and bureaucracy in the
disbursement of these funds;
3. Third, concrete proposals to create a government and business environment
favorable to growing our economy, creating well-paying jobs, and reducing
poverty levels on the Island;
4. Fourth, a true picture of the management of both locally raised and federally
allocated funds.
5. Fifth, how the pandemic has affected the plans for the territory’s budget,
public services, and economy; and
6. Last but not least, efforts to improve Puerto Rico’s less than equal treatment
in Federal programs.
We should work in a bipartisan and pragmatic manner, to help Puerto Rico.
Some people should resist the temptation to cater to those who would rather use
the Island as a political talking point, a weapon against an opponent or a platform
for impractical solutions that will never happen; we must focus on proposals and
legislation that could pass and get enacted into law—such as the bipartisan Puerto
Rico Recovery Accuracy in Disclosures Act, which addresses the need for increased
5
transparency in PROMESA proceedings and between those employed by the
Oversight Board, among others.
Let’s become informed about what is happening on the ground, on what chal-
lenges are pressing upon Puerto Rico’s fiscal resources, so we can address them in
a bipartisan, bicameral manner and with input from the people of Puerto Rico.
Targeting supposed villains or announcing utopian proposals may get us good
retweets and engagement on social media but won’t help the people of Puerto Rico.
The people that I am honored to represent do not have the luxury of these political
games.
I must point out that, on June 1, the Supreme Court validated the appointment
process for the Oversight Board, reaffirming that we are a ‘‘possession’’, a colony
without political power. As long as this is the case, we will continue to be treated
as a second-class state and the citizens I represent will only be able to obtain equal
treatment and opportunity by becoming a State. Today, 65 percent of all Puerto
Rican now live in a State. Puerto Rico is obtaining equality individual by individual
and family by family. The Island can never really prosper without equality and de-
mocracy within the United States. This is the fundamental problem ignored by
Congress and PROMESA, with the exception of its recognition that the people of the
territory have the right to determine its future political status otherwise.
I look forward to the testimony and questioning of our witnesses.

Dr. GOSAR. Mr. Chairman, this is Gosar.
The CHAIRMAN. Thank you, Mr. Gosar. The gentleman seeks
recognition for what purpose, Mr. Gosar?
Dr. GOSAR. I have filed a motion to adjourn, and I move that we
adjourn this Committee.
The CHAIRMAN. The gentleman is recognized, and the Clerk has
confirmed that that motion has been circulated to the Members?
Ms. LOCKE. We will be circulating shortly.
The CHAIRMAN. If we could pause for a second to allow Members
to have that motion, it is important for the record and it is
important for what follows——
[Pause.]
The CHAIRMAN. We are presently waiting for confirmation from
the Clerk and Counsel assuring that the motion has been cir-
culated as per the rules for online as adopted by the House of
Representatives. And as soon as we do that, then we will turn to
Mr. Gosar to reaffirm his motion and any comments he might have
at that point. So, we are waiting.
[Pause.]
Ms. LOCKE. The motion should have been distributed via e-mail.
The CHAIRMAN. Thank you, and the motion to adjourn is not
debatable. The gentleman from Arizona, Mr. Gosar, has motioned,
and the motion has been circulated and confirmed by the Clerk and
Counsel. Move that the Committee do now adjourn. The question
is on the gentleman from Arizona’s motion, Mr. Gosar.
All those in favor, indicate by saying aye. All those opposed, say
no. In the opinion of the Chair, the noes have it. The motion is
not——
Dr. GOSAR. I ask for a recorded vote.
The CHAIRMAN. A recorded vote has been requested on the
question on the motion to adjourn this hearing. The Clerk shall call
the roll.
Ms. LOCKE. Mr. Grijalva?
The CHAIRMAN. No.
Ms. LOCKE. Mr. Grijalva votes no.
Mr. Bishop?
6

Mrs. Napolitano?
Mr. Young?
Mr. Costa?
Mr. Gohmert?
Mr. Sablan?
Mr. Lamborn?
Mr. Huffman?
Mr. HUFFMAN. No.
Ms. LOCKE. Mr. Huffman votes no.
Mr. Wittman?
Mr. Lowenthal?
Mr. McClintock?
Mr. MCCLINTOCK. Aye.
Ms. LOCKE. Mr. McClintock votes aye.
Mr. Gallego?
Mr. Gosar?
Dr. GOSAR. Aye.
Ms. LOCKE. Mr. Gosar votes aye.
Mr. Cox?
Mr. COX. No.
Ms. LOCKE. Mr. Cox votes no.
Mr. Cook?
Mr. Neguse?
Mr. Westerman?
Mr. Levin?
Mr. Graves?
Ms. Haaland?
Ms. HAALAND. No.
Ms. LOCKE. Ms. Haaland votes no.
Mr. Hice?
Mr. Cunningham?
Mrs. Radewagen?
Ms. Velázquez?
Mr. Webster?
Ms. DeGette?
Ms. DEGETTE. No.
Ms. LOCKE. Ms. DeGette votes no.
Ms. Cheney?
Mr. Clay?
Mr. Johnson?
Mrs. Dingell?
Miss González-Colón?
Miss GONZÁLEZ-COLÓN. Aye.
Ms. LOCKE. Ms. González-Colón votes aye.
Mr. Brown?
Mr. Curtis?
Mr. McEachin?
Mr. Hern?
Mr. HERN. Aye.
Ms. LOCKE. Mr. Hern votes aye.
Mr. Soto?
Mr. Fulcher?
Mr. Case?
Mr. Horsford?
7

Mr. San Nicolas?
Mr. Cartwright?
Mr. CARTWRIGHT. No.
Ms. LOCKE. Mr. Cartwright votes no.
Mr. Tonko?
Mr. Garcı́a?
The CHAIRMAN. If the Clerk will read the names of any Members
that are not recorded.
Ms. LOCKE. Mr. Bishop?
Mrs. Napolitano?
Mr. Young?
Mr. Costa?
Mr. Gohmert?
Mr. Sablan?
Ms. DEGETTE. I believe Mr. Sablan needs to unmute.
Ms. LOCKE. Mr. Sablan, your——
Mr. SABLAN. Sablan is present. Hello?
Ms. LOCKE. How do you vote, Mr. Sablan?
Mr. SABLAN. No.
Ms. LOCKE. Mr. Sablan votes no.
Mr. Lamborn?
Mr. Wittman?
Mr. Lowenthal?
Mr. Gallego?
Mr. Cook?
Mr. Neguse?
Mr. Westerman? Mr. Westerman, how do you vote?
Mr. MCCLINTOCK. He has voted aye. A point of order, Mr.
Chairman. Mr. Westerman has repeatedly tried to vote. I am
witness to it right here in the hearing room, and you are not
recording it.
The CHAIRMAN. Mr. Westerman would you indicate your vote?
Mr. WESTERMAN. I vote aye.
Ms. LOCKE. Mr. Westerman votes aye.
The CHAIRMAN. Thank you.
Ms. LOCKE. Mr. Levin?
Mr. Graves?
Mr. Hice?
Mr. Cunningham?
Mrs. Radewagen?
Ms. Velázquez? Ms. Velázquez, your mute button is on. Ms.
Velázquez, how do you vote?
Ms. VELÁZQUEZ. Yes.
Ms. LOCKE. Ms. Velázquez votes aye.
Mr. Webster?
Ms. Cheney?
Mr. Clay?
Mr. Johnson?
Mrs. Dingell?
Mr. Brown?
Mr. Curtis?
Mr. McEachin?
Mr. Soto?
Mr. Fulcher?
8

Mr. Case?
Mr. Horsford?
Mr. San Nicolas?
Mr. Tonko?
Mr. Garcı́a?
The CHAIRMAN. Yes. Are all——
Miss GONZÁLEZ-COLÓN. Mr. Chairman?
The CHAIRMAN. Yes?
Miss GONZÁLEZ-COLÓN. Point of order. Amata Radewagen is con-
nected, and she is saying that she is voting aye but it is not
recorded.
Ms. LOCKE. I do not visually see Mrs. Radewagen.
The CHAIRMAN. If she would just indicate that she was voting
aye, according to the rules, that is sufficient. Where is she?
Ms. VELÁZQUEZ. Is she connected? She has to be connected either
by phone or by video.
Ms. LOCKE. I don’t have an audio or a video.
Miss GONZÁLEZ-COLÓN. Mr. Chairman, she was connected, but
now it looks like she is disconnected.
The CHAIRMAN. The situation, Miss González-Colón, is that we
need to verify that. It can be by hand signal, yes, thumbs up, or
it can be verbally, but the requirement that it be, at the minimum,
that visual confirmation. We don’t have that at this point.
Mrs. RADEWAGEN. Hello. This is Amata Radewagen.
The CHAIRMAN. Yes.
Mrs. RADEWAGEN. Can you hear me?
The CHAIRMAN. Yes.
Mrs. RADEWAGEN. Yes.
Ms. LOCKE. Yes.
The CHAIRMAN. Ms. Radewagen votes yes.
Ms. LOCKE. Ms. Radewagen votes yes.
The CHAIRMAN. Are there any Members who wish to vote that
have not voted or other Members who wish to change their vote?
Hearing no request for recognition, let me now turn to the Clerk,
and the Clerk will report the vote.
Ms. LOCKE. Mr. Chair, on this vote, the yeas are seven and nays
are seven.
Ms. VELÁZQUEZ. Mr. Chairman? Mr. Chairman?
The CHAIRMAN. Ms. Velázquez, you are recognized.
Ms. VELÁZQUEZ. Did I make a mistake?
The CHAIRMAN. Ms. Velázquez’s vote was what, Clerk?
Ms. LOCKE. Ms. Velázquez’s vote was a yea.
Ms. VELÁZQUEZ. And that was supposed to be yes.
Ms. LOCKE. Correct.
The CHAIRMAN. And the Clerk will report.
Ms. LOCKE. Mr. Chair, on this vote, they yeas are seven and the
nays are seven.
Mr. SABLAN. Point of inquiry. This is Sablan.
The CHAIRMAN. Mr. Sablan?
Mr. SABLAN. Yes. Is my vote consistent with the Chairman’s
vote?
The CHAIRMAN. Yes, the Chair voted no so that the hearing could
proceed.
Ms. VELÁZQUEZ. Mr. Chairman?
9

The CHAIRMAN. Yes?
Ms. VELÁZQUEZ. This is Ms. Velázquez.
The CHAIRMAN. Thank you, Ms. Velázquez.
Ms. VELÁZQUEZ. I am supposed to vote no, and I want to clarify
that.
The CHAIRMAN. Ms. Velázquez is recognized, and she has
changed her vote to a no vote. Clerk will report.
Ms. LOCKE. Mr. Chair, on this vote, the yeas are six and the nays
are eight.
The CHAIRMAN. The nays have it. The motion fails, and I will
now introduce our witnesses. Let me remind the witnesses that
under our Committee Rules, they must limit their oral statements
to 5 minutes, but their entire statement will appear in the hearing
record. When you begin, the timer will begin, and it will turn to
5 minutes and count down from there.
When you have 1 minute remaining, I recommend that Members
and witnesses joining remotely use grid view so that they may pin
the timer at that point. After your testimony is complete, please re-
member to mute yourself to avoid any inadvertent background
noise. I will also allow the entire panel to testify before ques-
tioning. The Chair now recognizes Ms. Natalie Jaresko, who was
designated Executive Director of the Financial Oversight and
Management Board for Puerto Rico in March 2017. She is respon-
sible for approving and certifying the fiscal plans for the govern-
ment of Puerto Rico and representing the government during debt
restructuring negotiations.
As Executive Director, is an American-born Ukrainian invest-
ment banker who served as Ukraine’s Minister of Finance from
December 2014 until April 2016. She also held several economic-
related positions at the U.S. Department of State.
Ms. Jaresko, the floor is yours for your time.
STATEMENT OF NATALIE JARESKO, EXECUTIVE DIRECTOR,
FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR
PUERTO RICO
Ms. JARESKO. Thank you, Mr. Chairman. As you said, I am
Natalie Jaresko, Executive Director of the Oversight Board. Thank
you for this opportunity to update the Committee. As you said and
as we all know, when the Board began its work, Puerto Rico faced
unsustainable debt of more than $70 billion and more than $50
billion in unfunded pension liabilities, a decade of economic decline,
and significant outmigration. Shortly after the Board got under-
way, Hurricanes Irma and Maria struck. And most recently, we
have endured major earthquakes.
Only 2 months later, Puerto Rico was confronted with a pan-
demic. And overnight, the economy shut down except for the most
critical activities as the government took prudent steps to mitigate
the risk of a catastrophic public health crisis. The government
acted promptly and decisively. The board’s efforts over the past 4
years ensured that the government was not forced to make drastic
cuts to its expenditures as revenues dropped.
Budgeting practices enabled setting aside emergency funds at the
onset and prior to the adoption of the CARES Act by Congress. The
board and the government mobilized to deliver immediate support
10

to residents and businesses. This included a $787 million package
and temporary tax relief. However, there have also been several
setbacks. The situation caused by the purchase of test kits shows
poor procurement practices despite best intentions. Additionally,
complications in distributing school lunches, payments to frontline
and employed workers illustrate the challenges to efficiency.
The shock of the pandemic on Puerto Rico is severe. Unemploy-
ment has skyrocketed. Our analysis shows that the economy will
contract by 4 percent in the current 2020 fiscal year, just as it did
after Hurricane Maria, a sharp decline in real GNP, the very mild
projected recovery in the next fiscal year, further declines in 2022,
2023 and close to zero growth in 2024 and 2025. Simply put, the
economy will contract over the next 5 years. So, reforms are more
important than ever because the economic decline is even more
severe.
In that spirit, the 2020 Fiscal Plan reflects a 1-year delay in
most budgetary reductions to allow the government to focus on im-
plementation. This includes maintaining the subsidies to the
University of Puerto Rico and the municipalities at current fiscal
year levels. At UPR specifically, tomorrow, the Board will——
Mr. MCCLINTOCK. Mr. Chairman, point of order.
The CHAIRMAN. Mr. McClintock?
Mr. MCCLINTOCK. Mr. Chairman, I am informed that Garret
Graves, a member of this Committee, has been trying to get on this
hearing and has not been able to. Is it the ruling of the Chair that
Members can be excluded from the deliberations of this Committee
because of this new process?
The CHAIRMAN. No. That is not the ruling of the Chair. Let’s not
grab at straws right now, Mr. McClintock. This is a difficult
process.
Mr. MCCLINTOCK. Well, I am trying to grab Garret Graves, who
has been thwarted in his attempts to join this Zoom call.
The CHAIRMAN. Mr. McClintock, every Member was given,
including Mr. Graves, the process to call the technical staff on the
Committee immediately if there were problems dealing with the
technology and being able to go online. I will——
Mr. MCCLINTOCK. Then, Mr. Chairman, I would suggest that we
suspend this until Mr. Graves can join the Committee to which he
is duly appointed as an elected Member of the House of
Representatives.
The CHAIRMAN. Mr. McClintock, I would more than happily
pause and see if he has talked to our technical staff or his staff has
talked to our technical staff. And pending that short pause, we will
proceed. If he is able to be put online, that is wonderful. And if
there is some other technical issue that there is no resolution to,
we will know that as well. But at this point, let me just pause for
a second in the spirit of fairness and make sure that he has
communicated with our technical staff. And I will also try to com-
municate with the staff as well. So, let’s just recess for a second.
[A brief recess was taken.]
The CHAIRMAN. Now that we have the pleasure of Mr. Graves’
company, we can proceed. The witness will continue her testimony.
Ms. JARESKO. I think I lost a little bit of time. So, I will try
to——
11

The CHAIRMAN. We will accommodate that. Thank you.
Ms. JARESKO. Thank you. As I was saying, in that spirit, the
2020 Fiscal Plan reflects a 1-year delay and most budgetary reduc-
tions to allow the government to focus on implementation. This
includes maintaining the subsidies to the University of Puerto Rico
and municipalities at the current fiscal year levels. At the
University of Puerto Rico specifically, tomorrow the Board will be
certifying an updated fiscal plan that will halt tuition increases by
a year. Without the need to achieve incremental budget savings,
the government should re-double its efforts to assure better deliv-
ery of services. The board has also articulated a comprehensive
roadmap of the actions that must be taken to restore growth
through economic development. However, the Board must rely
upon the political will of the island’s elected leadership in order to
truly transform the government of Puerto Rico and the economic
landscape.
Even with implementation of far-reaching growth-inducing struc-
tural reforms, the 2020 Fiscal Plan projects that the government
cannot afford to pay the public debt as originally contracted.
Recognizing the importance of the ongoing Title III cases but tak-
ing into account these realities, on March 23, the Board presented
a motion requesting the Title III court to adjourn consideration
until further notice.
The board also continues to work with the government on the
transformation of PREPA to ensure reliable and low-cost energy.
The board and the government are in full agreement that private
generation and private management of the transmission and dis-
tribution system are key to these improvements, and we look for-
ward to a positive announcement in the near future. Regarding the
recently introduced amendments to the PROMESA Act, the Board
supports several of the provisions on the proposed changes but is
very concerned that other provisions, while well-intended, will com-
promise the Board’s ability to fulfill its mandate under PROMESA.
The board has a collaborative working relationship with the
Governor. However, change is hard. And as PROMESA states—and
I quote, ‘‘a comprehensive approach to fiscal management and
structural problems and adjustments that exempts no part of the
government of Puerto Rico is necessary involving independent
oversight.’’
While we will always collaborate in the best interest of the peo-
ple of Puerto Rico, it is in this same interest that sometimes the
Board must disagree with the government. In conclusion,
PROMESA is not perfect, but it has provided the government with
a stay on its debt payments while continuing to fund essential
services. And this compromise provided the island with a way to
restructure its debt under a bipartisan board, preventing chaos in
2016 when its debts became unpayable. The board’s fiscal planning
and budgeting discipline have helped the island be more resilient
and responsive to crises. Unlike other states and local govern-
ments, Puerto Rico has not been forced to cut essential services.
12

All said and done, however, debt restructuring and balanced
budgets are unfortunately not enough to return prosperity to the
people of Puerto Rico. Paramount is implementing the reforms that
the people of Puerto Rico need and deserve. Thank you, Mr.
Chairman.
[The prepared statement of Ms. Jaresko follows:]
PREPARED STATEMENT OF NATALIE JARESKO, EXECUTIVE DIRECTOR, FINANCIAL
OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO
Chairman Grijalva, Ranking Member Bishop, and members of the Committee, I
am Natalie Jaresko, Executive Director of the Financial Oversight and Management
Board for Puerto Rico (the ‘‘Board’’). Thank you for this opportunity to update the
Committee on the challenges and the work of the Board during the COVID-19
pandemic. As soon as the pandemic hit the Island, the Board began working closely
with the Commonwealth to provide the people of Puerto Rico critical support for
public health and financial assistance during the crisis. In addition, the Board
recently certified an updated 2020 Fiscal Plan which further addresses the needs
of residents and the Puerto Rican Government. I would also like to take the oppor-
tunity to comment on the ‘‘Amendments to PROMESA Act’’ recently introduced by
Chair Grijalva and members of the Committee.
I. Introduction
To put the Board’s work during the pandemic in context, please allow me to start
by recounting some of the early work of the Board, as well as our work leading up
to the pandemic.
As you know, when the Board began its work, Puerto Rico faced an unsustainable
burden of more than $70 billion in debt and more than $50 billion in unfunded pen-
sion liabilities, a decade of economic decline, and significant outmigration. In
PROMESA, Congress charged us with guiding and overseeing the restoration of the
Island’s fiscal health via long-term fiscal planning and annual balanced budgeting,
the restoration of its ability to access private capital via both debt restructuring and
economic development and, as part of that, the Island’s transition to a sustainable
economic model that provides opportunities for our citizens.
A. The Board’s Work in the Aftermath of Hurricanes Irma and Marı́a and the
Resignation of Governor Rosselló
The pandemic afflicting the Island is not the first disaster Puerto Rico has faced
since the adoption of PROMESA. Shortly after the Board got underway, Hurricanes
Irma and Marı́a inflicted the most horrific natural disaster devastation to strike the
U.S. in 100 years, compounding the financial and emotional distress of the Island
and its people. As detailed in my testimony before this Committee on November 17,
2017, the Board worked extensively with the Government in post-hurricane efforts.
On the day after Hurricane Marı́a hit, the Board immediately provided Governor
Rosselló authority to reallocate up to $1 billion of the Commonwealth’s budget to
give the Government flexibility to respond during the first weeks of the crisis. The
Board also worked closely with the Governor to help estimate the cash-flow shortfall
and need for emergency liquidity assistance caused by the sudden drop in revenues
and increase in expenditures. In the 21⁄2 years since, the Board continues to do
everything in its power to support the efforts of the Commonwealth and the U.S.
Government to provide critical disaster relief funding to the Island and its residents.
The subsequent political upheaval around the resignation of Governor Rosselló
was unfortunate and very disruptive to the Government and the people of Puerto
Rico. The Oversight Board watched the protests with admiration for the fortitude
of the people of Puerto Rico and with sadness for the crisis that made the protests
necessary. For far too long the Island’s residents have not been treated with the re-
spect that they deserve. However, it did not deter the Board from carrying out its
obligations under PROMESA. The Board continued to work with the leaders of
Puerto Rico to provide its people with the stability needed by all stakeholders. Since
Governor Wanda Vázquez Garced took office last August, the Board has engaged in
a collaborative working relationship with the Governor and her team. In many re-
spects, the increase in collaboration and engagement is a night and day difference
as compared with previous Governors and their respective staffs.
13
B. Board’s Work Leading up to COVID-19
I think it is helpful to recap next the Board’s progress leading up to the pandemic,
which represents the culmination of our work from the start. In furtherance of
PROMESA’s mandates, the Board had taken the following steps:
• Section 201(b)(1) Budgetary controls and fiscal discipline: Implemented
best practices budgetary controls and constraints on Government spending to
avoid previous overspending practices. Given the absence of audited financial
statements and previous spending practices, prior multi-year appropriations
are suspended with few exceptions. Total Government spending must now be
reviewed and certified. All tax initiatives must have a neutral or positive
budgetary impact, and all expenses and revenue must be conservatively
estimated.
• Section 201(b)(1) PayGo Pension System: Moved to a PayGo pension
system allowing retirees to receive their pensions without interruption,
despite the insolvency of Puerto Rico’s pension funds, and enrolled police offi-
cers in Social Security to increase their security and retirement benefits.
• Section 202(e) Ensuring critical services: The Board-certified budgets
carefully balance the need to maintain funding for critical services commensu-
rate with the size of the population and prioritize critical services such as
education, public safety, and healthcare. These include (1) funding of $200
million a year to support increased labor participation; (2) funding for safe
kits to insure proper forensic analysis and long-await justice for victims and
the accused; (3) pay increases for teachers and police to ensure more competi-
tive compensation; (4) funding new positions for Forensics to rebuild capacity;
(5) funding to repay 10 years of back pay to police officers; (6) creating a
reserve account to ensure the ability to act to protect the population imme-
diately in case of future emergencies; (7) budgeted funds to cover any cost-
share required for Federal disaster funding; (8) funding to enable compliance
with certain consent decrees; (9) budgeting $400 million annually in Common-
wealth capital expenditures to improve significantly underfunded infrastruc-
ture; and (10) over $300 million in needs-based scholarships for University of
Puerto Rico students.
Without the Board and associated fiscal plans, projections show that Govern-
ment spending would have ballooned from $19 billion in fiscal year 2018 to
$22 billion in fiscal year 2025 (an increase of 16 percent). The Board, mean-
while, has contained expenditures to a 2 percent increase between fiscal year
2018 to fiscal year 2025, or up 12 percent on a per-capita basis (given the de-
cline in population), while providing valuable investments in frontline
services (in the wake of multiple crises).
• Section 204(b) Transparency and accountability in government
spending: Fostered more transparency and visibility into Puerto Rico’s
government finances, including Puerto Rico’s liquidity, budgets, and other
intergovernmental spending—notwithstanding the Government’s continued
delays in completing its overdue audited financial statements. Moreover, the
people of Puerto Rico now have access to public reports, including: bank
balances, quarterly budget to actuals, payroll and attendance, and tax
expenditures.
• Section 204(b) Contract Review: The Board reviews major contracts before
they can be ratified to ensure both consistency with the certified fiscal plans
and budgets, as well as to ensure they promote market competition. This
process has brought much-needed transparency, with all responses and
analyses posted in the Board’s website.
Since the inception of PROMESA, the Board has played a critical role in helping
Puerto Rico respond to crises. Moreover, it has worked with the Government to in-
stitute much more effective fiscal management after decades of mismanagement.
The fiscal plans that the Board has certified have walked a very prudent balance
between driving more effective and sustainable Government, while investing in crit-
ical needs on the Island. Last, the Board has articulated a detailed and comprehen-
sive roadmap of the actions that must be taken to restore growth through economic
development, with structural reforms being particularly critical. However, given the
constraints of PROMESA, the Board must rely upon the political will of the Island’s
elected leadership in order to truly transform the Government of Puerto Rico and
the economic landscape into what the people and businesses of Puerto Rico deserve.
14
II. COVID-19 and the Preceding Earthquakes
Before I address the Board’s work with the Government during the public health
pandemic, I would like to update you on the earthquakes that shook Puerto Rico
about 6 months ago. Beginning in late December, these were the most intense
earthquakes on the Island in recent memory, causing structural damage to build-
ings across southwestern Puerto Rico. Residents of these communities were sub-
jected to hundreds of aftershocks over several months, some approaching the
strength of the first earthquakes. Communities face concerns over public safety as
infrastructure was affected, businesses suffered further disruption, and the Govern-
ment suffered damage to schools, prisons and other crucial infrastructure. The full
extent of the damage is still unknown, and rebuilding efforts in some places have
yet to begin.
Only 2 months later, Puerto Rico—along with the rest of the world—was
confronted with the COVID-19 pandemic. Overnight, the economy shut down except
for the most critical activities, as the Government took prudent steps to mitigate
the risk of a catastrophic public health crisis. The Government acted promptly and
decisively by implementing a curfew, limiting entry to points to the Island mon-
itored by the National Guard, and shutting down virtually the entire economy to
enforce social distancing.
At the onset of the COVID-19 crisis and prior to the adoption of the CARES Act,
the Board in close partnership with the Government, mobilized to deliver immediate
support and relief to residents. This included providing a $787 million package of
measures including, among other things, (1) hazard pay for front-line workers of
$213 million; (2) direct payments to residents of $160 million including a $500 one-
time cash payment to 20,000 self-employed individuals and a $1,500 one-time cash
payment to 40,000 small businesses; (3) essential supplies and equipment of $50
million; (4) distance learning equipment in the public education system of $255
million; (5) assistance in the face of lost revenues for municipalities of $100 million;
and (6) funding of research and development of $2 million at UPR’s Medical
Sciences Department.
The Board also supported Government executive actions to provide temporary
relief on tax payment deadlines, as well as to authorize more than $50 million in
sales and use taxes exemptions for prepared foods and first-necessity items. The
Board further approved and supported a $400 million advance on Federal funding
for economic rebate payments administered by the local Treasury Department, as
well as a liquidity facility of up to $185 million for municipalities suffering from
revenue collection deferrals.
The Board also provided the Government with recommendations on how to effec-
tively disburse the $2.2 billion allocated to Puerto Rico through the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act) to finance eligible unbudgeted
expenses related to the pandemic in a way that is targeted to the most critical
pandemic-related needs.
Since certifying its first Fiscal Plan in 2017, notwithstanding the intervening
emergencies, the Board has been able to drive meaningful progress in creating a
more affordable Government. This has resulted in the ability of the Government to
increase expenditures at a time of crisis, while ensuring that total expenditure lev-
els remain within total available revenues. Puerto Rico was not forced to make
urgent and drastic cuts to its expenditures and essential services as revenues
dropped, as other states had to do. Moreover, budgeting practices introduced by the
Board enabled setting aside an Emergency Reserve Fund to mitigate and contain
COVID-19, as well as provide immediate support after the earthquakes.
However, it cannot be denied that there have also been several setbacks. The situ-
ation caused by the Commonwealth’s procurement of COVID-19 test kits shows that
the Government gets easily trapped in its own poor procurement practices despite
best intentions. Additionally, complications in ensuring the distribution of school
lunches and the slow distribution of payments to front-line workers and unemployed
workers illustrates the challenges to efficient implementation. The good news is the
economy is slowly reopening, and hospital capacity remains ample, suggesting that
the virus might be contained.
Nonetheless, the shock of the COVID-19 pandemic on Puerto Rico is severe.
Unemployment has skyrocketed, as many businesses have been forced to shut down,
and local and federal governments have quickly mobilized to provide support. Many
projections indicate the economic shock due to COVID-19 will be worse than that
of the Great Recession. The pathway to economic recovery remains highly dependent
on the overall public health response and the Federal Government’s ability to pro-
vide economic support for those whose livelihoods are at risk.
15
The Board’s analysis shows that the Puerto Rico economy will contract by 4.0
percent in the current 2020 fiscal year. Financially, the impact to the Puerto Rican
economy is as devastating as the impact of Hurricane Marı́a. There is a sharp de-
cline in real GNP with a very mild projected recovery of 0.5 percent in the 2021
fiscal year, with the help of COVID-19-related Federal funds from the CARES Act,
CDBG-DR, and other Federal programs. To illustrate, we estimate a revenue reduc-
tion of $1.3 billion in current fiscal year 2020, $1.2 billion in fiscal year 2021, and
$774 million in fiscal year 2022, relative to the 2019 Certified Fiscal Plan.
Our projections show further declines in real GNP in fiscal years 2022 and 2023,
and close to zero growth in 2024 and 2025. Simply put, the Puerto Rico economy
will contract over the next 5 years, and Puerto Rico can only recover if the Govern-
ment implements the necessary structural reforms. These reforms are more
important than ever because the economic decline is even more severe.
III. 2020 Commonwealth Fiscal Plan
The Board spent the last months analyzing the effects of the COVID-19 pandemic
on the Puerto Rican economy and the path to recovery in times of uncertainty.
Based on careful study of the data, in particular, Congressional Budget Office data,
the Board believes its certified 2020 Fiscal Plan is the best possible forecast under
the current circumstances.
The 2020 Fiscal Plan is a road map for Puerto Rico’s recovery and prosperity. It
outlines necessary Government action to improve fiscal responsibility and foster eco-
nomic growth. The effect of the destructive hurricanes, political upheaval, earth-
quakes and COVID-19 on the economy is severe and is exacerbated by the lack of
structural reform implementation necessary to improve economic growth in Puerto
Rico. With the ongoing support of the U.S. Government, this crisis presents an op-
portunity to redouble all efforts to reform the economy for the benefit of the people
of Puerto Rico.
In that spirit, the 2020 Fiscal Plan requires commitment to swift implementation
of an agenda that will transform government services. The 2020 Fiscal Plan reflects
a one-year delay in most categories of budgetary reductions to allow the Govern-
ment to focus on implementation. This pause in rightsizing includes maintaining the
subsidies to the University of Puerto Rico and the municipalities at current fiscal
year levels. Most agencies will maintain their fiscal year 2020 budgets in fiscal year
2021.
A. Investments
The 2020 Fiscal Plan includes substantial investments in the Government’s
response to the COVID-19 public health and economic crisis, as well as critical in-
vestment in the Island’s human capital and telecommunications infrastructure to
spur recovery and growth. It continues several investments outlined in the 2019
Fiscal Plan and provides new substantial investments of about $6 billion in fiscal
years 2020 through 2025. Some examples include investments in: (1) healthcare, in-
cluding capital expenditures for public hospitals, hiring public school nurses, fund-
ing for opioid treatment, and increased reimbursement rates for primary care and
outpatient specialty providers; (2) public education, including to improve English
language teaching, to incentivize schools to achieve better educational outcomes,
and payment of disputed salary increases to transitory teachers; (3) public safety,
including the third and final year of back pay for police, the second half of their
30 percent salary increase, funding for recruitment and training of cadets, and
equipment for firefighters; (4) technology, to improve access to broadband in rural
areas and increase business training; (5) a study for the private sector and the
Government to define a comprehensive and actionable plan to reactivate the manu-
facturing sector; and (6) hurricane reconstruction to expedite efforts by providing
$750 million in working capital to kick-off project work.
B. Financial Projections
As mentioned, the 2020 Fiscal Plan is based on the Board’s projection that the
Puerto Rico economy will contract by 4.0 percent in the 2020 fiscal year, with a mild
0.5 percent recovery in the 2021 fiscal year, dependent upon the support of Federal
funds related to COVID-19, and recent hurricanes and earthquakes. However, even
with complete and timely implementation of all structural reforms outlined in the
2020 Fiscal Plan, the Board projects that the economy of Puerto Rico will contract
over the next 5 years, with meager economic growth in some years.
The 2020 Fiscal Plan projects a Government deficit from fiscal year 2032 onward,
6 years sooner than the Board’s 2019 Fiscal Plan projected, and a total primary sur-
plus of about $8 billion between fiscal years 2020 and 2032, compared with an
16
approximate $23 billion surplus projected in the 2019 Fiscal Plan. That amounts to
a 65 percent decline in projected surplus.
Estimates of Federal funding in the 2020 Fiscal Plan include: (1) hurricane-
related funds amounting to $83 billion of disaster relief funding to be disbursed over
15 years, of which $48 billion is estimated to come from FEMA, $8 billion to come
from private and business insurance pay outs, $7 billion to come from other sources
of Federal funding, and $20 billion to come from CDBG-DR; (2) earthquake-related
funds amounting to $595 million from FEMA; and (3) COVID-19 related funds
amounting to $14 billion based on U.S. Government sources, Federal agency
announcements, and past allocations under ARRA of 2009.
Given the Board’s projections, we consider it imperative that the Government use
the next year to implement critical, overdue structural reforms. The 2020 Fiscal
Plan continues to require an agenda of Government transformation to efficiency,
and outlines the minimal reforms needed to change the structural nature of the
Puerto Rican economy. It requires commitment to swift implementation of an
agenda that will transform the Government and the economic landscape.
C. Structural Reforms
Since 2017, the Board has worked with the Government to implement numerous
structural reforms, but there has been little meaningful progress in most areas. The
structural reforms in the 2020 Fiscal Plan are those where the Government has
aligned with the need to pursue change. Nonetheless, each year, as a result of disas-
ters and poor implementation, the reforms have been delayed. As such, the 2020
Fiscal Plan provides an updated forecast reflecting such delays but also outlining
the potential positive impact looking forward, specifically:
• Human capital and welfare reform: Promoting participation in the formal
labor force by creating incentives to work through Earned Income Tax Credit
(EITC) benefits and Nutritional Assistance Program (NAP) reform, as well as
providing comprehensive workforce development opportunities.
• K-12 education reform: Transforming the K-12 education system to
dramatically improve student outcomes and contribute to an effective
workforce long-term.
• Ease of doing business reform: Improving the competitiveness and
attractiveness of Puerto Rico’s economy in order to attract a greater amount
of investment and job creation. Promoting economic activity and reducing the
obstacles to starting and sustaining a business in Puerto Rico. This includes
comprehensive reform to permitting, registering property, and tax administra-
tion. Establishing best-in-class entities that can attract investment and
increase tourism.
• Power sector reform: Providing lower cost and more reliable energy
through: (1) the transformation of PREPA; (2) the establishment of an inde-
pendent, expert, and well-funded energy regulator; and (3) the development
of cleaner and lower cost power generation.
• Infrastructure reform: Prioritizing economically transformative capital
investments with Federal funds available as a result of recent disasters and
on a regular basis from annual obligations, for example from the Federal
Highway Administration.
• Strengthening Puerto Rico’s technology sector: Addressing the digital
divide is critical to ensuring that all residents of Puerto Rico can take advan-
tage of the well-documented socioeconomic benefits afforded by Internet
connections (e.g., telehealth, distance learning, remote work). Important infra-
structure gaps remain, particularly across rural areas of the Island. The 2020
Fiscal Plan includes $400 million to expand access to broadband for the resi-
dents of Puerto Rico, thereby improving economic opportunities for those in
rural areas. The 2020 Fiscal Plan also recognizes that technology skills are
critical for the future of the workforce; it thus includes $50 million in funding
to invest in workforce development, specifically focused on business- and
technology-related disciplines.
D. Government Efficiency
Finally, the main measures in the 2020 Fiscal Plan aimed at efficiency and cost
reduction, some of which have not been implemented since the 2018 Fiscal Plan,
include: (1) agency efficiencies; (2) creation of the Office of the CFO; (3) Medicaid
reform; (4) enhanced tax compliance and optimized taxes and fees; (5) reduction of
appropriations; and (6) comprehensive pension reform.
17
Without the need to achieve incremental budget savings, the Government should
focus all its efforts in fiscal year 2021 on real changes across the Government that
assure better delivery of essential services. In that light, the 2020 Fiscal Plan
outlines key reforms for the Department of Education, Department of Health,
Department of Public Safety, Department of Corrections and Rehabilitation, and
Department of Economic Development. These reforms focus on improving implemen-
tation, increasing efficiency, and consolidating regional and similar offices.
To drive implementation of key reforms and outcomes, the 2020 Fiscal Plan
introduces milestone budgeting, which will allow for investments in certain areas
once key milestones are met. Milestone budgeting is introduced because urgent
action is necessary to support the broader reform journey for particular agencies.
Crucial milestones and incentives include for the: (1) Employee Retirement System
to finalize establishment of defined contribution accounts for public retirees and
employees; (2) Department of Treasury to issue the 2017 Comprehensive Audited
Financial Report, draft the 2018 Comprehensive Audited Financial report, and
develop an ERP system; (3) Department of Education to implement attendance re-
porting, school scorecards, and digitalization of Special Education Individualized
Education Programs; and (4) Department of Economic Development and Commerce
to publish regularly in a transparent manner economic incentives provided to busi-
nesses and associated returns.
E. Implementation is Key to Puerto Rico’s Success
Unfortunately, Governments have failed to achieve meaningful economic growth
through structural reforms or drive operational change that would deliver greater
responsiveness and efficiency of government services. Efforts at private sector labor
market reforms have stalled and the impact of human capital and welfare reform
is not expected for several years. The Government’s efforts to improve the ease of
doing business have not changed the burden on businesses in any meaningful way.
To date, Government agencies have reduced expenditures but generally not in an
effective fashion, as included in the certified fiscal plans. Rather than achieving
budget savings by improving the way services are delivered or discontinuing dupli-
cative or unimportant services, the Government has enacted broad-based early re-
tirement programs to reduce headcount, creating major gaps in capabilities and
functionality and potentially putting services at risk. Agencies should rethink their
business processes and priorities, instead of relying on attrition and voluntary
transition programs.
Across many areas, the Government has struggled to implement changes, with
even new investments often not driving the intended use. For example, salary raises
provided for teachers were improperly implemented, bringing new litigation costs,
while police officers’ enrollment in Social Security was delayed by 6 months. Despite
efforts by members of the Government, the Board, and the Federal Government—
which has increased oversight over Federal funds, installed Federal monitors in cer-
tain agencies, and managed expectations via consent decrees—the Government has
been unable to meet the increasingly urgent need for real change.
The 2020 Fiscal Plan includes dozens of practical actions that the Government
must take to create a more accountable, affordable, and transparent government,
with resources focused on improving the front-line services that matter. Given the
global COVID-19 pandemic, the 2020 Fiscal Plan pauses most government right-
sizing measures for a year, so that the full focus of Government may focus on
recovery and implementation.
Implementing the structural reforms and fiscal measures included in the 2020
Fiscal Plan fully on a timely basis will enable the Island to achieve low-cost and
reliable energy, robust infrastructure, greater labor participation, an improved regu-
latory and permitting environment, and a more effective and efficient public sector.
That said, these reforms are insufficient to return the Island to prosperity, nor do
they allow Puerto Rico to avoid future deficits, which begin again in fiscal year
2032. Thus, in the near future, the Government will be required to take incremental
measures, such as improving labor market flexibility through repealing restrictive
laws and pursuing meaningful tax reform to broaden the base of collection and
lower rates. These incremental structural reforms go beyond the 5-year framework
of this 2020 Fiscal Plan and are required to return the Island to prosperity. Many
of these reforms—which would reduce deficits and therefore make funds available
for a variety of potential uses, most importantly to invest in the people of Puerto
Rico—have been proposed by the Board, but the Board cannot implement them
without the support of Puerto Rico’s elected Government.
18
IV. Debt Restructuring
To date, the Board has: (1) developed and the District Court has confirmed a Title
III Plan of Adjustment for COFINA; (2) authorized and the District Court has con-
firmed a Title VI Plan of Adjustment for GDB; and (3) supported a nearly $1 billion
loan restructuring agreement for PRASA with EPA and USDA.
The Board proposed an amended Plan of Adjustment (the ‘‘Plan’’) in February
2020 to restructure $35 billion of debt and other claims against the Commonwealth
of Puerto Rico, the Public Building Authority, and the Employee Retirement System,
and more than $50 billion of pension liabilities. The Plan significantly reduces $35
billion in debt liabilities to $11 billion, or about 70 percent, and ensures that almost
75 percent of current and future pensioners are not cut. The Plan also provides pre-
dictability to public employees via updated collective bargaining agreements and
restores over $1.3 billion of withheld employee contributions to Sistema 2000.
The Plan has been supported by the Official Committee of Retirees representing
retired government employees, current government employees represented by the
Public Service Union as the Puerto Rico chapter of AFSCME, and the Lawful
Constitutional Debt Coalition, a group of investors and funds holding Puerto Rico’s
general obligation bonds and PBA bonds. The Board also has been seeking broader
active public employee support and feedback, including from teachers represented
by the Puerto Rico chapter of AFT.
The Board’s Special Investigations Committee hired the law firm Kobre & Kim
to provide a complete, independent review of the Government’s debt, ultimately re-
ceiving a comprehensive investigative report. Following on Kobre & Kim’s findings,
the Board undertook review of potential infirmities of debt issued by Puerto Rico
and its various agencies and instrumentalities. Through its Special Claims
Committee, the Board objected to the validity of over $11 billion of general obliga-
tions bonds and filed several hundred complaints against entities to recover their
payment related to issuance of that debt. That committee also filed complaints
against over 20 banks, law firms and other parties to recover fees earned in
issuance of nearly $9 billion in bonds.
Given the considerable uncertainty about the effect of COVID-19 on Puerto Rico,
however, the Board continues to believe that the primary focus of the Government
and the Board should be to minimize and contain the pandemic. Furthermore, even
with implementation of far reaching growth-inducing structural reforms, the 2020
Fiscal Plan projects that the Government cannot afford to pay the public debt as
originally contracted.
Recognizing the importance of the ongoing Title III cases, but taking into account
these realities, on March 23 the Board presented a motion requesting the Title III
court to adjourn consideration of the proposed Plan of Adjustment’s disclosure state-
ment hearing until further notice. The amended proposed Plan of Adjustment, pre-
sented to the Court on February 28, 2020, is now on hold and the next status report
is due on July 15. As to PREPA, the Board and the Government filed a motion seek-
ing to adjourn the hearing and all deadlines related to the PREPA restructuring
support agreement Rule 9019 motion. On May 15, the Board and the Government
provided a required update, stating that all briefing and hearing deadlines relating
to the 9019 motion should continue to be adjourned.
V. Municipalities
On April 15, 2020, the District Court held invalid and unenforceable Puerto Rico
Act 29–2019, which had eliminated the municipalities’ obligation to reimburse the
Commonwealth for hundreds of millions of dollars in pension and health care cost
for their own retirees. Contrary to what some mayors have said, the reversal of Act
29–2019 is not expected to have a significant impact on municipalities’ finances in
the near term. The repeal of Act 29–2019 represents a deficit of 3 percent of the
total municipalities’ budgets for fiscal year 2020, and the Board outlined a process
for municipalities to repay these fiscal year 2020 obligations from incremental
unbudgeted revenues, thus not affecting municipalities’ operating budgets.
Better budgetary practices, reduction of expenses through consolidation or shared-
services arrangements and increased own-revenue streams should help municipali-
ties remain sustainable for the benefit of the people of Puerto Rico. Moreover, a new
partnership model between the Government and municipalities needs to be devel-
oped in order to deliver important services. That is why the Board is working with
Mayors to develop potential solutions, as well as with the Municipal Revenue
Collection Center (‘‘CRIM’’ by its acronym in Spanish) on initiatives aimed at mod-
ernizing and improving the management of the property tax system and increasing
the collection rate of such taxes. In addition, the Board is directly working with 10
municipalities to assist them with cost reduction and economic development
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measures. Further, and as explained earlier, the Commonwealth’s 2020 Fiscal Plan
maintains the level of support to the municipalities for the next fiscal year at the
same amount as in fiscal year 2020. Moreover, the 2020 Fiscal Plan provides an
annual fund of $22 million during the next 5 fiscal years (for a total of $110 million)
to incentivize municipalities that achieve cost savings through cost sharing or
consolidation of services.
As a result of the extension of time granted to taxpayers for filing their personal
property tax returns from May to August 2020, CRIM is facing a cash shortfall that
has affected its ability to make the monthly remittances of May through August to
the municipalities. To assist with this situation, the Board approved a Common-
wealth liquidity facility for CRIM of up to $185 million to help with monthly remit-
tances through July 2020. To date, CRIM has not accepted the terms of the liquidity
facility.
VI. Transformation of PREPA
The Board continues to work with Government on the transformation of PREPA
to ensure reliable energy for the residents, more effective and efficient management,
and lower fuel costs.
This transformation is important to every individual, every business, and every
potential investor. The people of Puerto Rico deserve a power system that can with-
stand hurricanes to ensure they are safe in their homes, and Puerto Rico’s busi-
nesses deserve to open every day without relying on back-up generators to ensure
they can serve their customers. Puerto Rico deserves manufacturing and service
industry jobs created by investors who don’t turn away because its electric power
system is unreliable and antiquated.
The Board and the Government are in full agreement that private generation and
private management of the transmission and distribution system are key to these
improvements. The Board is working with the Government on the pending public
private partnership process for selection of a private transmission and distribution
operator and strongly supports the Government’s efforts to secure FEMA funding
to help with the cost of restoration and reconstruction of an affordable, resilient, and
reliable power system that is environmentally compliant and that serves as a driver
of economic growth. Selection of this operator and securing this Federal funding are
critical next steps in the modernization of PREPA and increased economic develop-
ment on the Island.
VII. U.S. Government Matters
A. Supreme Court Decision
On June 1, 2020, the U.S. Supreme Court issued a unanimous decision that will
allow the Members of the Board and the Board to continue their work under
PROMESA. The Supreme Court confirmed that PROMESA established the Board
as an entity within the Government of Puerto Rico and that the process for selecting
and approving members of the Oversight Board without Senate confirmation does
not violate the Constitution’s Appointments Clause.
B. Amendments to PROMESA Act
I appreciate the opportunity to now comment on the Amendments to PROMESA
Act recently introduced by Chair Grijalva and members of the Committee.
As mentioned in my October 22, 2019 testimony on an earlier version of this pro-
posed legislation, the Board has serious concerns that several of these provisions,
while well-intended, will substantially hamper its ability to effectively negotiate set-
tlement of claims at this very critical juncture in implementation of PROMESA.
Moreover,
• The Board supports the legislative proposal of Rep. Velázquez in the bill to
extend the disclosure requirements of the Federal Rules of Bankruptcy
Procedure to professionals employed by the Board, court, or debtor to avoid
conflicts of interest and its goal of greater transparency and disclosure. The
proposal, however, needs to be interpreted or altered in a manner allowing
its practical implementation. It currently requires disclosures of each profes-
sional’s connections with all creditors, and in the Puerto Rico Title III cases
over 165,000 creditors filed proofs of claim.
• The provision for a GAO report on expenditures and operation of the Board
is understandable, and the Board looks forward to working with Congress on
the details.
• The provision allowing the Legislature of Puerto Rico to cancel some of its un-
secured financial debt will lead existing Puerto Rico bondholders to demand
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secured debt during ongoing negotiations, which is more expensive and
restrictive than the unsecured debt. Moreover, this provision could render the
issuance of future municipal debt in Puerto Rico and throughout the United
States more expensive, and will cause purchasers of new debt to require that
it be secured debt in all instances. The new discharge provision is also likely
not to inspire creditor trust and confidence because no court is involved in the
discharge accomplished by the Legislature and Governor. The Board’s legal
advisors also believe the criteria for the application of this new discharge may
only allow Puerto Rico to qualify, in which case the statute will be subject
to constitutional challenge as not being a uniform bankruptcy law.
Additionally, the constitutionality of discharging the unsecured financial debt
for nothing, while other debt is paid, will be challenged. It may well be that
these new provisions will be upheld because they are being enacted under the
Territories Clause, and not expressly the Bankruptcy Clause, but that too will
be litigated.
• The proposed definition of essential public services specifies that public
education, public safety, healthcare, and pensions are ‘‘essential public
services’’, with the ostensible purpose to ensure their funding in the certified
Fiscal Plan to the maximum extent possible. The Board believes that this pro-
vision could have the exact opposite effect, as it provides ammunition to those
who have been arguing that the Board cannot fund services above and beyond
their own highly restrictive interpretation as to what services are truly essen-
tial. The Board is facing this claim in Title III cases filed by creditors, who
would welcome congressional support for an essential service definition that
could be used to advance their argument. The result could be substantially
reduced funding for services that the Board and the Government consider
essential but that other parties strongly believe otherwise.
• The prescribed funding for operation of UPR significantly expanding and lock-
ing in an $800 million annual allocation to UPR makes efficient and effective
operation of the Commonwealth substantially more difficult and delays any
strengthening or diversification of UPR’s revenue base. To put it in context,
an $800 allocation represents 70–80 percent of UPR’s total budget, versus a
20–30 percent average for U.S. public universities. It is also diverts resources
away from the critical services funded by the Commonwealth budget.
• The provision expanding the definition of investments for economic growth is
consistent with the Certified Fiscal Plan and Budget. The plan and budget
already include specific investments both in structural reform implementation
and in the economic development tools necessary to reduce poverty, increase
labor participation, attract quality jobs to the Island, expand workforce
development programs—all leading to increased economic growth.
• The Board agrees with the importance of avoiding conflicts of interest. The
proposed language on prevention of conflicts of interest as to the Board, how-
ever, significantly reduces the number and quality of people who can be
Board members or Executive Director, which makes the Board far less effec-
tive at performing its critically important role and congressional mandate to
help improve Puerto Rico. The section further severely reduces the amount
on which the Board can rely for legal, financial, economic, and operations ex-
ternal advisors, which strongly impairs the Board’s ability to effectively
defend Puerto Rico in court against creditors.
• The initiation of Federal funding for operation of the Board and Title III
could well lead to a new constitutional challenge to the Board’s appointment
without Senate consent. Moreover, it significantly limits the ability of the
Board to determine how much money it needs to invest, research, and imple-
ment the critically important Title III work. It also makes the process harder,
riskier for the Board, Puerto Rico, and the U.S. Government. Currently, the
Title III fees are reviewed by the Title III Court and a fee examiner it ap-
pointed. That part of the system has worked well. If the Federal funding is
insufficient, then the Board would not have the financial resources to defend
against the attempts of secured and unsecured creditors to obtain judgments
awarding them Puerto Rico’s various revenue streams. To date, the Board has
been sued over 100 times by creditors, and cannot afford to run short of funds
to defend.
• The bill provides that any document, record, or information relating to the
public debt of the Commonwealth of Puerto Rico is a public document and
accessible to any interested party. Making public any document relating to
the negotiations or restructuring of the public debt would be prejudicial and
21
detrimental to the Board’s effort to effectively and expeditiously secure the
best debt deal possible for Puerto Rico and its people.
• In connection with the new disclosure obligations, the new provision for
assessing attorneys’ fees is problematic because it may deter highly qualified
individuals from serving as Board members. Furthermore, it contradicts
PROMESA’s insulation of the Board and its staff from liabilities and obliga-
tions for acts undertaken in carrying out PROMESA.
• The section creating a Puerto Rico Public Credit Comprehensive Audit
Commission disregards and duplicates the work of the Board almost 2 years
ago based on the over 600-page Investigative Report prepared by Kobre &
Kim. That independent report effectively served the purpose of a debt audit.
The Board’s Special Claims Committee is pursuing valid claims arising out
of that report (subject to a stay on some of the proceedings), and the Debt
Management Policy in the 2019 Fiscal Plan is designed to make sure these
issues do not arise again.
The Board remains committed to working with the Chairman, the Ranking
Member, and other members of the Committee and the Congress as you continue
oversight over implementation of PROMESA and consider any changes to the law.
C. Legislation Expanding Manufacturing
The Board was established by law to create the conditions for fiscal responsibility
in Puerto Rico and restore access to capital markets. One element of this mandate
has been to take opportunities to support the Government of Puerto Rico in its
efforts to pursue prudent actions to promote economic stability and create the
conditions for growth.
In this context, the Board wrote to the U.S. President and Congressional leader-
ship on March 18 stating that if Federal policymakers consider actions to require
increased manufacturing within the U.S., the Board strongly believes that Puerto
Rico is a center of excellence within the Nation and can play a leading role in the
national portfolio of locations where this manufacturing re-locates. The physical in-
frastructure, human capital, and regulatory processes are already established and
well positioned. Moreover, this is a valuable opportunity to expand investment, jobs,
and ultimately prosperity on the Island.
We acknowledge there are a number of policy considerations that would need to
be discussed. Should policymakers pursue actions to require additional manufac-
turing in the United States, we respectfully encourage proactive dialogue between
the Government of Puerto Rico and Federal policymakers to find mutually accept-
able solutions to these issues. It is in this spirit that the Board will conduct a com-
prehensive study to update the facts and acquire the knowledge necessary for the
private sector and the Government to define a comprehensive and actionable plan
to reactivate the manufacturing sector in Puerto Rico. The Board would be proud
for Puerto Rico to play a leading role in bolstering our national security and stand
ready to assist however we can.
D. Legislation Supporting Puerto Rico
Finally, the Board continues to support legislative efforts of Chairman Grijalva,
Ranking Member Bishop, Puerto Rico Resident Commissioner González-Colón,
Representative Velázquez, Representative Soto, and many members of this
Committee and Congress to provide equitable distribution of Federal funding and
other Federal programs for Puerto Rico.
For example, the Board continues to support the Government’s request to receive
equitable treatment in Medicaid and Medicare. Residents of Puerto Rico pay the
same level of Medicare taxes as mainland residents, but the Island receives substan-
tially lower payments. Moreover, the Board is supportive of congressional action to
provide enable Puerto Rico to participate in the Federal Earned Income Tax Credit
program, which would bolster Puerto Rico’s own local Earned Income Tax Credit
and create an even more powerful incentive to bring more workers into the
Commonwealth’s formal labor market. Likewise, the Board supports legislation that
provides funding to extend the Federal Child Tax Credit to more families with chil-
dren in the Commonwealth. The Board also supports Governor Vázquez Garced’s
request to authorize Puerto Rico to participate in the Pandemic Electronic Benefits
Transfer program created by the Families First Coronavirus Response Act, to en-
sure children on the Island have access to critically needed nutritional assistance
benefits.
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VIII. Conclusion
PROMESA is not perfect, but it has provided Puerto Rico with the protection of
a stay on its debt payments while continuing to fund essential services. The com-
promise between both sides of the aisle to provide the Island with a novel mecha-
nism to restructure its debt under a bipartisan Board allowed the Government to
prevent complete chaos in 2016 when the debts became unpayable.
The fiscal planning and budgeting discipline spearheaded by the Board since its
first certified fiscal plan has in fact allowed Puerto Rico to be resilient and strong,
with the ability to respond with concrete actions to extraordinary natural disasters
and the COVID-19 pandemic. The savings measures have been successful in driving
some meaningful progress in rightsizing the Government and enabled it to imme-
diately provide fiscal stimulus and economic support to those affected by the
COVID-19 measures. Unlike other local governments in the United States, Puerto
Rico was not forced to respond to lost revenues with urgent and drastic cuts to its
expenditures and essential services. In fact, next year’s budget will be higher than
the current budget, unlike most U.S. states, in part to respond to the need for fiscal
stimulus and economic growth drivers.
Since we began working with Governor Vázquez Garced, we have engaged in a
collaborative working relationship. We must clarify, however, change can be hard.
In accordance Section 405(m)(4) Congress’ own finding states: ‘‘a comprehensive
approach to fiscal, management and structural problems and adjustments that ex-
empts no part of the Government of Puerto Rico is necessary, involving independent
oversight.’’ While we will always collaborate in the best interest of the people of
Puerto Rico, it is in this same interest that sometimes the Board must disagree with
the Government and utilize the tools in PROMESA to further its mandate. Simply
stated, all efforts should be on implementing the reforms that the people of Puerto
Rico need and deserve.
Since 2016, the Board has been carefully executing its mandate in law. The fact
that both sides—creditors and politicians—have material disagreements with the
Board means something. The Board is doing its job and PROMESA is working. As
stated earlier, the Board has serious concerns that several of the proposed amend-
ments to PROMESA, while well-intended, will substantially hamper its ability to
effectively negotiate settlement of claims at this very critical juncture in implemen-
tation of the law. These amendments should not become a distraction from the real
work we all have to do.
The Board appreciates this Committee’s invitation to provide an update on the
status of the implementation of PROMESA and will continue to follow the path
outlined in law to ensure Puerto Rico returns to fiscal responsibility and the capital
markets.

Supplemental Testimony
Natalie Jaresko
Executive Director
Financial Oversight and Management Board for Puerto Rico
Submitted on July 2, 2020

Chairman Grijalva, Ranking Member Bishop, and all members of the House
Committee on Natural Resources, I humbly submit this supplemental testimony in
addition to my written and oral testimony from June 11, 2020. I reviewed the tran-
script from the hearing and have compiled the information below to clarify some of
the issues that were discussed.
NEW FORTRESS ENERGY AGREEMENT FOR THE CONVERSION OF PREPA

FOMB approved the agreement, even though the pricing structure was higher
than the industry benchmark; the price was cheaper than the oil in use at that
time. FOMB uses industry benchmarks and other pertinent data to evaluate pro-
posed contracts, but the industry benchmark is not always available in Puerto Rico.
In addition, since PREPA remains in bankruptcy, bidders tend to factor that finan-
cial risk in the cost of their bids. FOMB also approved the agreement because it
would result in moving to LNG as a cleaner fuel than the bunker fuel it replaced.
FOMB has seen recent media reports that San Juan 5 and 6 are still using diesel
because New Fortress Energy has failed in its LNG safety tests, and FOMB is
looking into that issue.
23
THE ABILITY OF THE DEPARTMENT OF HEALTH TO DEAL WITH THE PANDEMIC AFTER
RIGHTSIZING

The Department of Health’s capacity to provide timely and reliable data and
administer diagnostic tests was not affected by previous actions of FOMB as to the
funding or administration of the Department. The Fiscal Plans certified by FOMB
have required a transformation of the Island’s health system into a more efficient
one that provides better services to the people of Puerto Rico. The Government had
several health-related agencies that were highly fragmented, driving up costs and
inefficiency as well as impairing the level of care. The Fiscal Plan required that the
Department of Health consolidate six of the healthcare agencies with centralized
support functions, and so far, the Government has made limited progress. For exam-
ple, the Department of Health has struggled to establish an effective, centralized
process for managing COVID-19 testing results and municipalities outside San Juan
have found it hard to get access to tests.
THE WORKING CAPITAL OF UPR FOR FISCAL YEAR 2021 AND BEYOND

FOMB’s goal is to put the university—Puerto Rico’s most important engine for
economic mobility—on a path to sustainability while also ensuring the tools it needs
to manage the current COVID-19 pandemic. The FY2021 Budget for UPR tracks the
2020 UPR Fiscal Plan with modest adjustments based on updated projections
related to COVID-19 interruptions. The details are below:
• Total revenues in this year’s budget come to $1.2 billion:
— Includes the delay in reduction of the Commonwealth subsidy to UPR
by 1 year, along with a corresponding delay in scheduled tuition and fee
increases to relieve burden on students and families.
— Revenues also decline this year due to decrease in enrollment (4.6
percent for undergraduates); COVID-19 related interruptions to self-
generated revenues, such as hospital income; and, macroeconomic
declines that affect UPR-directed funding streams (e.g., slot machine
revenue).
— Another major cause of the significant decline in revenues versus
FY2021 Budget is the fact that FY2020 included significant federal and
private insurance disaster relief.
• This year’s budget provides for $1.2 billion in expenditures:
— FOMB is expecting UPR to make marked progress in implementing the
administrative transformation this year.
— Nonetheless, the Budget continues to invest in academic excellence,
including a 3 percent increase in faculty payroll, continued growth in
the university’s pool of need-based scholarships (beyond those provided
through the Commonwealth scholarship fund), and over $10 million to
support implementation of the system’s much needed transformation.
— The Budget also enables UPR to spend $30 million in Capital
Expenditures ($42 million including equipment expenditures); this is
significant as UPR has routinely underinvested capex to cover its
operating overruns.
— FY2021 also assumes that roughly 50 percent of the CARES Act funds
not directly distributed to students will be expended during the
academic year to help the system adjust to a ‘‘new normal’’, including
expanded distanced learning, physical reconfigurations of campus
spaces, and student counseling.
• On pensions, specifically, this year’s budget contemplates freezing the defined
benefit plan, moving to a defined contribution plan, and reducing accrued
benefits to bring annual pension contributions to a sustainable level:
— As a result of the pension measures, the total contribution required falls
this year by ∼$40 million to $121 million in annual expenditures.
— The FY2021 Budget also creates a $41 million emergency reserve. This
reserve is funded through the projected reduction in procured and non-
personnel services expected from the COVID shutdown, and can be
used, for example, to maintain pension funding levels should UPR fail
to implement the required pension reforms.
24
• The net deficit in this year’s budget (post-debt service) is about $33 million:
— The Budget does imply an operating surplus (pre-debt service) is ∼$15
million.
— FOMB has consistently said that even after measures are implemented,
UPR will not have enough operating surplus to cover its ∼$48 million
in annual debt service (legacy debt of $542 million outstanding).
FOMB believes this level of operating surplus provides the right balance of allow-
ing UPR to maintain its important function as an engine of economic development
while also requiring adequate transformation efforts to right-size its administration
and reinvest in academic excellence.
FOMB’S AUTHORITY

The recommendation that Mr. Marrero makes on FOMB’s authority is based on
a false construct. There have been four issues, four situations where there have
been disputes between the Government and FOMB regarding FOMB’s authority. In
all four of those cases since 2018, the Court has agreed on the clarity and the
authority that has been provided by PROMESA to FOMB. If amendments were
made as Mr. Marrero suggested, then the definition of fiscal sustainability and bal-
ancing budget might need to be changed. If FOMB is no longer responsible for fiscal
sustainability, then it will be difficult, if not impossible, to ever restructure the debt
without clarity and confidence that the debt is sustainable.
TITLE V

The demand for expedited permitting pursuant to Title V of PROMESA has not
been overwhelming. The demand that came into the pipeline established was pri-
marily PREPA related; however, all the PREPA contracts needed to first either be
approved or rejected in the Title III court. It was only in early June of this year
that PREPA announced next steps for the PPOA contracts. Now, we expect that the
demand for Title V will grow as those contracts are in place. Moreover, we’ve also
started to see some other private sector investment. We are hopeful that as the
business environment improves, there will be more private sector investment
seeking to take advantage of Title V. To ensure FOMB is prepared to manage the
renewed demand, we are currently in the process of hiring a full time Revitalization
Coordinator.
FISCAL PLANS AND BUDGETS

The reforms included in the fiscal plans and budgets have not caused delays in
the receipt of federal funds. It is true that the fiscal plans and the budgets have
reduced payroll spending over the past 3 years. However, none of those payroll re-
ductions should have been implemented through frontline employees. The intention
and the agreement reached with the previous governor was that the bulk of the
right-sizing would happen through back office consolidation, consolidation of
bureaus into single departments, and those actions actually haven’t happened for
the most part. What has happened instead is the Government has used a very blunt
tool for early retirement or voluntary transition, which has been offered across prac-
tically all front and back offices. Since that happened, it is has been difficult to
direct who stays and who leaves because people have a voluntary choice to early
retire. By implementing the reductions and in that fashion, FOMB believes that
these programs have caused a problem in terms of capacity.
DELAY OF FEDERAL FUNDING

It is important to note that FEMA funding involves a very long and complex
process. The COR3 department is funded by the Federal Government, not by the
Commonwealth. So, it is a matter for COR3 and FEMA to clarify. Similarly, for
CDBG-DR, there is an entirely new group of individuals hired with federal funds
to implement the CDBG-DR program. That CDBG-DR program is very complex, so
having to learn federal procurement rules and do what is required by the CDBG-
DR program is complex.
THE EFFECTIVENESS OF PROMESA

PROMESA is not perfect, but it has provided Puerto Rico with the protection of
a stay on its debt payments while continuing to fund essential services. The
compromise between both sides of the aisle to provide the Island with a novel
mechanism to restructure its debt under a bipartisan Board, allowed the Govern-
ment to prevent complete chaos in 2016 when the debts became unpayable. The
25
fiscal planning and budgeting discipline spearheaded by FOMB since its first cer-
tified fiscal plan has in fact allowed Puerto Rico to be resilient and strong, with the
ability to respond with concrete actions to extraordinary natural disasters and the
COVID-19 pandemic. The savings measures have been successful in driving some
meaningful progress in rightsizing the Government and enabled it to immediately
provide fiscal stimulus and economic support to those affected by the COVID-19
measures. Unlike other local governments in the United States, Puerto Rico was not
forced to respond to lost revenues with urgent and drastic cuts to its expenditures
and essential services. In fact, next year’s budget will be higher than the current
budget, unlike most U.S. states, in part to respond to the need for fiscal stimulus
and economic growth drivers.
Since 2016, FOMB has been carefully executing its mandate in law. The fact that
both sides—creditors and politicians—have material disagreements with FOMB
means something. FOMB is doing its job, and PROMESA is working. In furtherance
of PROMESA’s mandates, FOMB had taken the following steps:
• Section 201(b)(1) Budgetary controls and fiscal discipline: Implemented
best practices budgetary controls and constraints on Government spending to
avoid previous overspending practices. Given the absence of audited financial
statements and previous spending practices, prior multi-year appropriations
are suspended with few exceptions. Total Government spending must now be
reviewed and certified. All tax initiatives must have a neutral or positive
budgetary impact, and all expenses and revenue must be conservatively
estimated.
• Section 201(b)(1) PayGo Pension System: Moved to a PayGo pension
system allowing retirees to receive their pensions without interruption,
despite the insolvency of Puerto Rico’s pension funds, and enrolled police
officers in Social Security to increase their security and retirement benefits.
• Section 202(e) Ensuring critical services: FOMB-certified budgets
carefully balance the need to maintain funding for critical services commensu-
rate with the size of the population and prioritize critical services such as
education, public safety, and healthcare. These include (1) funding of $200
million a year to support increased labor participation; (2) funding for safe
kits to insure proper forensic analysis and long-await justice for victims and
the accused; (3) pay increases for teachers and police to ensure more competi-
tive compensation; (4) funding new positions for Forensics to rebuild capacity;
(5) funding to repay 10 years of back pay to police officers; (6) creating a
reserve account to ensure the ability to act to protect the population imme-
diately in case of future emergencies; (7) budgeted funds to cover any cost-
share required for federal disaster funding; (8) funding to enable compliance
with certain consent decrees; (9) budgeting $400 million annually in
Commonwealth capital expenditures to improve significantly underfunded in-
frastructure; and (10) over $300 million in needs-based scholarships for UPR
students.
Without FOMB and associated fiscal plans, projections show that Govern-
ment spending would have ballooned from $19 billion in fiscal year 2018 to
$22 billion in fiscal year 2025 (an increase of 16 percent). FOMB, meanwhile,
has contained expenditures to a 2 percent increase between fiscal year 2018
to fiscal year 2025, or up 12 percent on a per-capita basis (given the decline
in population), while providing valuable investments in frontline services.
• Section 204(b) Transparency and accountability in government
spending: Fostered more transparency and visibility into Puerto Rico’s
government finances, including Puerto Rico’s liquidity, budgets, and other
intergovernmental spending—notwithstanding the Government’s continued
delays in completing its overdue audited financial statements. Moreover, the
people of Puerto Rico now have access to public reports, including bank
balances, quarterly budget to actuals, payroll and attendance, and tax
expenditures.
• Section 204(b) Contract Review: FOMB reviews major contracts before
they can be ratified to ensure both consistency with the certified fiscal plans
and budgets, as well as to ensure they promote market competition. This
process has brought much-needed transparency, with all responses and
analyses posted in FOMB’s website.
Since the inception of PROMESA, FOMB has played a critical role in helping
Puerto Rico respond to crises. Moreover, it has worked with the Government to in-
stitute much more effective fiscal management after decades of mismanagement.
26
The fiscal plans that FOMB has certified have walked a very prudent balance be-
tween driving more effective and sustainable Government, while investing in critical
needs on the Island. Last, FOMB has articulated a detailed and comprehensive
roadmap of the actions that must be taken to restore growth through economic de-
velopment, with structural reforms being particularly critical. However, given the
constraints of PROMESA, FOMB must rely upon the political will of the Island’s
elected leadership in order to truly transform the Government of Puerto Rico and
the economic landscape into what the people and businesses of Puerto Rico deserve.
AUDITED FINANCIAL STATEMENTS

Completion of the Commonwealth of Puerto Rico’s audited financial statements is
a top priority to FOMB and at the core of PROMESA’s objectives for the benefit of
the people of Puerto Rico. FOMB is committed to assist the Government in com-
pleting such an important milestone, which will ultimately enable the Government
to achieve financial sustainability and access to the capital market at reasonable
rates.
For years, the issuance of the Commonwealth of Puerto Rico’s audited financial
statements, better known as the Comprehensive Annual Financial Reports or
‘‘CAFRs’’, has been delayed. Most notably the FY2015 and FY2016 CAFRs were both
issued and published over 1,000 days after each fiscal year ended. The FY2017,
FY2018, and FY2019 CAFRs have yet to be issued as of this date. Despite best prac-
tices calling for audited financial statements to be published no later than 180 days
after the end of each fiscal year, today is day 1097 for the FY17, day 732 for the
FY18 and day 367 for the FY19.
To that effect, FOMB in its oversight role, has been actively collaborating in an
attempt (1) to identify the challenges to issuance (ii) to ensure that audits are com-
pleted as quickly as possible; (ii) for the Government to institutionalize best
practices; and (iii) for the Government to have the appropriate resources for the
preparation of the CAFRs. During this fiscal year, FOMB has been conducting re-
curring meetings, in some cases on a weekly basis, with the Department of the
Treasury, the Government’s external auditors, and key component entities within
the Government to help expedite the overdue delivery of the FY2017 CAFRs and
assess the timing of the FY2018 audit. In this spirit, FOMB has provided rec-
ommendations on relevant administrative orders submitted for FOMB’s consider-
ation pursuant to the Rules, Regulations and Orders Review Policy; and requested
the Government provide:
• weekly updates from the Department of Treasury on progress and risks to the
completion of the FY2017 CAFRs;
• progress reports on the FY2018 audit preparation;
• submission of the FY2018 proposed external auditor contract pursuant to
FOMB’s Contract Review Policy; and
• any and all other information requested in an effort to lend a hand, evaluate
key constraints, and facilitate the prompt delivery of current and future
audits.
Furthermore, the latest 2020 Certified Fiscal Plan and Fiscal Year 2021 Certified
Budget include incentive milestones and additional resources to promote and assist
with timely completion of the pending audits. Some of these incentives and invest-
ments include:
• a $1.6 million appropriation to hire staff accountants in the Department of
Treasury’s Central Accounting Division so that critical skills and capabilities
can be retained in-house while reducing the reliance on costly professional
services;
• a one-time $1,500 bonus to Central Accounting employees, estimated at total
cost of $100,000, if both the official 2017 CAFR is published and a draft of
the 2018 CAFR is provided to the FOMB by November 2020; and
• $36 million in capital expenditure appropriations for the implementation of
a new Government ERP system—broken down into $14 million for Wave 1
once a dedicated project team is in place by August 2020, and $22 million for
Wave 2 after Wave 1 is completed between September 2020 and February
2021.
Despite the Government’s efforts to comply with issuance deadlines and FOMB’s
willingness to assist the Government in any way possible, there are still high risks
in producing timely audits. Disaggregated accounting systems, manual procedures,
numerous circular letters, and a decentralized OCFO function have contributed to
27
consistent delays in the production of audited reports. And that’s the real question:
what will the Department do differently to change processes and procedures to en-
sure we can fix this moving forward on a permanent basis and on the basis of best
practices?
FOMB is committed to transparency, accountability, and to the sound administra-
tion that ultimately results in better services for the people on the Island. In light
of these goals, it is in the people’s best interest to conduct this public hearing on
the status of the overdue audited financial statements of the Commonwealth of
Puerto Rico. As always, FOMB is in the best position to collaborate with the
Government, accomplish the objectives of PROMESA, and ensure responsible fiscal
practices are institutionalized to achieve financial sustainability and a return to
capital market access at reasonable rates.

QUESTIONS SUBMITTED FOR THE RECORD TO NATALIE JARESKO, EXECUTIVE
DIRECTOR, FINANCIAL OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO

Questions Submitted by Rep. Grijalva

Question 1. Please provide a status of the debt restructuring negotiations and
proceedings of the central government and its instrumentalities in light of the
economic impact of the COVID-19 pandemic.
Answer. Given the considerable uncertainty about the effect of COVID-19 on
Puerto Rico, FOMB believes that the primary focus of the Government and FOMB
should be to minimize and contain the pandemic.
As to debt restructuring, even with implementation of far reaching growth-
inducing structural reforms, the 2020 Fiscal Plan projects that the Government
cannot afford to pay the public debt as originally contracted. Recognizing the impor-
tance of the ongoing Title III cases, but taking into account these realities, on March
23 FOMB presented a motion requesting to adjourn consideration of the proposed
Plan of Adjustment’s disclosure statement hearing until further notice. The amend-
ed proposed Plan of Adjustment is now on hold and the next status report is due
on July 15. Similarly, the Government and FOMB filed a motion seeking to adjourn
the hearing and all deadlines related to the PREPA restructuring support agree-
ment proceedings. On May 15, the Government and FOMB provided an update stat-
ing that all briefing and hearing deadlines relating to the restructuring support
agreement should continue to be adjourned.
Question 2. In April, the G20 announced a year-long moratorium for low income
countries on debt-payments and interest accumulation in response to the global
COVID-19 pandemic and economic crisis that is going to hit vulnerable economies
hardest. Will the Oversight Board adopt a similar position given the already high
levels of debt, unemployment, and poverty in Puerto Rico, which will only be exacer-
bated by the pandemic? What is your target for a principal haircut on the debt that
remains to be restructured?
Answer. A court approved stay is in effect for most of Puerto Rico’s debt pay-
ments, which has aided Puerto Rico in stabilizing its finances and developing
restructurings for its debt in a sustainable manner. In effect, as a result of
PROMESA, Puerto Rico has had some 3 years of relief already.
As for a target on restructuring of debt, we need to take one step at a time. The
first step was certifying the 2020 Fiscal Plan, which reflects the new reality. The
second step is to produce a certified Budget consistent with this certified Fiscal Plan
ensuring the funding of essential services. Thereafter, we will determine how to
most effectively implement our mandate and restructure Puerto Rico’s debts. FOMB
continues to believe that exiting from Title III is critically important for Puerto Rico
and we are dedicated to reevaluating our existing developments.
Question 3. After the COVID-19 pandemic started, you made statements saying
that you would postpone austerity measures for a year and acknowledged that the
plan of adjustment and fiscal plan need to be redrawn. Even the International
Monetary Fund has stated that austerity is not the answer in these times. Why not
shelve austerity altogether and focus on growth? How does it benefit the economy of
the island to continue gutting higher education, municipal budgets, retirees’
pensions, and other drastic cuts to government spending at a time of world economic
slowdown and recession?
28
Answer. The 2020 Fiscal Plan reflects a 1-year delay in most categories of budg-
etary reductions to allow the Government to focus on implementation. This pause
in rightsizing includes maintaining the subsidies to the University of Puerto Rico
(‘‘UPR’’) and the municipalities at current fiscal year levels. Most agencies will
maintain their fiscal year 2020 budgets in fiscal year 2021.
That said, the Fiscal Plans never ‘‘gutted higher education, municipal budgets,
retirees’ pensions or other.’’ The Fiscal Plans aimed only at achieving fiscal sustain-
ability, 4 years of balanced budgets per PROMESA, in light of the economic and
population decline. Two elements were required to achieve that balance: (1) struc-
tural reforms that enabled a growing economy and increased budgetary revenues as
a result; and (2) efficiency measures to decrease expenditures while improving
government services.
During the 1-year delay in rightsizing, the fiscal plans will press for major
structural reforms to restore competitiveness and spur a return to prosperity.
To further promote growth, the fiscal plans will accompany these reforms with
targeted investments in and support for those on the front lines of service delivery.
Given FOMB’s financial projections outlined in my written testimony, we consider
imperative the Government’s implementation of the critical, overdue structural
reforms in the fiscal plans over the next year.
Question 4. Please provide the projections for tax revenue shortfalls this fiscal year
FY2020, as well as FY2021.
Answer. We estimate a revenue reduction of $1.3 billion in the current fiscal year
2020, $1.2 billion in fiscal year 2021, and $774 million in fiscal year 2022, relative
to the revenue projections in the 2019 Fiscal Plan.
Question 5. The certified 2020 Fiscal Plan estimates that the economy of Puerto
Rico will receive an infusion of approximately $83 billion of disaster relief funding,
from federal and private sources. The expected funding from the Federal Government
has been slow in reaching the Island. The greatest share of that projected federal
funding is from FEMA ($48 billion) and HUD ($20 billion).
5a. How much of the federal funding has been received to date?
Answer. The $83 billion of disaster relief funding from federal and private sources
will be disbursed in the hurricane reconstruction effort over a period of 15 years.
It will be used for a mix of funding for individuals, funding for the public, and to
cover part of the Commonwealth’s share of the cost of disaster relief funding. In ad-
dition, FOMB estimates earthquake-related funds amounting to $595 million from
FEMA to cover the damage caused by the earthquakes at the beginning of 2020.
To date, the Commonwealth has received $16.2 billion from FEMA and other federal
agencies, $3.2 billion in CDBG-DR funds from HUD, and over $6 billion from
private insurance payments.
5b. Does the projected amount in FEMA funds for things like Individual Assistance
(IA) take into account FEMA’s history of denying over 60 percent of IA claims after
Maria and the recent earthquakes?
Answer. The data we use is provided directly by FEMA regarding approved IA
only.
Question 6. The CARES Act made Puerto Rico eligible for low-interest loans from
the Federal Reserve needed due to the COVID-19 pandemic’s impacts on the economy
and local budget. A former PROMESA Oversight Board contractor is handling this
program at the Fed. Did he consult with the Oversight Board before the Fed decided
to exclude Puerto Rico (and the other territories) from eligibility? Did the Oversight
Board or any of its contractors discuss Puerto Rico’s eligibility with anyone at the
Fed or the U.S. Treasury Department?
Answer. FOMB has not engaged in any conversations with the Fed or the U.S.
Treasury Department as to the low-interest loans from the Federal Reserve. We un-
derstand these are meant to help states and municipalities with liquidity shortfalls,
which is not the case of Puerto Rico.
Question 7. $4.9 billion was appropriated after Hurricane Maria for low-cost
forgivable Community Disaster Loans for Puerto Rico and the U.S. Virgin Islands
based on projections of revenue losses that, in Puerto Rico’s case, were vastly
overestimated. The White House suggested Puerto Rico could expect about $4.65
billion of the total, but only a few hundred million were disbursed to Puerto Rico’s
municipalities because the territorial government did not have a liquidity problem
as projected. Since Puerto Rico was excluded from the Federal Reserve program—
contrary to Congress’ intent—should a reprogramming of the $4 billion in
29
Community Disaster Loans that were appropriated but have not been used be
disbursed to Puerto Rico?
Answer. The intent of both the Community Disaster Loans and the recent Federal
Reserve program appear to be providing liquidity support to local governments as
needed when revenue losses are substantial. At this time, the territorial government
has not experienced liquidity and revenue losses that would cause budgetary reduc-
tions. As a result of the budgeting practices in place since PROMESA was adopted,
the territorial government was able to increase spending by some $500 million dur-
ing the pandemic to support front line public health and public safety workers, as
well as those most affected by the economic consequences of social distancing meas-
ures. Moreover, the FY2021 General Fund budget also is higher than the previous
year budget, notwithstanding revenue declines.
Question 8. Ms. Jaresko, in one of your previous congressional testimonies before
the House Natural Resources Committee, you said that the Oversight Board con-
cluded that at least $6 billion of Puerto Rico’s debt was illegal. Yet, instead of pur-
suing that claim you settled with bondholders out of court. What message does it
send during debt restructuring negotiations that the Oversight Board is willing to
allow Wall Street and other investors to keep charging the people of Puerto Rico for
debts accrued in an illegal fashion?
Answer. A Special Investigation Committee of FOMB hired Kobre & Kim to con-
duct a comprehensive study of Puerto Rico’s debt and its relationship to the finan-
cial crisis and to determine whether any of Puerto Rico’s debt should be challenged.
As a result of this review, FOMB with the Official Committee of Unsecured
Creditors (‘‘UCC’’) objected to the validity of over $6 billion of general obligation
(‘‘GO’’) bonds issued in 2012 and 2014. In early 2020, during the negotiation over
the Commonwealth Plan of Adjustment, FOMB through the court-ordered mediation
process reached a settlement on both the validity of the 2012 and 2014 GO bonds.
A settlement avoids the costly and risky litigation that would be necessary to con-
clude the validity claims. As noted, the Court proceedings as to the Plan of
Adjustment remain adjourned at this time.
Question 9. Serious concerns have been raised after it became public that the
Oversight Board has contracts with McKinsey, which has a subsidiary that owns
Puerto Rico bonds. What measures are you taking to prevent this conflict of interest
from happening again?
Answer. Transparency is critically important, and we are committed to making
sure our disclosure rules are fair and comprehensive. We carefully looked into the
disclosures of our consultants and hired an independent law firm to do an inde-
pendent investigation. The report 1 did not find any violation of the disclosure rules
governing our vendors or those required by law. Nonetheless, we did implement ad-
ditional disclosure rules, as suggested in the report, to make more explicit the
intolerability of conflicts of interest.
Question 10. In October 2019, you testified before this Committee that you
supported Rep. Velazquez’s H.R. 683—Puerto Rico Recovery Accuracy in Disclosures
Act of 2019 (PRRADA) bill to require all PROMESA consultants, advisors, and law
firms to disclose their conflicts of interest. Do you still support Congress passing the
PRRADA bill and have PROMESA advisors like McKinsey increased their trans-
parency or at least ceased trading in Puerto Rico debt while they also serve as a
bankruptcy advisor?
Answer. FOMB continues to support the legislative proposal of Rep. Velázquez in
the bill to extend the disclosure requirements of the Federal Rules of Bankruptcy
Procedure to professionals employed by FOMB, Court, or debtor to avoid conflicts
of interest and advance greater transparency and disclosure. The proposal, however,
needs to be modified to assure its practical implementation. It currently requires
disclosures of each professional’s connections with all creditors, and in the Puerto
Rico Title III cases over 165,000 creditors filed proofs of claim. We look forward to
working with Congress on technical amendments to further the bill’s objectives.
Question 11. The Oversight Board wrote a letter supporting the establishment of
new incentives to reshore U.S. manufacturing (specifically pharmaceutical and med-
ical devices plants currently located in China) to return to Puerto Rico. There are
two bills that have similar objectives, one by Rep. Plaskett, H.R. 6648—Territorial

1 Final Investigative Report—McKinsey & Company, Inc. prepared by Luskin, Stern & Eisler
LLP, special counsel to FOMB, available at https://drive.google.com/file/d/1avv872k0XNon
EiN9x0UzNUCUYDtYkqOd/view.
30
Economic Recovery Act, to cut the GILTI tax for companies that create jobs in the
territories. The other is from Resident Commissioner González-Colón, H.R. 6443—
Securing the National Supply Chain Act, that would apply to the states and terri-
tories establishing depressed zones for manufacturing investment. Which of these
does the Oversight Board support?
Answer. FOMB has not taken a position with regard to either bill. We support
the reshoring of U.S. manufacturing to Puerto Rico and recognize the certain
economic growth, jobs, and development that would result.
One element of our mandate under PROMESA is to take opportunities to support
the Government in its efforts to pursue prudent actions to promote economic
stability and create the conditions for growth. Puerto Rico is a center of excellence
within the Nation and should play a leading role in supporting pharmaceutical or
medical device manufacturing. It is in this spirit that FOMB is conducting a
comprehensive study for the private sector and the Government to define a
comprehensive, actionable plan to reactivate manufacturing.
Question 12. During recent natural disasters and the COVID-19 pandemic, the
University of Puerto Rico (UPR) has been essential for recovery efforts. As an
example, we can see the work done by the Puerto Rico Seismic Network, which is
part of the UPR, and has been essential during the earthquake emergency to evalu-
ate, inform and educate in protection of civil society. Also, health professionals of the
Medical Sciences Campus have been key to the COVID-19 medical task force created
by the Government of Puerto Rico to guide them in the decision-making process to
control the spread of the pandemic. In that sense, the UPR can be distinguished from
other Universities in the country, because it provides essential public services and
plays an important socioeconomic role that otherwise would not exist for the residents
of Puerto Rico. As the fiscal plans for the next years keep reducing the budget of the
UPR, and thus the possibilities for it to operate and develop such essential programs,
has the Oversight Board identified other ways that such essential public services
would be provided to the residents of Puerto Rico?
Answer. UPR has played and undoubtedly will continue to play an essential role
in Puerto Rico’s recovery and its future. In light of COVID-19, the 2020 UPR Fiscal
Plan provides a 1-year delay in the reduction of the annual appropriation from the
Government and the previously scheduled tuition, fees, and dues increases. In the
longer term and more fundamentally, FOMB believes that the greatest challenges
to UPR are falling enrollment, an aging infrastructure, and a pension system that
is at serious risk of insolvency soon.
In the coming fiscal year, UPR needs to focus on increasing revenues, attracting
more students, implementing scholarship funds to help those students who need
financial assistance, preserving its faculty, securing the pensions of its staff, and
cutting administrative costs. The UPR Fiscal Plan does not foresee any campus clo-
sures, any decreases in teaching staff, any decreases in student services, yet does
require efficiency in administration of the 11 campuses. Furthermore, to address fu-
ture tuition increases and students in need of assistance, the Commonwealth Fiscal
Plan establishes an over $200 million scholarship fund that will be administered by
the non-profit Fundación Comunitaria. In addition, a special $30 million tuition-
remission fund is established for UPR medical students.
Question 13. The Oversight Board insists that budget cuts to the University of
Puerto Rico do not risk the accreditation of the educational institution and will not
result in it losing its U.S. Department of Education certification. In several instances,
the Oversight Board cites an opinion provided by the U.S. Department of Education
to that effect. Can you confirm that this is the position of the Oversight Board and
that it is sustained in a written opinion of the U.S. Department of Education? If so,
can the Oversight Board provide this Committee with a copy of the written opinion
it refers to?
Answer. FOMB is not authorized to speak on behalf of the U.S. Department of
Education. A clean reading of Title IV of the Higher Education Act makes it clear
that a restructuring under Title III or Title VI of PROMESA does not trigger the
Title IV ‘‘bankruptcy’’ rules.
Question 14. In the 2020 Fiscal Plan, the Oversight Board completely defunded the
public broadcasting system and, according to Director Marrero, attempted to micro-
manage the Government of Puerto Rico through such measures as specifying what
agencies should perform promotional activities for the new earned income tax credit
and imposing requirements on street parking. Can you explain why the Oversight
Board needs to tell elected government officials what agencies should be involved in
31
promoting its earned income tax credit and impose requirements on street parking?
Or do you dispute his testimony?
Answer. FOMB disputes Director Marrero’s testimony mischaracterizing FOMB’s
actions as micromanaging. In each of these alleged instances, FOMB acted in
accordance with its mandates under PROMESA. For almost 4 years, the Govern-
ment has been slow in implementing the reforms needed to grow the economy.
On the two examples of ‘‘micromanaging,’’ we would like to correct the record.
• On ‘‘promotional activities for the earned income tax credit:’’
The earned income tax credit (EITC) is key to promoting labor force partici-
pation and reducing poverty. Implementation of across mainland states and
have resulted in meaningful gains in formal labor force participation,
especially among low- to moderate-income workers. The of the EITC is
impactful when the targeted population’s appreciation of its value affects
their decision whether to stay in the formal economy or seek employment in
Puerto Rico or elsewhere.
Although the Government implemented an EITC for tax year 2019, it did not
include a robust promotional campaign as required by the Certified Fiscal
Plan. Hacienda’s EITC outreach centered on sending circular letters to tax
preparers and establishing a few outreach centers to discuss EITC with po-
tential filers. The centers opened in late February and closed on March 15th
due to the pandemic. By relying on an in-person outreach campaign after the
tax year was over and failing to establish a more robust promotional strategy
(e.g. via digital channels, targeted marketing) throughout 2019, the benefit of
the EITC has been muted. To maximize the EITC’s impact, the Government
must urgently assure that individuals are aware of its benefits.
• On ‘‘imposing requirements on street parking:’’
As part of the Fiscal Plan development process, FOMB has required from the
Government ‘‘initiatives to create an integrated multimodal transport system
across the Island, including a plan to execute on the initiatives and reflect
any Government expenditures to implement these initiatives.’’ When the
Government failed to provide such detail, FOMB included the following in the
Fiscal Plan:
‘‘Public transit agencies should work with the Government and
local municipal authorities to promote the adoption of innovative
curb management practices (e.g., dynamic pricing for on-street
parking, replacing on-street parking with drop-off zones). These
practices would raise the cost of car usage and would incentivize
commuters to use public transit. They would also generate funds
that could improve service quality in the communities they service
(e.g., construct more and better bus shelters).’’
Dynamic pricing for on-street parking and replacing on-street parking with
drop-off zones are examples of initiatives the Government should undertake
to improve the Island’s transit system, especially in the San Juan metropoli-
tan area, which is the 25th most congested city in the United States.
In both cases, if the Government had implemented best practices on its own, there
would be no need to describe the actions in the Certified Fiscal Plan. However, to
maximize the benefit of the EITC and to increase the availability and convenience
of public transport to residents, which reduces congestion, pollution, and increases
mobility, we identified the best practices.
As to WIPR, in January 2019 FOMB recommended that the Government transfer
ownership of WIPR’s assets to a private nonprofit entity. In April 2019, the Govern-
ment accepted the recommendation and began implementing the change. However,
to date, there has been no progress.
Question 15. The Oversight Board decided that a major way to attract job-creating
investments in Puerto Rico would be to repeal the law that requires employers to
provide severance pay if they fire employees without being able to show cause, ‘‘Law
80.’’ The Oversight Board convinced then Governor Ricardo Rosselló and represented
this as an agreement with the entire Government. However, the Puerto Rico Senate
passed a bill that would have repealed Law 80 for new hires. The Oversight Board
rejected this proposal. Since the purpose of the repeal was to create new jobs and the
branch of government that writes the laws in Puerto Rico was willing to repeal the
law for new hires, why didn’t the Oversight Board accept the legislation?
32
Answer. FOMB believes that unless Puerto Rico substantially increases its labor
force participation and employment, incomes will fall even farther below U.S. states
and outmigration will continue to grow. Pre-COVID labor participation in Puerto
Rico was around 40 percent, while it was 60 percent on the mainland, and 60
percent in nearby island economies such as Dominican Republic. Increasing labor
force participation may be the single most important objective for long-term
economic well-being in Puerto Rico.
FOMB believes that labor reform, especially including transforming Puerto Rico
into an ‘‘employment-at-will’’ jurisdiction, will improve the vibrancy of the local
labor market, make Puerto Rico more competitive and attractive for job-creating
investments, promote more hiring within the formal economy, and produce more
revenue to the government.
The bill that you describe would have repealed Law 80 only for new hires and
provided that individuals formerly covered by Law 80 would remain protected.
Because that law failed to repeal Law 80, did not change Puerto Rico to an at-will
employment jurisdiction, and potentially would have created greater administrative/
regulatory burden in recordkeeping for business, FOMB did not accept the
legislation.
Question 16. Ms. Jaresko, you have sued the Government of Puerto Rico for not
turning over documents related to the controversial purchase of rapid COVID-19 test
kits for $38 million, that never arrived. What are the systemic contracting issues you
have identified that should be addressed in order to prevent this kind of situation
from happening again?
Answer. FOMB asked the Government on April 6 and several times thereafter for
the documents that should precede any contract or purchase order, such as emails,
text messages and memos showing the procurement and decision-making process.
Given the numerous examples of failure in emergency procurement in the past 3
years, we requested this information to determine what procurement processes were
indeed executed, what lessons could be learned, so that a more transparent and ac-
countable emergency procurement process could be put in place to avoid similar
crises in the future. Unfortunately, the Government did not send these documents
despite multiple requests from FOMB. Therefore, FOMB was forced to file a com-
plaint in federal court to compel the Government to provide the requested required
documents. This litigation is still pending.
Question 17. Senate Finance Committee Chairman Charles Grassley wrote a letter
to Governor Wanda Vázquez outlining a series of well-documented incidents of cor-
ruption and mismanagement that have been widely reported by the media in Puerto
Rico. What specific measures is the Oversight Board implementing to address each
of his concerns and what steps are you taking to ensure these incidents never happen
again?
Answer. FOMB has taken the following actions:
Budgeting practices: FOMB-certified budgets include four sets of major
improvements in budgeting practices. First, FOMB worked with the Government to
provide a deeper level of detail in the budget, detail that had not previously been
available to the Legislature or public, enabling a better understanding of how funds
are being spent. Second, the consolidated budget is more comprehensive and cap-
tures items not budgeted previously, including all cash subsidies. Moreover, the
Fiscal Plan calls for the Government to consider limiting tax credits issued each
year by capping the notional amount authorized, and including sunset provisions
that eliminate the ability to claim unused credits previously issued. The Govern-
ment also now has the capacity to make decisions around limiting and more selec-
tively targeting tax expenditures based on the recent publication of the first-ever tax
expenditures report. Third, the published budget resolution includes more detailed
specific concepts of spending within the personnel and non-personnel categories for
each agency to provide a more detailed look at how the Government uses its funds.
Finally, a series of budget controls are established within the budget to improve
fiscal responsibility and discipline.
Transparency: Fostered more transparency and visibility into Puerto Rico’s
government finances, including Puerto Rico’s liquidity, budgets, and other intergov-
ernmental spending—notwithstanding the Government’s continued delays in com-
pleting its overdue audited financial statements. Moreover, the people of Puerto Rico
now have access to public reports, including: bank balances, quarterly budget to
actuals, payroll and attendance, and tax expenditures.
33
Contract review: FOMB is reviewing contracts for approval pursuant to Section
204(b)(2) of PROMESA to assure that they ‘‘promote market competition’’ and ‘‘are
not inconsistent with the approved fiscal plan’’. Further, in an effort to comply with
Section 204(b)(3) of PROMESA, FOMB is currently enhancing its Contract Review
& Procurement Office with seasoned procurement, contract management and qual-
ity resources with the sole purpose of bridging collaboration with the government
toward providing an end-to-end support in their procurement process, from the iden-
tification of the need(s) to the award of the service/product, the contract develop-
ment itself and the subsequent follow up on critical essential services deliverables/
milestones. The new office, which is expected to start in July 2020, is also working
on reviewing and approving Government procurement regulations on purchases and
contract registration to make the procurement and contracting process more trans-
parent. By promoting market competition, the Contract Review & Procurement
Office seeks to aid the Government in becoming more transparent and accountable
to the people of Puerto Rico.
Document requests for COVID-19 related issues: FOMB seeks to understand
the processes under which these contracts were negotiated, procured, and approved
to, among other things, increase the public’s faith in the Government contracting
process and improve the emergency procurement process. FOMB has requested all
this information to the Government. Unfortunately, much of it has not been pro-
vided after months of requests in writing. For such reason, FOMB filed a complaint
in the U.S. District Court for the District of Puerto Rico to compel the Government
to provide the missing documents.
Question 18. Due to a lack of government revenue, municipalities in Puerto Rico
are highly concerned with liquidity. Although the Oversight Board approved a $185
million line of credit for the Municipal Revenue Collection Center, known as CRIM,
the Government of Puerto Rico rejected the loan. Shortly after, the Puerto Rican legis-
lature tried to push for a bill that would grant access to the Oversight Board’s emer-
gency funds to obtain this $185 million line of credit. The Oversight Board rejected
this proposal. What steps will the Board be taking to address the liquidity of munici-
palities given these challenges?
Answer. FOMB is working with CRIM and the Government on how to reimburse
the Commonwealth for amounts paid to the municipalities under the now invalid
Law 29. FOMB has developed a plan to reimburse the Commonwealth, with several
options which only incrementally affects the budgets of the municipalities in Fiscal
Year 2020.
The Government and FOMB were aligned in offering CRIM a $185 million line
of credit, to help with its decision to defer property tax revenue in light of the pan-
demic, and CRIM rejected it. FOMB has asked CRIM, repeatedly, for an amount
works to structure a line of credit facility. The Puerto Rico legislature was
considering legislation in the Senate enabling the $185 million line of credit and
legislation in the House providing unbudgeted funds to the municipalities.
Moreover, FOMB has also adopted a number of measures to address these liquid-
ity situation, such as authorizing use of funds from the Emergency Reserve Fund
for municipalities, $15 million for 18 municipalities impacted by the January 2020
earthquakes, $100 million as part of the COVID Emergency Measures Support
Package, and over $30 million to cover the demolition and debris removal in 11
municipalities. In addition, the territorial government has allocated an additional
$100 million to municipalities for eligible COVID-19 related expenses from its
CARES Act funding.

Questions Submitted by Rep. Sablan

Question 1. The Oversight Board wrote in support of the establishment of new
incentives to restore U.S. manufacturing—specifically pharmaceutical factories and
medical device plants currently located in China—to return to Puerto Rico. There are
two bills that have similar objectives. One by Rep. Stacey Plaskett to cut the Global
Intangible Low-taxed Income (GILTI) tax for companies that create jobs in the terri-
tories. The other bill by Resident Commissioner Jenniffer González-Colón would pro-
vide federal tax incentives to economically depressed areas, also known as distressed
zones, for the manufacturing of vital medical supplies. Which, if any, of these bills
does the Oversight Board support?
34
Answer. As stated in reply to the same question from Chair Grijalva, FOMB has
not taken a position on either bill. However, as elaborated above, FOMB is con-
ducting a comprehensive study for the private sector and the Government to define
a comprehensive, actionable plan to reactivate manufacturing in Puerto Rico.

Questions Submitted by Rep. Costa

Question 1. In order to help Puerto Rico achieve fiscal responsibility and sustain-
ability, PROMESA required that Puerto Rico’s audited financials be made current
yet Puerto Rico remains behind in its audited financials even though PROMESA is
now almost 5 years old. Are there factors attributing to the delay of the financial
auditing process? If so, could you please elaborate on which factors?
Answer. FOMB has received the FY 2016 audited financial statements from the
Government, but the FY 2017 financial statements remain incomplete. The latest
date targeted by the Secretary of Hacienda to provide those statements is July 30,
2020. For a significant period of time, FOMB has been urging the Government to
update its audited financial statements and pressing the auditors to meet with
those elements that are delayed. The factors that have led to historic delays in the
issuance of audited financial statements include the numerous and disaggregated
accounting systems, manual procedures, numerous circular letters, and a decentral-
ized Chief Financial Officer function.
Question 2. The Financial Oversight & Management Board in an early fiscal plan
was projected to spend $1.5 billion on advisory fees. However, since then, this num-
ber has increased and there are growing concerns over where such fees are going.
Could you please provide the amount the Commonwealth and the Board has spent
on aggregate financial and legal advisory fees per year? Could please elaborate on
why the fees have increased?
Answer. FOMB’s budget for this fiscal year is $58M, which we decreased by 11
percent from last year by hiring more staff and reducing our reliance on outside con-
sultants. FOMB is working with the Government to fix a decades-long problem. To
do so, FOMB has recruited the best firms that provide expertise in the many areas
that FOMB needs to work to achieve lasting, sustainable solutions to fiscal manage-
ment and practices.
FOMB’s operating budget per year is included below:

FY 17 FY 18 FY 19 FY 20

$31M $60M $64M $58M

The Title III process includes many professional and advisor fees from FOMB as
well as the Government, the Unsecured Creditor Committee, and the Committee of
Retirees, among others. The growing cost for the Title III process is largely due to
the large number of lawsuits pending and challenges in reaching consensual agree-
ments for debt restructuring.
In total, for the period from FY2018 to FY2024, the Title III restructuring-related
expenditures projection in the 2020 Fiscal Plan continues to be ∼$1.1 billion (same
as the 2019 Fiscal Plan), however, uncertainty stemming from the series of recent
natural disasters and ongoing COVID-19 pandemic have drawn out the restruc-
turing process longer than anticipated. When adding FOMB’s operating costs for
this same period, the total cost adds up to around ∼$1.5B. Thus, it is not correct
that the number has increased.

Questions Submitted by Rep. Cartwright

Question 1. The 2020 Fiscal Plan includes various projections of the GNP short-
falls due to the pandemic. However, I’d like more clarity on the impact on tax
revenue for this year and upcoming years. How severely were tax revenue projections
impacted this fiscal year? What do the projected tax revenue projections look like for
the upcoming years?
Answer. We estimate a revenue reduction of $1.3 billion in the current fiscal year
2020, $1.2 billion in fiscal year 2021, and $774 million in fiscal year 2022, relative
to the revenue projections in the 2019 Fiscal Plan.
35
Question 2. In the hearing before this Committee in May 2019, you called the
University of Puerto Rico ‘‘the island’s crown jewel’’ and stated that ‘‘in many ways
the future of Puerto Rico depends on a vibrant and sustainable UPR’’. What steps
has the Financial Oversight and Management Board taken to protect this crown
jewel? How can the Board ensure that there is sufficient funding for the institution
to fulfill its role?
Answer. In response to the same question from Chair Grijalva, I have elaborated
on FOMB’s substantial commitment to the protection of UPR and financial support
for UPR, as well as the fundamental financial challenges which UPR must address
and the structural reforms it must implement in the coming years.
To reiterate, in the coming fiscal year, UPR needs to focus on increasing revenues,
attracting more students, implementing its scholarship funds, preserving its faculty,
securing the pensions of its staff, and cutting administrative costs.

Questions Submitted by Rep. Garcı́a

Question 1. During last week’s hearing you stated that the allegations of insider
trading during the mediation process are not the FOMB’s responsibility and that the
bankruptcy court, the mediation team and law enforcement were responsible for eval-
uating these claims and determining whether wrongdoing occurred. If participants
in the mediation process are found to have engaged in insider trading during the
private negotiations, could that revelation undermine the legitimacy of the bank-
ruptcy process? What will FOMB do to ensure confidence in the process moving
forward?
Answer. This question raises issues extremely important to FOMB. The mediation
process was introduced early in the Title III cases by the presiding judge, U.S.
District Judge Laura Taylor Swain. Judge Swain appointed several sitting federal
judges to serve as mediators. The mediation process is governed by a mediation
agreement approved by Judge Swain. Among other things, it requires strict con-
fidentiality. The mediation process has had several huge successes that led to the
successful Title III restructuring of COFINA involving approximately $18 billion of
debt, and Title VI restructuring of Government Development Bank involving more
than $4 billion of debt. Just prior to COVID-19, the mediation process led to the
proposal of a Title III plan of adjustment for the Commonwealth and PBA supported
by the statutory retiree committee and holders of many billions of the General
Obligation bonds.
From the beginning, the mediation process embodied several practices designed
to instill fairness and to deter or prevent wrongful insider trading. These practices
included (a) enforcement of Bankruptcy Rule 2019 requiring groups of holders to
disclose, among other things, their debt holdings and changes in their debt holdings,
(b) limiting some mediation sessions to creditors’ advisors so the creditors them-
selves would not receive inside information about the negotiations, and (c) ‘blowout
dates,’ under which the creditors themselves would engage in mediation sessions
knowing that the offers and counteroffers would be publicly disclosed by a date cer-
tain (the blowout date) after which creditors could trade because the information
would no longer be inside information.
Significantly, insider trading provides unfair profits to the entity trading on mate-
rial inside information and simultaneously causes prices to move in the direction of
fair value. Therefore, while such insider trading is wrongful and its perpetrators
should be punished, it does not affect the legitimacy of the Title III process which
benefits from securities prices adjusting to fair value. FOMB is adamantly opposed
to allowing anyone in the Title III process to abuse it for any purpose, especially
for wrongful personal gain. Therefore, if changes in price levels are shown to pre-
cede the blowouts of material inside information, FOMB would support actions by
the Title III court to require creditors and anyone else privy to the information to
disclose their trading records. Any entities proven to have traded on material inside
information should be compelled to disgorge all wrongful profits and to pay
penalties.

Questions Submitted by Rep. Bishop

Question 1. PROMESA required that Puerto Rico’s audited financials be made
current, yet Puerto Rico is further behind in its audited financials today than it was
when PROMESA was passed. Is this a failure of the FOMB or the Commonwealth
or both?
36
Answer. FOMB has helped foster more transparency and visibility into Puerto
Rico’s government finances, including Puerto Rico’s liquidity, budgets, and other
intergovernmental spending. The issue of audited financials, however, is squarely
within the authority and responsibility of the Government. Disaggregated account-
ing systems, manual procedures, numerous circular letters, and a decentralized
Chief Financial Officer function have contributed to consistent delays in the produc-
tion of audited reports.
FOMB, in its oversight role, has been actively collaborating in an attempt (1) to
identify the challenges to issuance (ii) to ensure that audits are completed as quick-
ly as possible; (ii) to institutionalize best practices within the Government; and (iii)
to enable the Government to have appropriate resources for the preparation of the
CAFRs. During this fiscal year, FOMB has been conducting recurring meetings, in
some cases on a weekly basis, with the Department of the Treasury, the Govern-
ment’s external auditors, and key component entities within the Government to help
expedite the overdue delivery of the FY2017 CAFRs and assess the timing of the
FY2018 audit. In this spirit, FOMB has provided recommendations on relevant
administrative orders submitted FOMB’s consideration pursuant to the Rules,
Regulations and Orders Review Policy; and requested the Government provide:
• weekly updates from the Department of Treasury on progress and risks to the
completion of the FY2017 CAFRs;
• progress reports on the FY2018 audit preparation;
• submission of the FY2018 proposed external auditor contract pursuant to
FOMB’s Contract Review Policy; and
• any and all other information requested in an effort to lend a hand, evaluate
key constraints, and facilitate the prompt delivery of current and future
audits.
On July 1, 2020, FOMB held a follow up hearing on the status of the issuance
of the audited financials, during which it required the Government to submit a 30-
day plan to urgently speed up the issuance of the audited financials. This plan will
be presented to FOMB at the end of this month.
Question 2. With aggregate balances now totaling more than $19 billion sitting in
Commonwealth accounts (and virtually half of that being unrestricted in use), why
have the Commonwealth and FOMB not been able to make more development
progress, and also bring bankruptcy proceedings to a conclusion? Why haven’t these
funds been utilized to help Puerto Rico develop, and to honor what obligations could
be honored in a timely fashion?
Answer.
(a) Answer Regarding Development
FOMB’s fiscal plans have pressed for major structural reforms to restore competi-
tiveness, enable growth, and spur a return to prosperity. These include human cap-
ital, welfare, and education reforms to advance successful participation in the formal
labor market, reforms to streamline core business processes to improve the ease of
doing business and enable job creation, and proposals to enable reliable power and
stable infrastructure for businesses and households. In addition to these structural
reforms, the fiscal plans have focused on improving the responsiveness and
efficiency of the Government, while reducing unnecessary administrative expenses.
Since 2017, and notwithstanding the environmental and public health emer-
gencies, FOMB has been able to drive meaningful progress in creating a leaner,
more affordable government. This has resulted in the ability of the Government to
increase expenditures at a time of crisis, while ensuring total expenditure levels
remain within total available revenues.
Unfortunately, despite this real progress in the face of ongoing crises, the Govern-
ment has still failed to achieve meaningful economic growth through structural
reforms or drive operational change that would deliver greater responsiveness and
efficiency. Efforts at private sector labor market reforms have stalled, the progress
from human capital and welfare reform is not expected for several years, and the
recent efforts to improve the ease of doing business have not changed the burden
on businesses in any meaningful way.
Rather than achieving budget savings by improving the way services are delivered
or discontinuing duplicative or unimportant services, the Government has enacted
broad-based early retirement programs to reduce headcount, creating major gaps in
capabilities and functionality and potentially putting services at risk. Across many
areas, the Government has struggled to implement changes, with even new invest-
ments often not driving the intended use. Absent real reform, Puerto Rico may not
37
ever fully recover from all its recent crises. The 2020 fiscal plan lays out the mean-
ingful changes needed to lead to an effective, responsive government and growing
economy.
(b) Answer Regarding Bankruptcy Proceedings
To date, FOMB has successfully: (1) developed and the District Court has
confirmed a Title III Plan of Adjustment for COFINA; (2) authorized and the
District Court has confirmed a Title VI Plan of Adjustment for GDB; and (3)
supported a nearly $1 billion loan restructuring agreement for PRASA with EPA
and USDA.
FOMB proposed an amended Plan of Adjustment in February 2020 to restructure
$35 billion of debt and other claims against the Commonwealth of Puerto Rico, the
Public Building Authority, and the Employee Retirement System, and more than
$50 billion of pension liabilities. The Plan of Adjustment significantly reduces $35
billion in debt liabilities to $11 billion, or about 70 percent, and ensures that almost
75 percent of current and future pensioners are not cut. The Plan of Adjustment
also provides predictability to public employees via updated collective bargaining
agreements and restores over $1.3 billion of withheld employee contributions to
Sistema 2000. The Plan of Adjustment has been supported by the Official
Committee of Retirees representing retired government employees, current govern-
ment employees represented by the Public Service Union as the Puerto Rico chapter
of AFSCME, and the Lawful Constitutional Debt Coalition, a group of investors and
funds holding Puerto Rico’s general obligation bonds and PBA bonds.
FOMB also has been seeking broader active public employee support and feed-
back, including from teachers represented by the Puerto Rico chapter of AFT. The
Special Investigations Committee hired the law firm Kobre & Kim to provide a
complete, independent review of the Government’s debt, ultimately receiving a com-
prehensive investigative report. Following on Kobre & Kim’s findings, FOMB under-
took review of potential infirmities of debt issued by Puerto Rico and its various
agencies and instrumentalities. Through its Special Claims Committee, FOMB
objected to the validity of over $11 billion of general obligations bonds and filed sev-
eral hundred complaints against entities to recover their payment related to
issuance of that debt.
That committee also filed complaints against over 20 banks, law firms, and other
parties to recover fees earned in issuance of nearly $9 billion in bonds. Given the
considerable uncertainty about the effect of COVID-19 on Puerto Rico, however,
FOMB continues to believe that the primary focus of the Government and FOMB
should be to minimize and contain the pandemic. Furthermore, even with imple-
mentation of far reaching growth-inducing structural reforms, the 2020 Fiscal Plan
projects that the Government cannot afford to pay the public debt as originally
contracted.
Recognizing the importance of the ongoing Title III cases, but taking into account
these realities, on March 23 FOMB presented a motion requesting the Title III court
to adjourn consideration of the proposed Plan of Adjustment’s disclosure statement
hearing until further notice. The proposed Plan of Adjustment is now on hold and
the next status report is due on July 15.
As to PREPA, FOMB and the Government filed a motion seeking to adjourn the
hearing and all deadlines related to the PREPA restructuring support agreement.
On May 15, FOMB and the Government provided a required update, stating that
all briefing and hearing deadlines relating to the restructuring support agreement
should continue to be adjourned.
(c) Answer Regarding Use of Funds to Help Puerto Rico Develop and Honor
Obligations
FOMB is dedicated to the development of the Island and honoring its commit-
ments to all stakeholders, including residents, retirees, and creditors.
It is important to clarify that Puerto Rico’s cash balances are not all unrestricted.
The major categories of restrictions that reduce the cash available include monies
with federal and state legal restrictions, including federal funds, working capital
requirements, and cash set aside to replenish emergency reserves. Moreover, part
of the cash was contemplated to be used as part of the proposed Commonwealth
Plan of Adjustment, including union and retiree settlements, a pension trust, and
reinstatement of pensions contributions.
Fiscal Plans certified by FOMB have pressed for major structural reforms to
restore competitiveness, enable growth, and spur a return to prosperity. These in-
clude human capital, welfare, and education reforms to advance successful partici-
pation in the formal labor market, reforms to streamline core business processes
(e.g., paying taxes, registering property and obtaining permits) to improve the ease
of doing business and enable job creation, and proposals to enable reliable power
38
and stable infrastructure for businesses and households. In addition to these struc-
tural reforms, the Fiscal Plans have focused on improving the responsiveness and
efficiency of the Government, while reducing unnecessary administrative expenses
and mitigating the escalating growth of healthcare and pension costs, which could
otherwise cripple future governments.
The Fiscal Plans have accompanied these reforms with targeted investments in
and support for those on the front lines of service delivery. Over the years, the
Fiscal Plans have provided for salary raises for teachers, school principals, fire-
fighters, and police officers to ensure salaries for these critical frontline roles are
more competitive. Strategic capital investments have been made in hospitals, correc-
tional institutions, public safety equipment, and other infrastructure. Moreover, the
Fiscal Plans have included increased spending in areas that are important for the
people of Puerto Rico: funds for an Earned Income Tax Credit to encourage more
formal labor market participation, needs-based scholarships for UPR to ensure every
student on the Island can access higher education, funds for the Puerto Rico Clean
Water and Drinking Water State Revolving Fund, and an emergency reserve to en-
able immediate Government action in times of crisis, among others. A specific list
categories of investments in included herein:
• Immediate support for COVID-19 response: Recognizing the imperative
for the public health system to focus its efforts on slowing the spread of
COVID-19 and healing those affected, as part of the Emergency Measures
Support Package certified on March 28, 2020, the FOMB approved $787
million in additional expenditures solely focused on COVID-19 response.
These funds are intended to provide ‘‘hazard pay’’ for frontline workers
(including public and private nurses and technicians, police, certain correc-
tional staff, and professionals managing taxes and financial operations), med-
ical and public safety supplies and capital expenditures, distance learning in
the public education system, and $100 million in support for municipalities
facing reductions in revenue due to the pandemic.
• Investing in critical healthcare infrastructure: FOMB proposed the
Government to use remaining FY2020 funds to invest in near-term improve-
ments to the Island’s healthcare infrastructure. These opportunities represent
$313 million of investment in areas that include addressing critical infra-
structure gaps in public hospitals (e.g., the renovation of functionally obsolete
facilities, purchase of power generators), instituting and expanding the use of
Electronic Health Record programs, expanding access to care through devel-
opment of telehealth infrastructure, enhancing access to opioid medication
and treatment programs, and providing scholarships to healthcare students
who are committed to working in underserved areas of Puerto Rico.
• Enhancing healthcare services: The 2020 Fiscal Plan builds on the stra-
tegic healthcare investments from prior Fiscal Plans to stabilize and improve
the healthcare system. It directs $586 million to improve the availability and
quality of care under the Medicaid system, maintain nurse and health profes-
sional staffing levels, increase hospital capacity through major capital
projects, operationalize the Comprehensive Cancer Center, and enable
operational efficiencies.
• Safeguarding public safety: The 2020 Fiscal Plan adds to prior invest-
ments, enabling almost $1.3 billion in public safety funding. This includes
continuing significant investments made in the May 2019 Fiscal Plan to pro-
vide sworn police officers with more competitive salaries and benefits
(including, life and disability insurance, Social Security coverage), as well as
the final of three installments to cover back pay for police, which represents
∼$122 million in FY2021. These investments are meant to ensure that more
sworn officers can remain on Island and serve in the field. Given the emer-
gencies that Puerto Rico has recently experienced, FOMB also believes it is
ever more important to ensure that there are enough emergency response per-
sonnel available to help residents. The 2020 Fiscal Plan provides funds to re-
cruit paramedics and dispatchers, hire additional specialists at the Forensic
Sciences Institute, support salary increases for firefighters, and provide public
safety equipment, materials, and vehicles.
• Driving education outcomes: FOMB has long recognized that significant
and thoughtful investment in the educational system is key to a stronger eco-
nomic future for Puerto Rico. The 2020 Fiscal Plan includes over $760 million
for strengthening English Language Learning training for teachers, bringing
psychologists on staff to provide evidence-based therapies for Special
Education students, hiring additional public-school nurses, driving
39
digitization to improve management and reporting, and compensating transi-
tory teachers and directors, who PRDE mistakenly excluded from the FY2019
and FY2020 salary raises previously funded by FOMB.
• Strengthening the technology sector: Addressing the digital divide is crit-
ical to ensuring that all residents of Puerto Rico can take advantage of the
well-documented socioeconomic benefits afforded by Internet connections (e.g.,
telehealth, distance learning, remote work). Important infrastructure gaps re-
main, particularly across rural areas of the Island. The 2020 Fiscal Plan in-
cludes $400 million to expand access to broadband for the residents of Puerto
Rico, thereby improving economic opportunities for those in rural areas. The
2020 Fiscal Plan also recognizes that technology skills are critical for the fu-
ture of the workforce; it thus includes $50 million in funding to invest in
workforce development, specifically focused on business- and technology-
related disciplines.
• Reactivating the manufacturing sector: The COVID-19 pandemic has
made it apparent that most raw materials and medical products necessary to
ensure national security are manufactured in China, India, and other coun-
tries outside the United States. This represents a unique opportunity for
Puerto Rico as a capable and reliable venue for manufacturing under the U.S.
flag. As part of implementation of the 2020 Fiscal Plan, FOMB will conduct
a comprehensive study to update the facts and acquire the knowledge nec-
essary for the private sector and the Government to define a comprehensive
and actionable plan to reactivate the manufacturing sector in Puerto Rico.
• University of Puerto Rico: The 2020 Fiscal Plan provides $43 million in
FY2021 for the UPR scholarship fund and a total of $179 million over
FY2020–FY2025 to meet the needs of the most financially vulnerable
students. The 2020 Fiscal Plan also provides $30 million for an independently
managed scholarship fund for healthcare (e.g., medical, dental, nursing)
students and residents who commit to serving in rural and underserved
areas.
• Supporting the needs of municipalities: In addition to the $100 million
in support post-COVID-19, the Fiscal Plan includes several investments to
support municipalities. These include: $185 million available through July 31,
2020, for a short-term liquidity facility to ensure that monthly property tax
remittances can continue to be advanced to municipalities (given major delays
in tax payments), thereby supporting the viability of municipal operations,
$110 million ($22 million per year through FY2025) as an incentive for vol-
untary service consolidation, and up to $92 million to fund demolition and de-
bris removal projects for municipalities in the southwest region of the Island.
• Transforming government services: The 2020 Fiscal Plan includes $94
million to support hiring of additional staff in core programs (e.g., NAP, GSA
procurement initiative) as well as incentives to drive change in government,
including to publish the 2017 CAFR, conduct an analysis of the correctional
system footprint to enable consolidation, implement a common ERP system,
and publish private sector incentives.
• Expediting reconstruction efforts: The 2020 Fiscal Plan provides for $750
million in working capital to be made available to facilitate FEMA-approved
reconstruction efforts. These funds will accelerate rebuilding efforts by pro-
viding the necessary capital upfront, with repayment via reimbursement from
the Federal Government.2
Question 3. The FOMB in an early fiscal plan projected an astonishing $1.5 billion
to be spent on advisory fees. Several years hence, how much money have the
Commonwealth and FOMB in fact spent on aggregate financial and legal advisory
fees so far since Puerto Rico began defaulting on its debt? Has this process created
a class of people that benefit financially from the prolonged continuation of
bankruptcy?
Answer. In total, for the period from FY2018 to FY2024, the restructuring-related
expenditures projection in the 2020 Fiscal Plan continues to be ∼$1.1 billion
(without change from the 2019 Fiscal Plan), however, uncertainty stemming from
the series of recent natural disasters and ongoing COVID-19 pandemic have drawn
out the restructuring process longer than anticipated. When adding FOMB’s

2 The working capital facility is considered a use of the Commonwealth balance sheet, not a
Fiscal Plan expense.
40
operating costs for this same period, the total cost adds up to around ∼$1.5B. Thus,
there it is not correct that the number has increased.
Professionals for FOMB, the Government, the Unsecured Creditors’ Committee,
the Retiree Committee, and the mediation team have requested about $704 million
in fees and expenses through the Title III compensation process through June 8,
2020. The breakdown is as follows:
The $704 million figure includes:
• FOMB: $326,706,771.01 (This includes the Special Claims Committee firms)
• Government: $234,687,347.34
• COR/UCC: $118,997,235.43
• The total of those three categories is $680,391,353.78.
• COFINA Agent and professionals: $20,700,188.03
• Mediation Team: $2,621,178.21
Fees were developed in conjunction with the Government and were benchmarked
versus comparable restructuring situations that yield an average professional-fee-to-
funded-debt ratio of 2.08 percent relative to 1.68 percent projected for the Common-
wealth. See Exhibit 20 from the Fiscal Plan below:
Professional fees for restructuring
(Excludes pensions and other retirement liabilities)

Moreover, expenses specifically related to the Title III process under PROMESA
are reviewed by a Court-appointed fee examiner. For FOMB’s operating expenses,
FOMB has retained its own fee examiner.
Question 4. Even before the COVID-19 pandemic began, the FOMB and Common-
wealth had not abided by their own agreement under the 2019 PREPA Restructuring
Support agreement to raise a 1 cent interim rate increase case to the PREB, why?
Answer. Under the PREPA restructuring support agreement, PREPA was only
obligated to implement the 1 cent ‘‘settlement charge’’ and commence settlement
payments to participating bondholders upon entry of the order approving the RSA
settlement. The hearing on the settlement motion has been continued for various
reasons and, as indicated in our May 15, 2020 status report, we do not yet have
sufficient visibility to determine whether the RSA settlements are feasible in light
of the impact of the pandemic on the island economy. PREPA has therefore held
off on adding this charge and increasing rates near term until this determination
is made.
Question 5. We have entered into the 4th year of bankruptcy proceedings, what has
the FOMB accomplished to restore access to the capital markets for Puerto Rico, one
of the only two explicit objectives of PROMESA?
Answer. Please see answer 2(b) above.
41
Question 6. The latest fiscal plan certified by the FOMB shows Puerto Rico
returning to long-term deficits after 2032 and beyond, even before paying contractual
debt service. How is it possible that there are no reforms or potential recovery that
can put Puerto Rico on the right track in the long term?
Answer. There are indeed reforms that could put Puerto Rico on the right track
in the long term. However, only a portion of them are agreed to in substance with
the Government of Puerto Rico, and thus, reflected in the 2020 Fiscal Plan. The
2020 Fiscal Plan financial forecasts include:
• Energy and ease of doing business reforms are projected to increase GNP by
0.60% by FY2025;
• Human Capital and welfare reform is expected to add another 0.15% in
FY2026; and
• K–12 education reforms add an additional 0.01% annual impact beginning in
FY2037,
These sets of reforms result in total GNP increase from structural reforms of 0.75
percent by FY2026 and 0.88 percent by FY2049. The anticipated timing of the incre-
mental positive impact of these reforms has been delayed in this Fiscal Plan given
the delay in the Government’s implementation efforts.
Yet even with full implementation of these, the 2020 Fiscal Plan suggests that
the current financial trajectory is not sustainable in the long term. Perhaps more
importantly, the 2020 Fiscal Plan, even if implemented in full, will not raise Puerto
Rico and its residents to a level of prosperity comparable to even the poorest states
on the U.S. mainland. There continues to be insufficient political appetite 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.
While the 2020 Fiscal Plan projects deficits from FY2032 onward, the Government
will be required to take additional measures that go beyond this 2020 Fiscal Plan.
Accordingly, what follows are a set of options that future governments can consider
in order to obtain fiscal balance in the out-years. Some of these reforms, which
would reduce deficits and therefore make funds available for a variety of potential
uses, have been proposed by FOMB but have not been adopted.
• Private sector labor reform, generating an additional 0.50 percent GNP
growth over 2 years, by repealing Law 80, reducing paid leave, and elimi-
nating the Christmas Bonus. Key reforms could require incentives, such as
wage subsidies for low-income workers and training programs to address
identifiable skills gaps. The reform is projected to increase the 30-year
surplus by ∼$10 billion if implemented after 10 years (FY2030) and by ∼$3
billion if implemented within 20 years (FY2040).
• Ease of Doing Business reform, generating an additional 0.15 percent GNP
growth, based on instituting Trading Across Borders reform to improve cus-
toms processes and congestion and repealing restrictive laws (e.g., Laws 21
and 75 dictating terms for terminating commercial supplier relationships).
The 30-year surplus is projected to increase by ∼$3 billion if implemented
after 10 years (FY2030) and by ∼$850 million if implementation lags by 20
years (FY2040).
• Overhaul of the tax system of Puerto Rico to stimulate growth, requiring
short-term investment (lower revenues in short-term) for long-term growth
benefits up to 0.5 percent spread over 5 years. The reform is projected to in-
crease the 30-year surplus by ∼$9 billion if implemented after 10 years
(FY2030) and by ∼$2 billion if implementation lags by 20 years (FY2040).
• Imposing a cap on total healthcare expenditure growth at 2 percent above
standard inflation is projected to result in savings of ∼$14 billion by FY2049
if implemented in FY2030 and ∼$3 billion if implemented in FY2040.
• Securing additional permanent Federal funding for Medicaid of ∼$1 billion
per year (and growing with inflation) is projected to increase the 30-year
surplus by ∼$27 billion if begun in FY2030 and ∼$11 billion if begun in
FY2040.
• Risks to the long-term projections in the 2020 Fiscal Plan. While the 2020
Fiscal Plan projects that ∼$8 billion surplus will be generated through
FY2020–2031, there are several variables that have a material impact on the
long-term financial projections in the 2020 Fiscal Plan. The impacts of
COVID-19 remain highly uncertain at this stage and could prove to be longer-
lasting and greater than anticipated. Moreover, revenues could be
42
compromised through lower growth generated by delayed or not implemented
structural reforms, lower than expected federal funding, and/or less efficient
spending on capital than projected. Both revenues and expenditures could be
impacted by demographic shifts not yet seen on the Island, and in the areas
of government expenditures.
• Lack of implementation of healthcare reform measures could affect the long-
term projections of the 2020 Fiscal Plan. If healthcare reform measures are
not implemented starting in FY2021, the surplus would decrease by $14
billion.
• Implementation risk of agency efficiency measures also exists. For example,
if only 50 percent of the projected run rate agency efficiency measures are
achieved, the 30-year surplus would decrease by $21 billion. Similarly, if only
75 percent of the projected run rate agency efficiency measures are achieved,
the 30-year surplus would decrease by $11 billion.
Question 7. PROMESA requires that any Certified Fiscal Plan respect the
Constitutional Priorities and lawful liens. How does this new certified plan meet that
requirement?
Answer. PROMESA section 201(b)(1)(N) provides the fiscal plan shall ‘‘respect the
relative lawful priorities or lawful liens, as may be applicable, in the constitution,
other laws, or agreements of . . .’’ Puerto Rico. As you know, the fiscal plan is com-
posed of FOMB’s methods for carrying out the congressional policies and require-
ments in section 201(b)(1). Notably, the fiscal plan is not a plan of adjustment.
Plans of adjustment discharge claims, extinguish liens, and determine how each
claim and lien is treated, and are governed by Title III of PROMESA. PROMESA
section 106(e) provides the court lacks subject matter jurisdiction over challenges to
FOMB’s certifications of fiscal plans, while the court can and must review plans of
adjustment before they can become effective. Therefore, the fiscal plans do not dis-
charge any debt, extinguish any lien, or determine the treatment of any claim, all
of which are done in Title III plans of adjustment.
Question 8. Why were all fiscal quarters before the COVID-19 lockdown producing
revenues well in excess of FOMB near term projections? What does this say about
new projections that are even more draconianly conservative than ever before? What
about longer term projections that are more difficult to make accurate predictions
over than short term ones?
Answer. The Fiscal Plan projects revenues based on underlying economic and/or
demographic indicators such as GNP growth and population. Those projections are
tracked against actual receipts, as reported by Hacienda. In the first 6 months of
the fiscal year (pre-COVID), revenue receipts were largely in line with projections
with the exception of corporate income tax, which was significantly higher than pro-
jected in large part due to a one-time payment of approximately $0.5 billion related
to a large multinational M&A transaction. Some revenue lines were ahead of fore-
cast (individual income tax, motor vehicle excise tax, rum tax, Act 154, and other
general fund revenue), while others were below forecast (non-resident withholdings,
alcoholic beverages, cigarette taxes, and sales and use tax). As explained in the
Fiscal Plan, long-term revenue projections depend directly on projections of future
economic growth and other demographic factors.
Question 9. Given that the FOMB is the debtor representative before the
bankruptcy courts, is it necessary to gain Commonwealth support for every deal?
Answer. Support from the Commonwealth strongly helps the process to move
along more efficiently and effectively. Government support is required to the extent
that legislation is required to affect the proposed transaction. Moreover, especially
in the current complex political environment, building support across the Govern-
ment and maintaining public goodwill is an important part of working within the
cultural and financial context of Puerto Rico.
Question 10. How and why does the FOMB project decreasing population on the
island ad infinitum, yet at the same time show rapidly rising gross healthcare costs
despite the declining population?
Answer. Even before Hurricanes Maria and Irma hit the Island in 2017, Puerto
Rico’s population had been trending downward by 1–2 percent every year as resi-
dents have left to seek opportunities elsewhere and birth rates declined. In 2016,
the U.S. Census Bureau’s official forecast, projected a worsening population outlook
due in large part to Puerto Rico’s rapidly aging population. This high average age
range results from extremely low age-adjusted birth rates and outmigration of
younger people. Indeed, in 2016, Puerto Rico began to experience negative natural
43
population change (a higher number of deaths than births). This negative natural
change has continued unabated into 2020.
Hurricanes Irma and Maria served to compound the problem, spurring an addi-
tional outflow of people just as natural population decline has set in, as many resi-
dents lost houses, jobs, and loved ones. While some of these people have returned,
the population is still projected to decline over the course of the 2020 Fiscal Plan
period and beyond. Further disasters, such as the series of earthquakes experienced
in 2020, have not made a swift return to balanced migration any more likely. But
while net migration is a larger driver of population change in the short term, this
factor is volatile; in the long run, net migration is projected to return to more bal-
anced trends. Meanwhile, natural population change is not guaranteed to rebalance
at any point, and births are likely to continue declining, while deaths are projected
to rise or stay stable.
The COVID-19 pandemic has been less severe in Puerto Rico than in many other
areas thus far, and therefore no large epidemic-driven mortality rate increase is an-
ticipated. COVID-19 is expected to suppress air traffic between Puerto Rico and the
mainland, and thus impact migration, but this effect will be transitory.
The 2020 Fiscal Plan projects that by FY2025, there will be 9 percent fewer peo-
ple living on the Island than in FY2019, and that by FY2049, the drop will grow
to 30 percent.
Notwithstanding the population decline, the Commonwealth’s healthcare costs
grow faster than inflation. Medicaid premiums grow at a faster pace than standard
inflation and are instead grown by a per member per month (PMPM) growth rate
and population change. On average, costs per demographic group will increase con-
sistent with historical Puerto Rico healthcare costs, and in line with external data.
However, the latest projections suggest the magnitude of this trend will not be as
significant as reflected previous Fiscal Plans. From FY2026–FY2049, the age-mix-
adjusted PMPM growth rate is expected to decline from 5.30 percent in FY2026 to
4.75 percent in FY2049. This projection is driven by two factors. First, current de-
mographic projections suggest that the population is not aging as fast as previously
projected, which causes declines in overall healthcare utilization. Second, general
cost efficiency spillovers from the U.S. mainland are expected to exert downward
pressure on PMPMs. In the near-term, PMPM growth is expected to be muted in
FY2020 due to lower utilization driven by the COVID-19 pandemic. Social
distancing and stay-at-home guidance have lowered utilization of the healthcare sys-
tem. Between FY2020 and FY2022, the PMPM growth rate is expected to increase
from 4.5 percent to 5.5 percent as utilization recovers from both the COVID-19
pandemic and persistent impact from Hurricane Maria.
Important to note is that in 2019, 37 percent of Puerto Ricans received their
health coverage through the Commonwealth’s state-run Medicaid program. This was
a higher share of Medicaid/CHIP-funded health insurance coverage than any U.S.
state. In addition to its large covered population, Puerto Rico has lagged U.S. states
in both health outcomes and access. Puerto Ricans face higher rates of chronic con-
ditions like hypertension, diabetes, and asthma than national averages. Puerto Rico
also has higher premature birth and infant mortality rates, and higher rates of
adults reporting fair or poor health. At the same time, 72 of Puerto Rico’s 78
municipalities are deemed ‘‘medically underserved areas,’’ with 500 doctors leaving
per year. As a result, Puerto Rico has half the rate of specialists as compared to
U.S. states in critical fields.
Puerto Rico’s Government-funded health plan, Vital, covers individuals through
three primary funding sources: federally matched Medicaid funds, the Children’s
Health Insurance Program, and the Commonwealth’s self-funded insurance program
for low-income adults. An additional 8 percent of the Puerto Rican population
receives some benefits from the Government as part of the Platino program, which
supports Medicare Advantage recipients who also qualify for Medicaid.
Question 11. Puerto Rico has received near 80 percent Medicaid FMAP since well
before the fiscal crisis began. The funding has been extended regularly. The Common-
wealth draft fiscal plan projected 55 percent long-term funding. PROMESA explicitly
allows for projections based not just on approved legislation, but also on draft or in-
troduced legislation that has not yet been passed. Why does the FOMB choose to
assume that there will be virtually no Medicaid funding?
Answer. FOMB has chosen to reflect current legislation, rather than draft or in-
troduced legislation given the uncertainty of adoption. Moreover, because Medicaid
is such an important element of essential services, it is important for the Govern-
ment to budget and be able to fund costs that are not known to be reimbursed with
Federal funds.
44
Because Federal Medicaid funding for U.S. territories is subject to an annual cap,
Medicaid expenditures eligible for federal matching often exceed available funding
without supplemental legislated sources. This makes Puerto Rico’s Medicaid pro-
gram very sensitive to rising healthcare costs. Since 2011, Puerto Rico has received
temporary relief from rising healthcare costs through increased levels of federal re-
imbursement made available through the passage of the Affordable Care Act and
the Bipartisan Budget Act of 2018. In December 2019, the Further Consolidated
Appropriations Act was passed, which provided supplemental federal funding (up to
$5.7B total) to Puerto Rico’s Medicaid program through September 30, 2021.
In addition, the law raised the FMAP—the portion of Medicaid expenditures that
federal funds can cover—from the standard level of 55 percent to 76 percent for
most populations. In response to the COVID-19 pandemic, the Families First
Coronavirus Response Act was passed in March 2020, further increasing both the
available federal funds and the FMAP.
The available supplemental federal funds and higher FMAP will both return to
standard levels in October 2021 without new federal legislation. Accordingly, the
Commonwealth will hit a ‘‘Medicaid fiscal cliff,’’ whereby it will be responsible for
multi-billion-dollar annual healthcare expenditures that had been covered by federal
funding since 2011.
It is crucial, therefore, that ASES take advantage of the additional runway pro-
vided by recent federal legislation to put in place reforms that reduce the long-term
growth rate of healthcare expenditures. Given the uncertainty as to future federal
reimbursement levels, the 2020 Fiscal Plan assumes that no further supplemental
funding will be provided beyond current programs, and thus, the Commonwealth
must be prepared to cover growing Medicaid costs as if federal reimbursement rates
reverts to steady-state levels.
Question 12. Why has the FOMB not made more utility out of PROMESA Title
VI mechanisms for consensual deals?
Answer. Actually, Title VI was the first provision used by the Government and
FOMB in a consensual debt restructuring, which was late 2018 Title VI consensual
restructuring of the Government Development Bank’s debts. In addition, where pos-
sible FOMB and the Government have successfully used PROMESA Section 207,
rather than either Title III or Title VI, in cases where unanimous consent could be
obtained from affected creditors to the consensual restructuring of their bonds. This
Section 207 approach was used to consensually restructure over $1 Billion of
Federal EPA and USDA loans to PRASA, saving PRASA nearly $400 million in the
first 10 years and re-starting New Money Federal lending from those agencies,
while also avoiding putting PRASA through either Title III or Title VI.
That said, both Section 207 and Title VI are narrower than Title III in terms of
the categories of claims and liabilities that can be resolved through those procedures
and the scope of relief available from those approaches. Accordingly, Title VI and
Section 207 are not necessarily viable or effective approaches for Puerto Rico’s other
government operating entities and public corporations.
Question 13. If the FOMB and creditors disagree over Commonwealth revenue
projections, could contingent notes be a partial answer to debt restructurings so that
creditors take the risk if revenues fail to exceed projections?
Answer. At this point in time, as noted in the May 2020 Certified Fiscal Plan for
the Commonwealth, FOMB has put a pause on the existing February 28, 2020 Plan
of Adjustment and will be exploring a variety of debt restructuring topics as it
considers how to move forward in an affordable, sustainable way.

Questions Submitted by Rep. Gohmert

Question 1. Ms. Jaresko, during your time as Ukrainian finance minister, did you
have a relationship with Alexandra Chalupa? If yes, were you aware of any efforts
to extract information from NABU (the National Anti-Corruption Bureau of
Ukraine)?
Answer. No, Ms. Jaresko had no relationship with Ms. Chalupa during her time
as Ukraine’s finance minister. Ms. Jaresko knew her only as a member of the
Ukrainian-American community.
45
Question 2. You were the chief executive officer of the Western NIS Enterprise Fund
(WNISEF), correct?
Answer. Yes, Ms. Jaresko served as CEO of WNISEF from 2001–2014, previously
having served as Executive Vice President and Chief Investment Officer from 1998–
2001, and Country Manager from 1995–1998.
2a. Is it true that you shifted management of WNISEF to Horizon Capital, a
private company? What is your relationship with Horizon Capital?
Answer. Yes, the goal of the Enterprise Funds, established initially by President
George H. Bush in eastern and central Europe, was to act as a catalyst to private
sector investment in the region of their mandate. The goal was to move from USAID
funding to attracting private sector capital investment in the region, based on the
track record and team experience of the Enterprise Fund. The Polish American
Enterprise Fund was the first to succeed, having spun out their team into
Enterprise Investors, one of the most successful East European private equity firms.
The Hungarian fund, and others were also successful in achieving the mandate.
Western NIS Enterprise Fund was successful in attracting over $100 million in pri-
vate capital and spinning off its investment team into Horizon Capital, a private
company, in 2006.
Ms. Jaresko was one of the Founders and the CEO of Horizon Capital from 2006
through November 2014, when she left to take the position of Minister of Finance
in the Ukrainian Government. Since then, she has had no role or relationship with
Horizon Capital.
2b. Did you receive bonuses during your time as head of WNISEF? And you
received these bonuses while the fund was losing money, correct?
Answer. Yes, USAID approved a bonus program in the Enterprise Funds, includ-
ing, but not only WNISEF, that provided the investment teams financial incentives
(bonuses) to liquidate the investments made with USAID funding at a profit.
Incentives were only paid based on profitable transactions. Given the Enterprise
Funds initially were all expected to return some portion of their capital to the U.S.
Government (which is a unique feature given almost all USAID programs are grants
and do not return funds to the USG), liquidation of the portfolio at a profit was an
important element of the Enterprise Funds.
2c. Was WNISEF audited for accounting irregularities that arose during your time
as head of the fund?
Answer. No, Ms. Jaresko does not recall any audit for accounting irregularities
during her leadership of WNISEF. All the audited financial statements from
inception are publicly available for the record.

Questions Submitted by Rep. Gosar

Question 1. Can you please elaborate on current weaknesses of the Government’s
contract procurement process and how this affected the government’s response to the
needs presented by the pandemic crisis?
Answer. Despite some improvement, the Government still fails to provide an ade-
quate level of transparency when it comes to contract procurement. In fact, when
FOMB attempts to obtain information about pending and executed contracts, it is
often a very long and tedious process. Currently, the Government is required to get
approval from FOMB for contracts that cost $10 million and over. Specifically, when
it comes to the pandemic, the Government failed to secure approval from FOMB for
a $38 million contract to purchase COVID-19 testing kits. FOMB immediately
requested the required information but unfortunately the Government failed to pro-
vide the relevant procurement information. Ultimately, FOMB had to file litigation
in order to obtain the needed information.
Question 2. Is the Board doing anything to provide accountability in the
government’s contract procurement process?
Answer. In addition to instituting budgets and evaluating requests by the Govern-
ment for reapportionments, FOMB is reviewing contracts for approval pursuant to
Section 204(b)(2) of PROMESA to assure that they ‘‘promote market competition’’
and ‘‘are not inconsistent with the approved fiscal plan’’.
46
Question 3. Based on your testimony, it sounds like it is difficult to do business
in Puerto Rico. How does Puerto Rico’s business environment compare to the main-
land business environment? And how does Puerto Rico get to the point where it is
operating more like mainland businesses?
Answer. In Puerto Rico, there are several barriers to entry for businesses.
Perhaps the largest barrier is the fact that there is no at-will employment in the
territory. Christmas bonuses of $600 are mandated for employers regardless of em-
ployee performance. Moreover, the licensing, permitting, and registration process is
expensive and difficult. The Island’s energy supply is expensive and not reliable.
Construction permits are difficult and expensive, and the payment of taxes is ex-
tremely complicated. Finally, transportation costs are higher due, in part, to strict
local regulations and federal laws, such as the Jones Act.
Question 4. Can you elaborate on the spending trends for the Government of Puerto
Rico since the inception of the Board? Has the Government of Puerto Rico spent most
of its appropriated funds for key agencies in this fiscal year?
Answer. FOMB used its mandate under PROMESA to break the Government of
Puerto Rico’s cycle of deficit spending. The rightsizing measures in the Certified
Fiscal Plan have already reduced the Government’s payroll and overall operating ex-
penses while securing essential government services, as mandated under
PROMESA. The General Fund budget, looking only at operational costs, declined
from $8.9 billion in fiscal year 2016 to $6.2 billion in fiscal year 2020, a more than
30 percent reduction. The General Fund budget operational costs for the coming fis-
cal year 2021 are projected to increase to $7 billion because of COVID-19 and the
reclassification of certain expenses (about $600,000) from the Special Revenue
budget.
Separately and in addition, since fiscal year 2018, the Government’s budget also
includes Paygo pension costs, which did not exist in General Fund budgets before.
That cost fluctuates between $2.5 billion and $2.6 billion per year, prior to any pen-
sion reform proposed in the Plan of Adjustment. Ensuring pensions is mandated
under PROMESA. Further, the Government must budget for Puerto Rico’s expendi-
tures on Medicaid, which fluctuate dramatically based on Federal funding. Medicaid
costs not included in the above General Fund budget numbers have fluctuated from
about $400 million to over $1.5 billion. FOMB has always ensured that the Certified
Fiscal Plan projects costs of Medicaid based on current Federal legislation.

Question 5. PROMESA outlines a process for the development of the annual
budgets. Describe collaboration between the Board and the Government in developing
these budgets.
Answer. Since November 2019, FOMB has been working hand-in-hand with the
Government to develop the budgets for the Commonwealth and instrumentalities.
This includes the Commonwealth (across General Fund and Special Revenue
47
Funds), COFINA, CRIM, PREPA, PRASA, HTA, UPR, COSSEC, PRIDCO, and 10
municipalities in our pilot program.
Per PROMESA, the certified budgets need to be consistent with the certified fiscal
plans. The fiscal plans, which are updated annually to incorporate the latest rev-
enue and expenditure information and to reflect macroeconomic conditions (namely,
the impact of COVID-19), are the 5-year blueprint to return prosperity to Puerto
Rico and fiscal sustainability to the government and its different instrumentalities.
In the last month, FOMB certified updated (or in some cases new) fiscal plans for
the 19 aforementioned entities. Since then, FOMB has worked with the Government
to develop budgets that are consistent with those fiscal plans.
The budget process is not a simple one. FOMB requests a lot of information to
validate agency requests, understand how agencies spend their taxpayer dollars,
and make better management decisions that allow prioritization of much-needed
funds. FOMB also ensures that, in addition to ensuring transparency and efficient
use of public funds, the budget also serves as a tool to ensure efficient implementa-
tion of key priorities as outlined in the fiscal plans.
Unfortunately, for the fourth year in a row, the Government and the Legislature
were unable to submit a budget compliant with the Commonwealth Fiscal Plan. In
fact, the Legislature never submitted an official budget to FOMB for its review.
Notwithstanding several meetings to try to find a consensus among FOMB, the
Governor, the Senate, and the House, FOMB was unable to do so.
Question 6. Many keep insisting that Puerto Rico is in trouble because it does not
have enough money and that the Federal Government needs to throw more funds and
resources at the territory. Is this an accurate portrayal of why Puerto Rico is
suffering?
Answer. It cannot be denied that Puerto Rico has been through horrible disasters,
including hurricanes, earthquakes, and a health pandemic, all within the last 3
years. However, Puerto Rico has received substantial funding for these disasters
when it comes to Medicaid, NAP, FEMA reimbursements, CDBG-DR, unemploy-
ment, and other areas as well. These federal funds have been extremely helpful
during these difficult times. However, more federal funds alone will not solve the
problems in Puerto Rico. In order to be economically healthy, the highest priority
is for the Government to implement structural reform related to labor, welfare re-
form, ease of doing business, rightsizing of the government, pensions, healthcare,
the power sector, infrastructure, and education. In doing so, Puerto Rico needs to
give its residents confidence in future economic growth and opportunity to stem, and
even to reverse, the outmigration to the mainland United States.
Question 7. Do you agree that the Board is forcing the privatization of the Public
Broadcasting Corporation without taking into consideration the value of the FCC
licenses?
Answer. No. In January 2019, FOMB recommended that the Government transfer
ownership of the Public Broadcasting Corporation’s assets to a private nonprofit en-
tity. In April 2019, the Government accepted the recommendation and said it would
begin implementing the change. To date, the Government has not acted on this re-
form and is extremely delayed in doing so. The FCC licenses should be protected
and a transfer to a private nonprofit entity should not jeopardize the value of the
FCC licenses. There would need to be an appropriate transition period in the
process.
Question 8. The Board made the decision in the latest Certified Fiscal Plan to
freeze all budget cuts for the next year in order to encourage the implementation of
it is recommended reforms. Can you please explain how you expect this to work?
What is different this time?
Answer. The 1-year delay of many budget reductions will give the Government
more bandwidth to handle effectively difficult policy and implementation issues re-
lated to structural reform. In light of the health pandemic and so many unknown
factors, FOMB reinforces in its fiscal plans that structural reforms are even more
important.
Most of the initiatives in the Fiscal Plan do not require legislation, just leadership
from the executive branch and agency heads. Government institutions and processes
must continue operating regardless of whether there is an election. These initiatives
that are necessary for our economy and people to recover from the pandemic.
The Government should focus all of its efforts in fiscal year 2021 on making real
changes across the Government to ensure better delivery of essential services. These
reforms are designed to promote the focus of finite Government resources on
48
frontline service delivery that matters to residents. Real changes include, but are
not limited to:
• For the Department of Education to implement a back to school plan, a
time and attendance reporting policy for all employees, record daily student
attendance, efficiently manage its student-teacher ratio by observing its own
staffing policies, and generate savings through improved procurement and
more transparent accounting.
• For the Department of Health to focus on core health care services by sav-
ing money through centralized procurement of supplies across agencies and
public hospitals, develop an action plan for telehealth, consolidate regional
Medicaid offices, improve hospital management, and merge the
Administración de Seguros de Salud (ASES) into the department.
• For the Department of Public Safety to move more officers from adminis-
trative positions to the field so they can better serve residents, and reduce
overtime with better time management, fully consolidate the back office.
• For the Department of Corrections and Rehabilitation to, analyze the
utilization of facilities given the decline in the prison population, and
generate savings through improved procurement.
• For the Department of Economic Development to finalize the consolida-
tion of the Puerto Rico Tourism Company into the department, complete the
ascription of the Planning Board, renegotiate procurement contracts, and
publish quarterly reports of economic incentives.
Question 9. There are no work requirement for NAP in Puerto Rico. In fact, the
way that NAP is currently structured, it discourages recipients from finding employ-
ment. What should Puerto Rico do to change that? And if Puerto Rico does not do
anything to change it, is there anything the Federal Government could do to help in
that arena?
Answer. The 2020 Fiscal Plan required the Government to adhere to a set of
parameters when implementing a NAP work/volunteer requirement. Specifically, the
Government should: (1) apply the requirement year-round to all able-bodied NAP
beneficiaries aged 18–59; (2) grant all eligible recipients up to a 3-month transition
period to secure employment, begin volunteering, or enroll in qualified education or
training programs; (3) mandate that all eligible recipients complete 80 hours of
qualifying activities per month; (4) redesign NAP eligibility guidelines and benefit
calculations to ensure that eligible recipients are not penalized for seeking formal
sector work; (5) redistribute savings realized through the work/volunteer require-
ment to boost working eligible recipients’ take-home pay through an expansion of
the Earned Income Disregard; and (6) continue to extend NAP benefits to children
even if their parents are eligible recipients who do not comply with the work/
volunteer requirement.
NAP is a capped block grant, through which the food and nutrition assistance pro-
gram for Puerto Rico is funded at a fixed level. Since it is a block grant, Puerto
Rico must make its own decisions regarding eligibility and work requirements and
must also enforce those policy decisions. The only way this could be changed is
through federal legislation.
Question 10. What growth has Puerto Rico foregone because of little to no
implementation of structural reform since the creation of the Board?
Answer. Structural reforms were expected to cumulatively increase nominal GNP
by approximately $2.65 billion between FY20–25 if they were to have been imple-
mented as stated in the 2018 Certified Fiscal Plan. This represented an incremental
cumulative uptick of 1.8 percent in Real GNP growth rates during this period. Due
to the delay in implementation, structural reforms, if fully implemented going for-
ward per the Certified Fiscal Plan, are now expected to increase nominal GNP by
only $242 million (an incremental cumulative uptick of 0.6 percent in Real GNP
growth rates). In other words, the economy has lost in potential nominal growth
approximately $2.4 billion dollars between FY20–25 due to this delay.
In the long run the loss is even greater. Structural reforms were expected to
cumulatively increase nominal GNP by approximately $90.28 billion between FY20–
49 if they were to have been implemented as stated in the 2018 Certified Fiscal
Plan. This represented an incremental cumulative uptick of 1.97 percent in Real
GNP growth rates. Due to the delay in implementation, structural reforms are now
expected to increase nominal GNP by only $24.67 billion (an incremental cumulative
uptick of 0.88 percent in Real GNP growth rates).
49
Question 11. What is the status of the HUD GDBR funds for Puerto Rico? Puerto
Rico has received them, correct? Have the funds been utilized yet?
Answer. To date, about $86 million have been disbursed of the $3.2 billion
obligated by U.S. HUD. Most disbursements to date are related to the flagship R3
Housing Program (repair, reconstruction, and relocation), which is expected to
impact a significant number of families/homes in the following 6 months.

The Chairman. Thank you very much. Let me now recognize our
next witness, Mr. Omar Marrero, who is the Executive Director of
the Puerto Rican Fiscal Agency and Financial Advisory Authority.
In this role, he is responsible for leading the preparation of fiscal
plans for the government of Puerto Rico, which are considered by
the Oversight Board. Governor Wanda Vázquez appointed Mr.
Marrero to be the Puerto Rican government’s representative before
the Oversight Board, and we welcome you here, sir, and look for-
ward to your testimony.
STATEMENT OF OMAR MARRERO, EXECUTIVE DIRECTOR,
PUERTO RICO FISCAL AGENCY AND FINANCIAL ADVISORY
AUTHORITY
Mr. MARRERO. Thank you, sir. Good afternoon, Chairman
Grijalva, Ranking Member González-Colón and members of the
Committee. I am Omar Marrero, Executive Director of the Puerto
Rico Fiscal Agency and Financial Advisory Authority. I am honored
to appear here before you again on behalf of Governor Wanda
Vázquez and thank you for the opportunity.
During the last 21⁄2 months, our Governor’s top priority has been
COVID-19. Today, I will share some of the measures we have im-
plemented in order to manage the crisis. I will also discuss the
implementation of PROMESA during this period and some areas of
the law that need to be modified in order to make them more effec-
tive. Based on our experience with the Board, we believe that the
best way PROMESA will be able to clarify the unique power-
sharing relationships between the government and the Board is by
limiting each to their respective public policy and fiscal account-
ability roles, especially now as we continue to respond to COVID-
19 and as the Chairman said, rebuilding from past and ongoing
natural disaster.
Let’s discuss the measure our administration has implemented
against COVID-19. First, on March 15, Governor Vázquez imposed
the first mandatory lockdown in the Nation, the executive order
that included the closure of non-essential businesses, an island-
wide curfew, and social distancing measures.
On March 18, the Governor, who was the first in the Nation as
well, requested the FAA to limit the air traffic into Puerto Rico,
including suspending all domestic and international flights. And
the FAA agreed that all commercial flights must land at the San
Juan International Airport. Then we started conducting COVID-19
testing for all passengers arriving at the airport. That strategy has
been praised by both our businesses and residents.
On March 23, Governor Vázquez announced a local relief pack-
age of approximately $787 million to provide immediate emergency
assistance. Some of the initiatives were aimed at the self-employed,
small and medium businesses, municipalities, public hospitals, and
50

some dedicated emergency response personnel. We appreciate the
help of the Oversight Board to make it happen.
On March 27, the CARES Act was signed into law. And of the
$150 billion Congress appropriated to state and local governments
through the CRF, Puerto Rico was awarded roughly $2.2 billion.
On May 15, Governor Vázquez announced our strategic disburse-
ment plan for the CRF funds. Under the plan, the CRF funds are
mainly prioritized for economic stimulus or health-related expenses
and for government-related expenses incurred due to COVID-19.
The government’s goal is to distribute funds as quickly as pos-
sible while ensuring transparency, compliance, and accountability.
To ensure appropriate oversight, review panels comprised of rep-
resentatives from each lead agency are providing input and rec-
ommendations on a newly created CRF Disbursement Oversight
Committee that serves as the centralized oversight authority of all
programs and disbursement. To date, we have distributed from the
CRF approximately $150 million to self-employed individuals, ap-
proximately $100 million to small and medium businesses and
transferred around $150 million to the State Unemployment
Insurance Trust Fund.
In addition, we have allocated $150 million to private hospitals
and $100 million to the municipalities. All this information is
publicly available through our transparency portal at the above
COVID-19 website. Certainly, like any other government, our re-
sponse to this unprecedented crisis has not been free of challenges
and obstacles.
Similar situations have occurred stateside. However, our
governor remains committed to the principle of transparency and
accountability and that is what we have implemented for the funds
available for COVID-19. As to the implementation of PROMESA
during COVID-19, as this Committee knows, the government and
Board have had a long history marked with uneven periods of co-
operation and disagreement, some of which has become the subject
of litigation.
But despite some important disagreements, the Board and the
government have actually collaborated on successful infrastructure,
about $25 billion over the last few years. Since taking office in
August 2019, Governor Vázquez has consistently sought to improve
the relationship between the government and the work by facili-
tating periodic meetings and supporting the infrastructure and
proceedings.
In addition, Governor Vázquez has worked with the Federal
administration, which Coast Guard Rear Admiral Brown, the
Trump administration’s liaison to the government, acknowledged
earlier this year when he said that Puerto Rico’s reputation seems
to lag the reality because the government has implemented very
strong internal control mechanisms to counter any attempts at cor-
ruption or diversion of Federal funds. These measures establish a
new atmosphere of cooperation and trust that did not exist with
prior administrations and is a development that we hope will
continue to improve and expand.
Despite our best effort to minimize disagreements, PROMESA
allows the Board to blur the line between the government and the
Board. Over the last several years, the Board has taken the
51

advantage of such unclear separation of powers to gain more con-
trol over the day-to-day operations, particularly by using
PROMESA certification processes to micromanage the public
governance in Puerto Rico.
The government believes that any attempt to actively impede our
public policy initiatives is counterproductive and undermines the
recent progress to work together. Therefore, due to the lessons
learned during the last 4 years, the government recommends that
if this Committee were to consider amendments to PROMESA, this
must be to clarify where the Board stands, as I fully explained in
my written statement.
Finally, as Justice Breyer advised in his book, Making Our
Democracy Work, a workable government requires trust among
government institutions and between those institutions and the
people. In order to achieve a long-term workable government for
the people of Puerto Rico, the government on the Board must trust
each other in their respective roles, respecting, thereby, our demo-
cratic system which not only is fundamental to our Puerto Rican
community but also is intrinsically aligned with the long-standing
American principle that government of the people, by the people,
and for the people shall not perish from the Earth. Thank you,
Chairman.
[The prepared statement of Mr. Marrero follows:]
PREPARED STATEMENT OF OMAR J. MARRERO, ESQ., CHIEF FINANCIAL OFFICER OF
THE GOVERNMENT OF PUERTO RICO AND EXECUTIVE DIRECTOR OF THE PUERTO
RICO FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY (AAFAF) (ON BEHALF
OF HON. WANDA VÁZQUEZ GARCED, GOVERNOR OF PUERTO RICO)

Chairman Grijalva, Ranking Member Bishop, and members of the Committee:
Thank you once again for the opportunity to appear before you to discuss ways to
evaluate and improve the implementation of the Puerto Rico Oversight, Manage-
ment and Economic Stability Act (PROMESA). Over the last 4 years, PROMESA
attempted to provide Puerto Rico with vital tools to restructure its debts, achieve
fiscal stability, and spur economic growth. While some of these tools have produced
meaningful results, there remain certain aspects of the law that need to be reformu-
lated to make these tools more effective, which will allow Puerto Rico to finish the
job of restructuring its debts, achieving fiscal responsibility and exiting from the
bankruptcy process. However, in several respects, the amendments that have been
proposed in the past do not adequately address critical implementation issues that
will allow Puerto Rico to finish the job that PROMESA started. For instance, none
of the amendments that have been considered address the flawed fiscal plan and
budgeting process under PROMESA sections 201 and 202, which continues to be the
subject of ongoing friction between the elected Government of Puerto Rico (the
‘‘Government’’) and the Financial Oversight and Management Board (the ‘‘Oversight
Board’’ or the ‘‘Board’’). The best way for Congress to improve the efficiency and
effectiveness of PROMESA would be to clarify the unique power-sharing relation-
ship between the Government and Board by limiting each to their respective public
policy and financial accountability roles. Especially now as Puerto Rico continues to
respond to the COVID-19 pandemic and rebuild from past and ongoing natural
disasters, clarifying the roles of the Board and the Government would substantially
improve the collaboration and cooperation that we have cultivated to date.
My testimony today will focus on five topics: (i) how Puerto Rico has responded
to the COVID-19 crisis; (ii) how PROMESA has facilitated substantial progress in
Puerto Rico; (iii) how PROMESA’s unclear delineation of power has led to unneces-
sary and wasteful conflict between the Board and Government regarding the imple-
mentation of public policy; (iv) how PROMESA has been implemented during the
current COVID-19 crisis; and (v) recommended changes to PROMESA that Governor
Vázquez’s administration believes will facilitate a better long-term future for Puerto
Rico. While the administration believes the framework and implementation of
PROMESA can be improved, changing the law or the way the law is implemented
will not be sufficient alone to unlock the full potential of Puerto Rico unless the
52
federal government, including Congress, demonstrates its commitment to Puerto
Rico and works with us to end the current unequal and undemocratic territory
status and places Puerto Rico on the definitive path to full equality through
statehood.
I. Puerto Rico’s Response to the COVID–19 Crisis
Since China first alerted the World Health Organization of flu-like cases in
Wuhan on December 31, 2019, the COVID-19 virus has spread to 188 countries in
every continent except Antarctica with over 7,100,000 reported cases. Addressing
this humanitarian challenge continues to be the Government’s top priority at this
moment. As of June 9, 2020, Puerto Rico had 5,185 cases that tested positive for
COVID-19 and 142 deaths. The Government continues to take actions to combat the
spread of the virus, and today I would like to share with the Committee part of the
efforts we have implemented during this time.
On March 15, Governor Wanda Vázquez signed Executive Order OE–2020–023,
which mandated a lockdown, the closure of business, an island-wide curfew and
social distancing procedures. This was the first such measure taken by any jurisdic-
tion in the United States of America. On March 18, the Governor requested the
Federal Aviation Administration (the ‘‘FAA’’) to take a series of steps to limit air
traffic into Puerto Rico, including suspending all domestic and international flights
to and from Puerto Rico. In response, the FAA agreed that all commercial flights
must land at Luis Muñoz Marı́n International Airport, located in San Juan, thereby
making Puerto Rico the first jurisdiction to receive tools from the FAA to control
air traffic amid the COVID-19 threat. In addition, testing for COVID-19 is being
carried out for passengers arriving at the Luis Muñoz Marı́n International Airport,
a strategy that has been welcomed by both our visitors as well as our residents.
Since the COVID-19 crisis started, the Governor has issued several executive
orders to address, among other things, caring for the homeless, school and private
sector closures, the creation of a Medical Task Force to provide counsel and rec-
ommendations to the Governor, acquisition of goods and services, use of the
National Guard, prompt diagnosis of COVID-19, and the general state of emergency
due to the pandemic. Taken together, these measures help protect the physical,
mental, and economic health of the people of Puerto Rico, while preserving the
social fabric of the Island’s diverse communities.
On March 23, Governor Vázquez, with the support of the Oversight Board,
announced a local emergency relief package of approximately $787 million, which
was intended to provide short-term stimulus and emergency assistance. On March
25, the Oversight Board issued a letter to the Governor and Legislature outlining
the stimulus measures and necessary steps to secure the budgetary allocation. On
March 28, the Puerto Rico Legislature approved a Joint Resolution to provide the
allocation of $500 million from the General Fund to cover the initial phase of the
Government’s stimulus package. On March 30, the Board approved a reprogram-
ming request to transfer $157 million under the custody of the Puerto Rico Office
of Management and Budget to various agencies according to the Government’s
stimulus package.
I would like to provide some details on some of the specific measures approved
as part of the local economic stimulus package:
Under the Self-Employed incentive, approximately 200,000 self-employed workers
are eligible to receive a $500 one-time payment. The estimated total cost of this
measure is $100 million.
Under the Small Business Incentive, businesses with 50 employees or less and
with business volume of $10 million or less are eligible to receive a $1,500 one-time
cash payment. The estimated total cost of this measure if $60 million.
Some workers are eligible to receive bonuses. These include dedicated emergency
response personnel including state police and firefighters, medical emergency tech-
nicians, and staff of COVID-19 emergency response management agencies. Amounts
awarded per worker range between $2,000–$4,000.
On March 27, the Coronavirus Aid, Relief, and Economic Stability Act (known as
the ‘‘CARES’’ Act) was signed into law. Of the roughly $2.3 trillion of approved fund-
ing under the CARES Act, Congress appropriated about $150 billion to state and
local governments through the Coronavirus Relief Fund (CRF) under section 5001.
Puerto Rico’s population of 3.2 million people accounts for 74.7 percent of the entire
pool for territories, thus awarding us roughly $2.2 billion dollars.
On May 15, Governor Vázquez signed Executive Order EO–2020–040, establishing
a Strategic Disbursement Plan for CRF funds. Under the Strategic Plan approved
by the Governor, these funds have been allocated in the following way: $965 million
for economic stimulus, $500 million for health related expenses, $290 million for
53
government related expenses and $485 million as a reserve for future programs. The
Government’s goal is to distribute funds as quickly as possible to put them into the
hands of organizations and individuals that need them the most, while ensuring
transparency, compliance, and proper use of those funds. To that end, the Govern-
ment developed a Strategic Disbursement Plan that, at the time of its publication,
was more comprehensive and detailed than any other state. To ensure appropriate
allocation of funds and oversight, review panels comprised of representatives from
each lead agency for individual Programs are providing input and recommendations
regarding Program guidelines and disbursement allocations, and a newly con-
stituted Coronavirus Relief Fund Committee for the Oversight of Disbursements
will maintain overall oversight and governance of all Programs and authorize all
disbursements.
On May 15, the Government began distributing the CRF funds. To date, the
Puerto Rico Treasury Department has distributed approximately $150 million of the
allocated $200 million for the Assistance Program to Self-Employed Individuals
Program, impacting over 149,000 individuals. This information is publicly available
through our Strategic Disbursement Plan Funding Report, hosted through the
AAFAF COVID-19 webpage.
On May 18, we opened the application period for the Assistance Program to
Private Hospitals and Assistance Program to Municipalities. As of June 9, all appli-
cations for the Assistance Program to Private Hospitals have been reviewed by the
Program Grant Office, Compliance Office and the Lead Agencies. In total, 47 appli-
cants representing 51 hospitals were awarded almost $140 million of the $150
million allocated to the program. These funds have begun to be disbursed, and we
anticipate all awarded funds will be disbursed in the next week.
On June 4, the assistance programs to Small and Medium Businesses were
launched. In the first 48 hours, over 21,000 small and medium businesses applied
for assistance through the program, and more than $101 million was identified for
disbursement. In the coming week, we expect to continue to make progress on
launching the remaining programs as well as solidifying the process for fund recipi-
ents to document and report their use of funds to ensure the strictest compliance
with CARES Act guidelines and the mitigation of fraud, waste, and abuse.
Like any other crisis, the Government’s response has not been free of errors and
controversies. Similar situations have occurred in other states and jurisdictions of
the Nation. However, the Government remains committed to the principles of trans-
parency and accountability, and will continue to work with our Federal counterparts
in order to ensure that the recovery funds available to combat the COVID-19 crisis
go directly to the people and entities that need it most.
II. PROMESA Has Facilitated Substantial Progress in Puerto Rico
I would now like to discuss how PROMESA has been implemented during this
current crisis. As this Committee knows, the Government and Board have had a
long history—across three different administrations in nearly 4 years—marked with
uneven periods of cooperation on the one hand and disagreement on the other, some
of which has become the subject of litigation. Notwithstanding some important dis-
agreements, the Government and Board have actually collaborated and achieved
several restructurings over the last few years. For example, in November 2018, the
Government Development Bank of Puerto Rico (GDB) completed a first-of-its-kind
consensual restructuring of about $4 billion of debt under Title VI of PROMESA.
In February 2019, COFINA consummated its Title III plan of adjustment to restruc-
ture approximately $18 billion of bond debt. And in July 2019, PRASA entered into
definitive agreements to restructure almost $1 billion in debt under Federal
programs administered by the EPA and USDA under section 207 of PROMESA, pro-
viding significant annual debt service relief, among other benefits for PRASA. All
of these efforts garnered the full support of the Oversight Board and the Govern-
ment, including both the legislative and executive branches.
In the past, the Government and the Board have also had disagreements over
fiscal plans and budgets. But we have generally agreed on many of the fiscal plan
provisions. Any remaining disagreements have been primarily based on public policy
decisions, such as civil service reform and the treatment of Government employee
compensation and pension benefits, among other things.
After Puerto Rico experienced an unexpected political upheaval in July and
August 2019, the relationship between the Government and Board adjusted to a
new administration under Governor Vázquez. Since taking office, Governor Vázquez
has consistently sought to mend the historically fractious relationship between the
Government and the Oversight Board by facilitating informal discussions to achieve
meaningful solutions for the people of Puerto Rico including supporting the restruc-
turing proceedings. From the outset, Governor Vázquez’s administration has been,
54
and will continue to be, fully committed to (1) transparency, (2) accountability, and
(3) fiscal responsibility. To achieve these objectives, this administration has issued
a series of executive orders in the last year designed to combat corruption in govern-
ment contracting and restore Puerto Rico’s credibility with the Board and the
Federal Government. In fact, after reviewing the Government’s recovery operations
in February 2020, Coast Guard Admiral Peter J. Brown—the Trump administra-
tion’s liaison to the Government for natural disaster recovery efforts—reported that
Puerto Rico’s ‘‘reputation seems to lag the reality’’ because the Government has
implemented ‘‘very strong internal control mechanisms to counter any attempts at
corruption or diversion of funds.’’ These measures have helped to establish a new
atmosphere of cooperation and trust between the Government of Puerto Rico, the
Oversight Board, and the Federal Government that did not exist with prior adminis-
trations—a development that we hope will continue to improve and expand.
In particular, this recent collaboration between the Government and the Board
has been vital to achieving a swift response to the negative health and economic
impacts of COVID-19 in Puerto Rico. On March 13, 2020, the Government sent a
request to the Oversight Board seeking authorization to use $160 million from an
Emergency Reserve fund established under the Commonwealth’s fiscal plan for pre-
paredness and response to the COVID-19 emergency. That same day, the Oversight
Board authorized the use of these funds on the condition that the Puerto Rico Office
of Management and Budget (OMB) provide weekly reports to the Board on its uses
and the disbursements of emergency expenses. The OMB has been providing these
weekly reports to the Board. A few weeks later—on March 23, 2020—Governor
Vázquez, with the support of the Oversight Board, announced a $787 million local
emergency relief package package to address local issues. This relief package was
among the most complete and ambitious packages awarded at the state/territory
level to face this unprecedented crisis, and required substantial coordination
between the Government and the Board to make available the necessary funds.
This level of unprecedented collaboration between the Government and the Board
demonstrates how meaningful achievements are possible under PROMESA when we
work together. However, on June 8, 2020 the Board commenced a new adversary
proceeding against the Government over a disagreement that, frankly, could have
been resolved out of court. The Government believes that this and other disagree-
ments we still have are reconcilable and we remain committed to working with the
Board to achieve consensus wherever possible to build upon these prior successes.
III. Due to PROMESA’s Unclear Delineation of Power, the Oversight Board
Has Engaged in Efforts to Impede the Government’s Public Policy
Objectives
Despite our best efforts to minimize disagreements, the language and structure
of PROMESA as currently adopted by Congress, allows the Board to blur the delin-
eation of power between the Government and the Oversight Board. Because the re-
spective roles of the Government and Oversight Board often overlap, the lack of
clarity in the statute creates too many opportunities to waste time jockeying for
power rather than creating and implementing meaningful solutions for the people
of Puerto Rico.
Over the last several years, the Board has attempted to take advantage of this
unclear separation of powers to gain control over day-to-day operations of the
Government. For instance, on October 26, 2017, the Oversight Board brought a mo-
tion in the Title III cases seeking the appointment of a chief transformation officer
(CTO) for PREPA, the Island-wide public electric company. In its motion, the Board
argued that the broad powers granted to it under PROMESA obligated the Board
to act as a ‘‘chief executive officer’’ over both long-term strategic planning and day-
to-day management of PREPA, such that it could unilaterally displace a statutorily
created management structure and direct the executive functions of PREPA (or any
other Puerto Rico public corporation). Fortunately, the Title III Court denied the
Board’s request, noting that, unlike the establishment of the D.C. control board,
‘‘Congress did not grant the [Oversight Board] the power to supplant, bypass, or re-
place the Commonwealth’s elected leaders and their appointees in the exercise of
their managerial duties whenever the Oversight Board might deem such a change
expedient.’’ In re The Fin. Oversight & Mgmt. Bd. for Puerto Rico, 583 B.R. 626,
634 (D.P.R. 2017).
After failing to be acknowledged as the CEO of PREPA, the Oversight Board
pivoted its strategy to subvert the duly elected Government’s policy objectives
through significant lobbying efforts, which have cost a disturbingly considerable
amount of Puerto Rico taxpayer dollars to do it. The Board’s use of such anti-
democratic tactics to undermine the elected Government’s policy preferences should
be a primary concern of this Committee.
55
The Oversight Board has also seized the fiscal plan and budget certification proc-
esses under PROMESA sections 201 and 202 to micro-manage virtually all aspects
of public governance in Puerto Rico, including attempts to exercise managerial
duties that the Title III Court has already denied. For example, in 2018, the
Oversight Board refused to provide appropriations for public-sector employee
Christmas bonuses, and economic development initiatives for municipalities (among
other things) and insisted on a draconian cut to public pensions unless the Govern-
ment agreed to become an ‘‘at will’’ employment jurisdiction by repealing Act 80. Act
80 requires employers to have ‘‘just cause’’ before terminating the employment of
an employee hired for an indefinite period of time. Although then-Governor Rosselló
agreed to the Board’s request in exchange for vital funding necessary to support the
Government’s public policy objectives, the Puerto Rico Legislature did not repeal Act
80. In retaliation, the Oversight Board re-certified a new version of its fiscal plan
and budget for fiscal year 2019 imposing severe austerity measures designed to pun-
ish the Government for failing to adopt the Board’s preferred public policy on
employment.
In its latest Commonwealth-wide fiscal plan certified on May 27, 2020, the Board
did it again when it completely defunded the State Public Broadcast Corporation
(‘‘WIPR’’, by its Spanish acronym) to force the Government to comply with an unrea-
sonable and unrealistic timeframe that could jeopardize the crown jewel of WIPR:
its licenses issued by the Federal Communications Commission and their renewals.
The Board also included in the new Fiscal Plan a detailed K-12 education reform
plan that requires the Puerto Rico Department of Education to implement non-
financial reforms such as: (i) segmenting schools based on performance outcomes;
(ii) launching evidence-based curriculum reforms; (iii) creating post-COVID-19 back-
to-school plans and improving distance learning capabilities; (iv) improving profes-
sional development opportunities for directors and teachers; and (v) implementing
initiatives to boost family engagements. While the Government does not necessarily
disagree with these measures, the Government believes that these types of detailed
public policy initiatives—which have nothing to do with fiscal responsibility,
ensuring sustainable debt levels, exiting the Title III bankruptcy, or maintaining
balanced annual budgets—go far beyond the intent of PROMESA’s fiscal plan and
budget processes. These are matters for the people of Puerto Rico to decide.
There is no doubt that an improved education system will help propel Puerto
Rico’s economy forward by developing a more competitive workforce and providing
better opportunities for Island residents. In fact, improving education in Puerto Rico
is one of Governor Vázquez’s top priorities. But fiscal plans and budgets should not
be a masquerade for the Board to implement its own vision for the future of edu-
cation in Puerto Rico (or any other public policy for that matter). Puerto Ricans
have elected their own government to do that. If the Board can use the fiscal plan
and budget process to impose its own public policies on the Government of Puerto
Rico, then the Board can tie the hands of elected officials (as it has done histori-
cally) and effectively strip the people of Puerto Rico of their voice in an elected
government of their own choosing. Although we are cognizant of the fact that terri-
tories are subject to the plenary powers of Congress under Article IV of the U.S.
Constitution, certainly, this is not what Congress adopted or intended under
PROMESA when it installed an oversight board for Puerto Rico rather than a
control board.
The May 27 Fiscal Plan includes many other policy initiatives that have nothing
to do with fiscal responsibility and financial management, but instead impose direc-
tives on day-to-day governmental operations, such as which agencies should perform
promotional activities for the earned income tax credit. These measures include the
micromanagement of government functions related to, among other things:
• Business permitting and occupational licensing;
• Workforce development programs;
• Public safety programs;
• Freight regulations;
• Tourism marketing;
• Broadband access programs; and
• Street parking.
To be clear: the Government does not necessarily disagree with these policies. The
problem is that the Board should not be able to use its fiscal plan and budgetary
powers to dictate the specifics of every policy the Government pursues. A proper di-
vision of power would allow the Government to construct its own policies freely to
meet the needs of the people, and the Board’s oversight role would be to intervene
56
only if the costs of Government policies significantly undermine the financial frame-
work of the certified fiscal plan. If the Government acts within the broad revenue
and expense targets in the fiscal plan, then the Board’s powers should end and the
democratic will of the people should prevail.
In addition to imposing its own policy preferences, the Board has also used its
fiscal plan and budgetary authority to impede the Government’s own public policies
by seeking to nullify new laws. Over the last several months, the Board has sent
an excessive amount of correspondence to the Government asserting rights and pow-
ers that the Government believes exceeds the Oversight Board’s capacities under
PROMESA and which the Government has spent considerable time and energy re-
sponding to. A list of these efforts, including samples of the related correspondence,
is attached hereto as Appendix A. Some of these letters touch upon aspects far re-
moved from regular Oversight Board work, including suggesting when and how the
Puerto Rico Electric Power Authority’s (PREPA) vegetation management program
should occur. But the most troubling of these communications from the Govern-
ment’s perspective include:
• Directives to provide substantial unwarranted information in support of the
Government’s fiscal plan compliance certifications related to new laws
designed to (i) better regulate the healthcare industry in Puerto Rico (Act 82–
2019, Act 90–2019, and Act 138–2019); (ii) change employee vacation and sick
day accrual rates (Act 176–2019); (iii) provide the Fire Department of Puerto
Rico a pay increase paid for with a new 3 percent tax on fire and allied lines
insurance policies (Act 181–2019); and (iv) provide tax relief to health profes-
sionals in light of their personal and professional sacrifices related to COVID-
19 (Act 47–2020); and
• Assertions that the Board can unilaterally nullify these new laws pursuant
to PROMESA sections 204(a) and 108(a) if the Government fails to comply
with the foregoing directives.
Furthermore, on June 8, 2020 the Oversight Board commenced yet another
adversary proceeding over certain information requests the Board has sent to var-
ious Government agencies. Even though the Government has cooperated with such
requests by producing over 1,000 pages of documents, the Board still alleges some
information is missing. Rather than engaging with the Government and meeting
with public officials to discuss the alleged missing information, as the Government
has suggested, the Board decided to go through the courts, once again antagonizing
the Government in expensive judicial proceedings that unnecessarily wastes public
funds.
In contrast to the Board’s interference with Government public policies, the Board
has not made efficient use of the economic development tools provided by
PROMESA. As of today, the position of Revitalization Coordinator provided for in
section 502, has been vacant for over a year. And as far as the Government is
aware, only one critical project under section 503 of PROMESA has been approved
by the Board. Almost 4 years since the enactment of PROMESA, the economic de-
velopment tools provided to the Board by PROMESA are stalled. As with the
Board’s imposition of public policies in the fiscal plan, the Government believes that
actively impeding the Government’s own public policy initiatives is counter-
productive and undermines our recent progress to work collaboratively with the
Board to implement meaningful fiscal and economic solutions for the people of
Puerto Rico. It is particularly disconcerting that the Board has used these letters
to make unwarranted threats to nullify the duly elected Government’s recently en-
acted laws. The Government believes that a more carefully delineated division of
power would avoid these wasteful and time-consuming endeavors, while preserving
effective governance in Puerto Rico.
IV. Any PROMESA Amendments Should Clarify Where the Board’s Powers
End
As with prior proposed PROMESA amendments that this Committee has consid-
ered, any further PROMESA amendments must address the most important
obstacle to effectively implementing the statute: Clarifying where the Board’s
powers end. As such, the Government recommends that Congress consider the
following amendments to PROMESA:
• Clarify the Roles of the Government and the Oversight Board: It is
critical to the legitimacy of this process that the Government of Puerto Rico
always retain its democratically derived powers. Congress should make clear
that appropriate, important roles exist for each of the Government of Puerto
Rico and the Oversight Board. As previously discussed, the Oversight Board
57
has used its fiscal plan and budgetary powers to impose detailed spending
restrictions that have the effect of dictating public policy—an approach that
undermines the Government’s powers and turns the Oversight Board into
something more akin to a control board. To address this issue, we submit that
sections 201 and 202 of PROMESA should be amended to make clear that the
Oversight Board’s fiscal plan and budgetary powers do not extend to deter-
mining day-to-day operating level expenditures or the imposition of detailed
public policy (such as education reforms). The Government of Puerto Rico
should be responsible for setting public policy, operating the government and
implementing solutions. The Oversight Board should provide financial over-
sight and monitor the budget and fiscal health of the Commonwealth to
assure that appropriate controls are in place and financial metrics are being
met. While the Government and the Oversight Board would still be required
to work diligently together to make their respective roles work as a cohesive
whole, a more careful delineation of PROMESA’s power-sharing arrangement
would make for a much more effective process.
• Eliminate the Role of the Oversight Board as Title III Representative:
The insertion of the Oversight Board as the Title III representative creates
confusion and results in litigation within the Title III process. The Title III
debtor is already subject to the scrutiny of the court process. While the
Oversight Board has a critical role to play, it is not necessary to create con-
flicting roles by giving the Board both the debtor role and the oversight
function in the Title III process.
• Revise Fiscal Planning Process: The fiscal plan and budgeting process
should be revamped to provide a focus on one-year budgets to make sure that
Puerto Rico is not spending more than it is taking in and that an objective
and reliable assessment is made each year to determine how much the
Government needs to pay for essential services. The fiscal plan and budgeting
process should not be used as a public policy tool or turned into an endless
modeling exercise.

Conclusion
As Justice Breyer advised in his book ‘‘Making Our Democracy Work,’’ a
‘‘workable government’’ requires trust among government institutions and between
those institutions and the people. In order to achieve a long-term ‘‘workable govern-
ment’’ for Puerto Rico, the Government and the Board must trust each other in their
respective roles. But the people of Puerto Rico will not trust the dynamic between
the Board and their Government if the Board is able to impose its public policy pref-
erences at will over elected officials. Hence, failing to amend PROMESA to more
clearly delineate the respective roles of the Board and the Government will result
in only one thing: an ‘‘unworkable government.’’ Moreover, the Board may be tempt-
ed to continue in their attempts to interfere with local governmental powers, acting
like a judicial branch by unilaterally enjoining the implementation of local laws, like
a legislative branch by illegally incorporating and mandating public policy issues in
certified fiscal plans, and like an executive branch, by dictating when and how their
own public policy determinations are executed. Surely this is not the type of entity
Congress had in mind when PROMESA was approved. The Government believes
that, notwithstanding the substantial restructuring progress we have made to date,
further and faster progress could be made, and the job of exiting Title III bank-
ruptcy can be achieved, if the Government and Board’s powers were more clearly
delineated in PROMESA. By doing so, we will fully respect thereby both the demo-
cratic system of the People of Puerto Rico, which the Preamble of our Constitution
acknowledges as fundamental to the life of our community, as well as the long-
standing tradition of our American democracy ‘‘that government of the people, by
the people, for the people, shall not perish from the earth.’’ Thank you.

*****
58
The following documents were submitted as attachments to Mr. Marrero’s
testimony. These documents are part of the hearing record and are being retained
in the Committee’s official files:

Appendix A: Board Actions Interfering With Government Operations
— Exhibit 1: U.S. District Court, District of Puerto Rico, Case 17-04780-LTS
— Exhibit 2: FOMB, Letter to Governor Wanda Vázquez Garced, dated
November 15, 2019.
— Exhibit 3: AAFAF’s Response Letter to FOMB, dated November 22, 2019.
— Exhibit 4: FOMB, Letter to Omar Marrero, dated December 18, 2019.
— Exhibit 5: FOMB, Letter to Omar Marrero, dated April 27, 2020.
— Exhibit 6: AAFAF’s Response Letter to FOMB dated May 8, 2020.
— Exhibit 7: FOMB, Letter to Ortiz Vázquez, PREPA, dated April 30, 2020.
— Exhibit 8: FOMB, Letter to Governor Vázquez, Senate President Thomas
Rivera Schatz, and House Speaker Carlos J. Méndez Núñez, dated May 11,
2020.
— Exhibit 9:AAFAF’s Response Letter to FOMB, dated May 19, 2020
— Exhibit 10: FOMB, Letter to Governor Vázquez, Senate President Thomas
Rivera Schatz, and House Speaker Carlos J. Méndez Núñez, dated May 11,
2020.
— Exhibit 11: FOMB, Letter to Governor Vázquez, Senate President Thomas
Rivera Schatz, and House Speaker Carlos J. Méndez Núñez, dated May 21,
2020.
— Exhibit 12: AAFAF’s Response Letter dated May 28, 2020.
— Exhibit 13: FOMB, Letter to Omar Marrero, dated June 5, 2020.

QUESTIONS SUBMITTED FOR THE RECORD TO OMAR MARRERO, EXECUTIVE DIRECTOR,
PUERTO RICO FISCAL AGENCY & FINANCIAL ADVISORY AUTHORITY

Questions Submitted by Rep. Grijalva

Question 1. How does the 2020 Fiscal Plan certified by the Oversight Board differ
from the proposed Fiscal Plan presented by the Government of Puerto Rico?
Answer. While there are many overlapping assumptions and measures in the
Government’s fiscal plan proposal dated May 3, 2020 (the ‘‘Government 2020 Fiscal
Plan’’) and the Oversight Board’s fiscal plan as certified on May 27, 2020 (the
‘‘Certified 2020 Fiscal Plan’’), there are also areas where the Government and the
Oversight Board differ. Below please find a summary of certain provisions that are
fundamentally different.
• Term of the Financial Forecast: The Government 2020 Fiscal Plan includes
a 20-year forecast through fiscal year 2039, consistent with the life of the
bonds as proposed in the Board’s as-filed plan of adjustment proposal dated
February 28, 2020. The Certified 2020 Fiscal Plan includes a 30-year forecast
through fiscal year 2049.
• Macro-Economic Forecast: The Government 2020 Fiscal Plan reflects a
slightly more pessimistic macroeconomic forecast in fiscal year 2020 and fiscal
year 2021 relative to the Certified 2020 Fiscal Plan. This is a result of
assumptions related to United States economic growth, the COVID-19 shock,
and the offsetting COVID-19 stimulus.
• Long Term Medicaid Federal Funding: The Government 2020 Fiscal Plan
includes an assumption that the Commonwealth will receive long-term
Medicaid federal funding of 55 percent after the current Medicaid Bill expires.
Conversely, the Certified 2020 Fiscal Plan does not assume that there will be
long-term Medicaid funding.
• Pension Reform: The Government 2020 Fiscal Plan excludes pension reform,
such as pension cuts and a pension freeze. Conversely, the Certified 2020
Fiscal Plan includes pension reform measures such as the pension cuts and
pension freeze.
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• General Fund Expenses: The general fund expenses in the Government 2020
Fiscal Plan are based on the Puerto Rico Office of Management and Budget
(‘‘OMB’’) proposed budget for fiscal year 2021. Additionally, the Government
2020 Fiscal Plan includes several reinvestment initiatives such as Uniform
Remuneration, Police Retirement, Parametric Insurance, and the payment of
the ‘‘Christmas Bonus,’’ an integral part of government employees’ compensa-
tion for over 40 years. The Certified 2020 Fiscal Plan is based on the
Oversight Board’s target budget for fiscal year 2021. Moreover, the Certified
2020 Fiscal Plan includes approximately $5.5 billion in re-investment in
Puerto Rico on account of the COVID-19 crisis.
• Measures and Appropriations: The Government 2020 Fiscal Plan calls for a
2-year delay in rightsizing measures and appropriations as a result of the
COVID-19 pandemic. Additionally, the Government 2020 Fiscal Plan excludes
go-forward measures related to education, health, and public safety given
their critical nature. The Certified 2020 Fiscal Plan includes a 1-year delay
in rightsizing measures and appropriations on account of COVID-19.
Question 2. Are austerity measures requested by the Oversight Board impacting the
Government’s ability to provide essential public services and/or respond to the
current COVID-19 public health and economic crises? For example, are austerity
measures causing delays in processing stimulus checks, unemployment applications,
NAP expansion, and/or local programs to respond to the pandemic?
Answer. The Oversight Board’s austerity measures have affected the Govern-
ment’s ability to provide services to the people of Puerto Rico in some instances.
Specifically, the Labor grouping in the Certified 2020 Fiscal Plan has already had
its budget reduced by $8.9 million from fiscal year 2018 through fiscal year 2020.
Over the same time period, headcount declined from 2,318 to 2,084, a 10 percent
reduction.
Question 3. $4.9 billion was appropriated after Hurricane Maria for low-cost
forgivable Community Disaster Loans for Puerto Rico and the U.S. Virgin Islands
based on projections of revenue losses that, in Puerto Rico’s case, were vastly
overestimated. The White House suggested Puerto Rico could expect about $4.65
billion of the total, but only a few hundred million were disbursed to Puerto Rico’s
municipalities because the Government of Puerto Rico did not have a liquidity prob-
lem as projected. Since Puerto Rico was excluded from the Federal Reserve
program—contrary to Congress’ intent—should a reprogramming of the $4 billion in
Community Disaster Loans that were appropriated but have not been used be
disbursed to Puerto Rico?
Answer. The Government supports any initiative that allows it to cope with the
revenue losses caused by the substantial economic and health impacts of the
COVID-19 pandemic, including Puerto Rico’s participation in the Federal Reserve
program or the revenues loss provisions being contemplated in the HEROES Act
currently under evaluation in Congress.
Question 4. Through the CARES Act, the Federal Government assigned $2.2 billion
to Puerto Rico to address the COVID-19 pandemic. The 2020 Fiscal Plan outlines
how the funds will be allocated by the government. Mr. Marrero, how much of these
funds has the Government already used? Are you confident the government will be
able to make use of the available funds before the December 31, 2020 deadline
established by the CARES Act?
Answer. On May 15, 2020, Governor Wanda Vázquez Garced issued Executive
Order OE–2020–040 establishing Puerto Rico’s Strategic Disbursement Plan for the
Coronavirus Relief Fund (the ‘‘Strategic Disbursement Plan’’) under the Coronavirus
Aid, Relief, and Economic Security Act of 2020, Pub. L. 116–136 (the ‘‘CARES Act’’).
A copy of the Strategic Disbursement Plan is available at http://www.aafaf.pr.gov/
assets/strategic-disbursement-plan-crf.pdf.
The Strategic Disbursement Plan lays out 16 distinct programs that address both
government needs (mainly associated with attending to the public health emergency
and continuing government operations) and those of the private sector, which has
been severely affected by interruption of operations. In addition, the Strategic
Disbursement Plan established a reserve of $486 million to be allocated at a later
date. The Government is currently considering options to deploy that reserve based
on a necessity standard as well as data gathered from the applications received for
the other Coronavirus Relief Fund (‘‘CRF’’) programs.
As of June 17, 2020, 12 of the Strategic Disbursement Plan programs are live and
accepting applications, with the remaining programs expected to go live in the next
few weeks. $557 million in CRF funds have been disbursed or transferred to entities
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who were deemed eligible after completing the Strategic Disbursement Plan’s CRF
application process. Based on the pace of disbursements to date as well as addi-
tional eligible needs that have been identified, we expect the Government will be
able to make use of the available funds before the deadline established by the
CARES Act. Further information on CRF disbursements can be found at http://
www.aafaf.pr.gov/covid-19-resource-center.html.
Question 5. Mr. Marrero, like most places around the world, Puerto Rico is facing
higher unemployment rates due to the COVID-19 pandemic. However, Puerto Ricans
trying to obtain unemployment benefits have faced hours-long lines, faulty tech-
nology, and miscommunication from the local Department of Labor. What steps will
the Puerto Rico Department of Labor take to immediately correct the current missteps
in disbursing local unemployment funds?
Answer. The State Unemployment Insurance Program (‘‘UI’’) and the temporary
unemployment benefits programs created under the CARES Act (e.g., Pandemic
Unemployment Assistance (‘‘PUA’’), Federal Pandemic Unemployment
Compensation (‘‘FPUC’’) and Pandemic Emergency Unemployment Compensation
(‘‘PEUC’’)) require compliance with Federal law, which mandates that claimants
should meet all eligibility requirements. At present, there are more than 320,000
workers receiving UI and PUA benefits. However, a portion of applicants have
issues of eligibility on their claims that must be solved through investigation before
a payment is issued. These issues arise from the information provided by claimants
in their benefits application.
Federal law requires the adjudication of eligibility issues to be solved on a case-
by-case basis before the issuance of a payment. Sometimes, the adjudication of an
issue may require interviewing not only a claimant, but also his or her employer.
Therefore, the payment of unemployment funds cannot always be as fast as ex-
pected. See U.S. Department of Labor, Unemployment Insurance Program Letter No.
23–20, at p.4 (‘‘Eligibility for [Unemployment Compensation (‘‘UC’’)] is based on
claimants demonstrating that they meet certain eligibility requirements on a weekly
basis . . . a state’s failure to administer its UI program in conformity and substan-
tial compliance with federal law can result in loss of the state’s certification and loss
of its administrative grant to operate the UC program and/or its employers’ tax
credits under [Federal Unemployment Tax Act] FUTA’’) (emphasis added).
Hence, issues on a claimant’s eligibility can delay the receipt of unemployment
benefits. In order to speed up the issues-solving process, the Puerto Rico Depart-
ment of Labor (‘‘PRDOL’’) has contracted with a company that provides software
and virtual platform for employees to solve claimant’s issues by phone. Under this
new software, claimants will receive texts and e-mails informing the date and hour
in which PRDOL will call to solve their eligibility issues.
Claimants with issues of eligibility with an older date will be called before claim-
ants with recent eligibility issues. Therefore, the software provides an efficient way
to solve claims chronologically, so that people that have been waiting longer for the
resolution of their claim can obtain their unemployment benefits payment first.
PRDOL will promote this phone-appointment system, so that claimants do not have
to visit their local PRDOL office. PRDOL will also promote the use of its virtual doc-
ument uploader so that claimants will be aware that they do not have to hand in
person the documentation required to solve their eligibility issues. Moreover, new
mailboxes were installed at the PRDOL regional offices.
Regarding the acquisition of new technology to speed up the payment of claims,
PRDOL issued a request for proposal to analyze PRDOL’s processing of unemploy-
ment claims and issue an opinion with recommendations. Currently there is a bill
before the Puerto Rico Legislature that will allow a collaboration between the PR
Treasury Department and PRDOL. Once the aforementioned bill becomes a law, the
PR Treasury Department will be allowed to provide data and its updated technology
to the PRDOL with the purpose of speeding up the processing of unemployment
claims. Furthermore, PRDOL is currently analyzing various software proposals for
a fastest processing of PUA and ‘‘Disaster Unemployment Assistance’’ (‘‘DUA’’)
claims. Finally, it must be pointed out that PRDOL expects to add approximately
200 temporary employees (or more if needed) to its current workforce to help with
the resolutions of claims.
Question 6. Senate Finance Committee Chairman Charles Grassley wrote a letter
to Governor Wanda Vázquez outlining a series of well-documented incidents of cor-
ruption and mismanagement that have been widely reported by the media in Puerto
Rico. What specific measures is the Government of Puerto Rico implementing to ad-
dress each of his concerns and what steps are you taking to ensure these incidents
never happen again?
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Answer. As the Government’s response to Chairman Grassley made clear, the
allegations in his letter appear to be unsupported and many originated from unreli-
able sources or parties with partisan agendas. Governor Vázquez’s administration
has fought to ensure that government agencies take responsible measures to fairly
and transparently implement their procurement and contracting policies. This ad-
ministration has addressed issues related to irregularities in the use of federal
funds and ensured that relief is used to benefit the people of Puerto Rico. Since
assuming office in August 2019, Governor Vázquez has issued a series of executive
orders designed to combat corruption in government contracting and restore Puerto
Rico’s credibility with the Federal Government. In fact, after reviewing the Govern-
ment’s recovery operations in February 2020, Coast Guard Admiral Peter J.
Brown—the Trump administration’s liaison to the Government for natural disaster
recovery efforts—reported that Puerto Rico’s ‘‘reputation seems to lag the reality’’
because the Government has implemented ‘‘very strong internal control mechanisms
to counter any attempts at corruption or diversion of funds.’’
Question 7. Since the COVID-19 pandemic reached Puerto Rico, and the shelter in
place and lockdown restrictions were put in place, many non-profits entities, commu-
nity leaders and community-based organizations have been working together in sev-
eral groups to find solutions to the social problems created by this new emergency.
Some of those groups include ‘‘La Mesa Social’’ and ‘‘Task Force Social del Pueblo’’,
comprising more than 150 organizations. These groups have been working with vul-
nerable populations facing the new challenges imposed by COVID-19, and also
asking the Government for information and specific actions that would help the resi-
dents of Puerto Rico. Why hasn’t the Government of Puerto created a social task
force, similar to the medical or economic task forces, to address the problems faced
by the most vulnerable populations of the island?
Answer. The Government continues to take all measures necessary to combat the
effects of the COVID-19 pandemic. The Governor has created a medical task force
and an economic task force to advise on matters on how to handle the pandemic.
The vulnerable population of the Island is of the utmost importance to the Govern-
ment. In fact, one of the first Executive Orders signed by the Governor during the
COVID-19 crisis was geared toward protecting a sector of the most vulnerable
population of Puerto Rico; the homeless. Executive Order 202–25 ordered the PR
Department of the Family, the Department of Housing and the Health Department
to establish assistance centers to provide medical attention, among others, to this
vulnerable sector of the population. In addition, as further explained in our answer
to Question 8, under the Strategic Plan for the Disbursement of CRF funds, non-
governmental organization that work closely with these vulnerable communities are
eligible and encouraged to participate in many of the programs outlined in the
Strategic Plan. The Government will continue analyzing further ways in which to
address the problems of this important sector of our population.
Question 8. After advocacy efforts from a group of Puerto Rican NGOs, the
Oversight Board wrote a letter to Governor Wanda Vázquez supporting a petition
that a portion of the discretionary funds under federal stimulus packages be assigned
to the social services NGOs in Puerto Rico. However, the Government of Puerto Rico
has not answered this petition. What are the reservations to the petition made by the
NGO community and supported by the Oversight Board? Is the Government of Puerto
Rico going to act on this request any time soon?
Answer. On May 15, 2020, Governor Wanda Vázquez Garced issued Executive
Order OE–2020–040 establishing Puerto Rico’s Strategic Disbursement Plan for the
use of CRF funds under the CARES Act. The plan lays out 16 distinct programs
that address both government needs (mainly associated with attending to the public
health emergency and continuing government operations) and those of the private
sector, which has been severely affected by interruption of operations. Non-
governmental organizations (‘‘NGOs’’) are eligible for and have been encouraged to
participate in many of these programs.
Additionally, communication among representatives of the Puerto Rico Fiscal
Agency and Financial Advisory Authority (‘‘AAFAF’’) and representatives of the
NGO sector has been constant throughout the process of developing these CRF
programs. Representatives of AAFAF have met with a group of representatives of
the NGO sector three times and continue to discuss with them ways to achieve their
goals that are in line with the CRF guidance provided by the U.S. Department of
Treasury. AAFAF remains available to continue discussions with representatives
from the NGO sector.
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Question 9. Puerto Rico’s power grid is particularly fragile after Hurricane Marı́a
and the earthquakes in southern Puerto Rico. After the earthquakes this January,
the Costa Sur power plant has been out of service due to the significant damages
made. The 2020 Hurricane season began 2 weeks ago. Mr. Marrero, have you or
Governor Wanda Vázquez been in contact with FEMA to discuss the upcoming hurri-
cane season? What steps are being taken to plan and prepare for these upcoming
months? How are these being impacted by the upcoming privatization of the power
utility?
Answer. As a result of the multiple lessons learned following Hurricanes Irma and
Maria, PREPA has undertaken and implemented various System Planning and
Response Planning measures.
(a) System Planning—
• Vegetation Management: PREPA commenced a pilot and a comprehensive
vegetation management program, consistent with industry best practices, to
protect the integrity of PREPA’s T&D infrastructure. The pilot program was
supported by a $7 million budget for two contractors (fiscal year 2019–2020),
1,098 areas assigned across six regions on 38 kV lines. The full T&D vegeta-
tion management program (fiscal year 2020 and 2021) includes a $33 million
budget for three contractors, with 595 miles assigned across six regions.
• Enhanced Communications: PREPA also now has 68 satellite phones and
agreements with KP4 for radio communication in a natural disaster event.
This includes an installed teleconference system island-wide that improves
communication reliability and redundancy.
(b) Response Planning—PREPA has aligned the following support in the event
response is needed to another natural disaster.
• American Public Power Association (APPA) Agreement: The Mutual Aid
Program includes a variety of partners and networks for the provision of ex-
ternal resources for power restoration; This also contemplates coordination
with APPA within 72 hours.
• Master Service Agreement (MSA) for Emergency Restoration: PREPA issued
an RFP during early May. Selected proponents are expected to be announced
in early July 2020.
• Memorandum of Understanding (MOU) with Municipalities: PREPA has
made available an MOU agreement to those municipalities that wish to
provide restoration services at a very local level.
• Inventory: PREPA’s inventory positions is currently at $138 million versus
$37 million prior to Hurricane Maria. The $138 million amount includes $82
million of PREPA inventory and $56 million of USACE inventory.
• Additional Logistics in Place: Four functioning helicopters; 160 call center
resources at three different locations throughout the island.
The above are only some of the preparedness measures undertaken by PREPA.
In addition thereto, PREPA has undertaken multiple and specific initiatives that
have been included within the FEMA claims process that are designed to improve
the island’s ability to respond to hurricanes and other atmospheric events/natural
disasters. Initiatives include recommendations made by the Department of Energy
(‘‘DOE’’), FEMA, and other stakeholders. These include peaking units, substation
hardening, upgraded codes and standards, underground critical feeders, substation
relocations for flooding prevention, and new buildings for storm hardening, among
others.
The Operation and Maintenance services management contract for the
Transmission and Distribution infrastructure will not negatively impact any of the
preparatory actions and strategies. To the contrary, the selected operator and the
underlying public-private partnership agreement are contemplated to expressly aug-
ment the island’s capacity—from a financial, human resource, and practical
expertise standpoint—to improve, professionalize and react to any future event.

Questions Submitted by Rep. Sablan

Question 1. Like Puerto Rico, my district, the Northern Mariana Islands, was
recently devastated by multiple natural disasters. And, like Puerto Rico, we are
currently dealing with considerable fiscal, economic, and social challenges during
this pandemic. I imagine all the territories are. What are some lessons learned
63
during this crisis that you believe might be useful for the territories and the rest of
the United States?
Answer. If the last 3 years has taught us anything it is that we must be prepared
for the unknown. Over this time period, Puerto Rico has been struck with two dev-
astating hurricanes, Irma and Maria, countless earthquakes and is now facing the
COVID-19 pandemic. Territories must be financially and operationally equipped to
respond to events such as these. This includes budgeting for rainy-day funds, ensur-
ing adequate funding for emergency response and healthcare related agencies and
having action planes developed in advance of future catastrophic events to ensure
Government continuity and continuation of essential services.
Question 2. The 2020 Hurricane season began just a few weeks ago, while Puerto
Rico is still recovering from several natural disasters. Have you or the Puerto Rico
government been in contact with FEMA to discuss the upcoming hurricane season?
What steps are being taken to plan and prepare for these upcoming months?
Answer. The Government has regular communications with the Federal
Emergency Management Agency regarding both the continued work to rebuild after
Hurricanes Irma and Maria, the recent Earthquakes and COVID-19. The Govern-
ment anticipates a significant amount of monies to be obligated this year for the
rebuilding of the islands electric grid, water infrastructure and schools.
The Government is also keenly aware of the hurricane season ahead and the fact
that certain experts are anticipating an extremely active season. The Government
continues to fund a rainy-day fund that will grow over time to $1.3 billion by fund-
ing $130 million annually. The monies in the rainy-day fund will be used, where
needed, to respond to external shocks including hurricanes and other natural disas-
ters, among other possibilities. In addition to the rainy-day fund, the Oversight
Board has finally acknowledged the need for a Disaster Relief Funds (‘‘DRF’’) work-
ing capital facility. The Government has consistently articulated the need of a DRF
working capital facility to the Oversight Board but the Oversight Board had ob-
jected to this concept until the Certified 2020 Fiscal Plan, which includes a DRF
working capital facility in the amount of $750 million. The intent of the facility is
to accelerate the rebuilding process funded with Federal monies on a spend and re-
imburse basis. The acceleration of permanent projects will put the Island in a better
position to withstand future hurricanes.

Questions Submitted by Rep. Cartwright

Question 1. Like most places around the world, Puerto Rico is facing higher
unemployment rates due to the coronavirus pandemic. However, Puerto Ricans trying
to obtain unemployment benefits have faced hours-long lines, faulty technology, and
miscommunication from the local Department of Labor. Mr. Marrero, what steps is
the Puerto Rico Department of Labor taking to remedy this situation?
Answer. See response to Question 5 from Chair Grijalva above.

Questions Submitted by Rep. Bishop

Question 1. PROMESA required that Puerto Rico’s audited financials be made
current, yet PR is further behind in its audited financials today than it was when
PROMESA was passed. Is this a failure of the FOMB or the Commonwealth or both?
Answer. The expected issuance of audited financial statement for fiscal year 2017
is no later than July 31. The Government is targeting to have a draft of fiscal year
2018 financial statements for review by external auditors by November 2018.
Question 2. With aggregate balances now totaling more than $19 billion sitting in
Commonwealth accounts (and virtually half of that being unrestricted in use), why
have the Commonwealth and FOMB not been able to make more development
progress, and also bring bankruptcy proceedings to a conclusion? Why haven’t these
funds been utilized to help Puerto Rico develop, and to honor what obligations could
be honored in a timely fashion?
Answer. Respectfully, the premise of the question is misleading. For example, the
headline number of $19 billion (which was as of April 30, 2020 and does not reflect
drops in revenue since then) includes nearly $2 billion in CARES Act funding, $650
million in employee retirement contributions, $660 million in unemployment trust
funds, and nearly a billion in funds belonging to Puerto Rico’s water and sewer
authority (PRASA), which is current in its bond obligations. Funds available to
address creditor claims in each individual Title III case are much lower.
64
Moreover, over the last several years, the Government has worked with the
Oversight Board to develop several strategies to emerge from the Commonwealth’s
Title III cases. Many of these strategies have been successful. For example, in
November 2018, the Government Development Bank of Puerto Rico completed a
first-of-its-kind consensual restructuring of about $4 billion of debt under Title VI
of PROMESA. And in February 2019, the Puerto Rico Sales Tax Financing
Corporation (known as COFINA) consummated its Title III plan of adjustment to
restructure approximately $18 billion of bond debt. Both of these efforts garnered
the full support of the Oversight Board and the Government, including both the
legislative and executive branches.
In addition, substantial progress has been made regarding the Government’s
other Title III debtors. However, any consensual resolution of the Title III cases
must involve creditors recognizing weaknesses in their legal positions as well as a
realistic evaluation of what the Title III debtors can provide for recoveries. The un-
willingness to this point of major creditor constituencies to face these realities is a
roadblock to progress.
In addition, the COVID-19 pandemic has materially impacted the economic and
cash-flow projections for the Island, consistent with what all U.S. states are experi-
encing. As a result, the Government and Oversight Board will need to re-assess all
restructuring agreements to determine which approaches remain viable in the post-
COVID-19 economic reality. Before the COVID-19 pandemic, the Government and
Oversight Board made the following progress in the Title III process:
• Commonwealth: The Government worked closely with the Oversight Board
in the development of a Plan Support Agreement (‘‘PSA’’) and Plan of
Adjustment (‘‘POA’’) for the Commonwealth. Although the Government and
Oversight Board did not agree on all aspects of the POA proposal, they were
working together to resolve them. The PSA and POA contemplated the use
of approximately $5.1 billion of cash as part of settling various claims against
the Commonwealth. This disproves the assertion that the Government is not
willing to use cash to satisfy creditor obligations.
• Puerto Rico Electric Power Authority (‘‘PREPA’’): In the case of PREPA,
the Government supported, and was party to, the Restructuring Support
Agreement entered between the PREPA Revenue Bond holders, the Oversight
Board and AAFAF.
• Employees Retirement System (‘‘ERS’’): The validity of the Pension
Obligation Bonds (‘‘POBs’’) and rights of the Pension Obligation Bondholders
are subject to various complex litigation that has not yet been resolved.
Resolution of the legal issues surrounding the POBs will facilitate and
accelerate the Title III for ERS.
• Highway & Transportation Authority (‘‘HTA’’): The Government and
Oversight Board have participated in mediation sessions with the creditors of
HTA, but they have not yet reached an agreement with them.
Although the aggregate balances of the Commonwealth’s funds is currently
approximately $19 billion, some of these funds are restricted and cannot be used.
Many of the accounts holding these funds are (i) restricted by court order, (ii)
earmarked for emergency use only by the Oversight Board, (iii) federal funds limited
to specific uses, (iv) restricted by various federal laws or regulations, (v) held in cus-
todial or other segregated accounts for third parties, (vi) proceeds of tax-exempt
bonds with restrictions under the Internal Revenue Code, or (vii) restricted due to
third-party contracts (such as debt service reserve funds held by a trustee). And
many of the funds that are not otherwise restricted are being fought over by hun-
dreds of different creditor constituencies involving complex legal issues that remain
subject to pending litigation. Although the Government is trying to minimize the du-
ration of litigation and reach consensual resolution with creditors where possible,
the vast number of competing parties and interests has made global resolution
difficult to achieve.
Before the COVID-19 pandemic, the Government also repeatedly advocated for
reserving excess cash and additional resources so that Puerto Rico could adequately
address future natural disasters or other uncontrollable events that might nega-
tively affect the economy. Recent events have vindicated this position. In March
2020 alone, the Oversight Board authorized the use of nearly $1 billion of Puerto
Rico funds, which included an increase and reallocation of $800 million for the
Government’s fiscal year 2020 budget and $160 million of the remaining balance
available from the Government’s Emergency Reserve Fund to combat COVID-19.
Earlier this year, the Oversight Board authorized the use of $100 million from the
Emergency Reserve Fund to respond to Puerto Rico’s recent earthquake emergency
65
in January 2020. Without the availability of these cash reserves, the Government
would not have been able to quickly and effectively address these emergency situa-
tions. In order to successfully emerge from its Title III process and minimize the
risk of having to seek Title III relief again, the Government continues to believe it
should retain sufficient cash reserves not only for emergency purposes but also to
utilize any excess available resources to reinvest in areas earmarked as the most
critical to Puerto Rico’s future economic growth.
Thus, the Government is not simply sitting on a pile of cash and doing nothing
with it. To the contrary: the Government is trying to preserve its available resources
so that it can properly allocate and utilize them in a potential global resolution of
the Title III cases that is both fair to creditors and protects the health, welfare, and
safety of the people of Puerto Rico.
Question 3. The FOMB in an early fiscal plan projected an astonishing $1.5 billion
to be spent on advisory fees. Several years hence, how much money have the
Commonwealth and FOMB in fact spent on aggregate financial and legal advisory
fees so far since PR began defaulting on its debt? Has this process created a class
of people that benefit financially from the prolonged continuation of bankruptcy?
Answer. Perhaps the largest driver or professional fees has been that creditors
have engaged in failed litigation strategies, including their challenge to PROMESA’s
appointment process, which was rejected by a 9–0 vote in the U.S. Supreme Court.
The scorched earth tactics of creditors—who started the bankruptcy process filing
fruitless lawsuits rejected by the District Court, the Court of Appeals and the
Supreme Court and have continued a steady pace of motions and lawsuits since
then—forces the Oversight Board, the Government and the statutory committees
Congress required be appointed to spend resources. As described above, the fastest
way to stop professional fee expenditures is for creditors to be willing to reach
reasonable compromises instead of seeking overreaching recoveries.
We also refer you to section 5.2.8 of the Certified 2020 Fiscal Plan for a descrip-
tion of the professional fee forecast and Oversight Board operating expense forecast.
Additionally, Exhibit 20 of the Fiscal Plan provides an analysis of professional fees
as a percentage of funded debt relative to other mega bankruptcy cases. As can be
seen in that analysis, the projected professional fees are in line with other large,
complex cases. The Title III cases in Puerto Rico are arguably the most complex
bankruptcy cases ever and involve many legal and financial issues that have never
been addressed before. Restructuring over $100 billion in liabilities (funded debt and
unfunded pensions) with a wide array of creditors is a costly and timely endeavor
but a necessary one to put Puerto Rico on a path of sustainability.
Question 4. Even before the COVID-19 pandemic began, the FOMB and Common-
wealth had not abided by their own agreement under the 2019 PREPA Restructuring
Support agreement to raise a 1 cent interim rate increase case to the PREB, why?
Answer. PREPA filed a request before Puerto Rico Energy Bureau (‘‘PREB’’) on
July 3, 2019, to implement the settlement charge contemplated by the PREPA
Restructuring Support Agreement (the ‘‘PREPA RSA’’). See In re: the Puerto Rico
Electric Power Authority Initial Rate Review No. CEPR–AP–2015–0001. On
November 22, 2019, PREB denied the motion on procedural grounds. The PREPA
RSA provides that PREPA’s obligation to implement the one-cent settlement charge
is subject to entry of an order of the Title III Court approving the settlements em-
bodied in the PREPA RSA (the ‘‘9019 Order’’). The hearing on the 9019 Order has
not yet occurred so no order has been entered.
Question 5. Where is PREPA today in its transformation and privatization process?
Have delays in this process directly and negatively impacted its ability to provide
stable electricity to residents and hospitals on the island?
Answer. On June 22, 2020 the Government announced an agreement between the
Puerto Rico Public-Private Partnerships Authority (‘‘P3A’’) and LUMA Energy to
manage and operate the transmission and distribution system of PREPA. PREB
approved the contract last week. Under the agreement, LUMA Energy will operate,
manage, maintain, repair, and restore PREPA’s transmission and distribution
system to help the transformation of PREPA into a modern power company able to
deliver reliable, clean, and more affordable electricity to Puerto Rico’s households
and businesses.
Question 6. What creditability will PREPA and the Commonwealth have with
potential new transformation partners, or in future attempts to access the capital
markets, if it is now on the verge of pulling out of yet a third consensually agreed
PREPA Restructuring Support Agreement?
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Answer. The COVID-19 pandemic has materially impacted the economic and cash-
flow projections for the Island, consistent with what all U.S. states are experiencing.
As a result, the Government and Oversight Board will need to re-assess all restruc-
turing agreements to determine which approaches remain viable in the post-COVID-
19 economic reality.
Question 7. What has the Commonwealth government done to take advantage of
low oil prices to lock in future contracts for PREPA, and to offset the increase in
charges that are mandated by law to cover all costs including those under the
Commonwealth and FOMB agreements with creditors?
Answer. During fiscal year 2020, PREPA has renegotiated its existing Fuel
Purchase Contract for the supply of bunker fuel to the San Juan, Palo Seco,
Aguirre, and Costa Sur steam plants. After conducting an RFI process directed to
different potential bunker fuel suppliers, PREPA formally requested from the
Oversight Board approval of an amendment to an existing fuel provider with more
favorable terms. On June 2020, the Oversight Board approved the amended Fuel
Purchase Contract.
The contract amendment extended the term of the agreement until October 31,
2020, with an automatic extension until October 31, 2021. With this amendment,
PREPA also secured a reduction in price adders of just over 20 percent. Given
PREPA’s bunker fuel purchases from August 2019 through April 2020, the amended
contract has resulted in cumulative savings of $9.2 million in adder fees. Based on
projected bunker fuel purchases for May and June 2020, the amended contract is
expected to save PREPA an additional $3 million.
The Amendment generally seeks to stipulate that (i) the contract shall be in effect
until October 31, 2021, extendable by an additional year and (ii) PREPA will pay
a fixed price for bunker fuel oil, regardless of the market price, for purchases be-
tween a minimum volume of 250,000 barrels per month, up to a maximum of
400,000 barrels per month. As such, the fuel provider guarantees the price and is
responsible for delivering the product at such price, regardless of the actual price
at which it can secure inventory. The FOMB approval confirms that the renegoti-
ated agreement is consistent with PREPA’s fiscal plan and that funds for the rel-
evant fuel payments are included in budget. Furthermore, the FOMB’s analysis
shows that these generally align with typical hedging facilities and, while some
costs may be above typical benchmarks (i.e. hedging costs), the amended contract
is expected to produce savings to PREPA, if current projections for the price of oil
are realized.
Any increases in rates are regulated and subject to the Puerto Rico Energy
Bureau and the regulatory approval process thereunder. Furthermore, PREPA has
achieved certain efficiencies and operational improvements that are contained in its
current fiscal plan, which will be further detailed and reported on in the new fiscal
year 2021 fiscal plan for PREPA that is expected to be certified by the Oversight
Board on or before June 30, 2020. In addition, the announcement made on June 22,
2020 by the Government regarding the selection of a Transmission and Distribution
(‘‘T&D’’) private operator will also leverage additional and new operational and in-
frastructure efficiencies that will be incorporated into the T&D system over the next
few years.
Question 8. In the 2019 PREPA restructuring agreement the risk of a declining
population was borne by creditors with no true up to rates, and if the B note in the
transaction remained unpaid at maturity, it simply disappeared. Isn’t that deal even
better for the Commonwealth today than when it was struck given the greater
uncertainty on economic projections and collections?
Answer. Those are certainly good attributes of the PREPA restructuring agree-
ment. Unfortunately, the COVID-19 pandemic has materially impacted the economic
and cash-flow projections for the Island, consistent with what all U.S. states are ex-
periencing. As a result, the Government and Oversight Board will need to re-assess
all restructuring agreements to determine which approaches remain viable in the
post-COVID-19 economic reality.

Questions Submitted by Rep. Gosar

Question 1. What does the law require of the Puerto Rico government for procuring
contracts? Did the law require the government to get approval from the Financial
Oversight Management Board for Puerto Rico before the government entered a con-
tract with Promedical for $38 million worth of COVID-19 testing kits? If so, why did
the government not follow the appropriate protocols?
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Answer. On March 16, 2020, Governor Vázquez Garced signed executive order
EO–2020–024, which authorized the Government’s agencies to acquire the medical
supplies necessary to prevent the contagion of COVID-19 in Puerto Rico. As of the
date of the executive order and given the COVID-19 emergency, the Government’s
agencies were given a 60-day period to execute COVID-19 related contracts—
effective for only 60 days—without the need to comply with any requirements estab-
lished by law, regulation, administrative order, or other applicable guidelines.
Governor Vázquez Garced implemented this aggressive measure to acquire the med-
ical equipment necessary to combat the virus as expeditiously as possible.
The executive order also required that any contract executed within the 60-day
emergency period be remitted to the Oversight Board. This provision was designed
to minimize any disruptions to emergency contracting related to the Board’s con-
tract review policy under PROMESA section 204(b)(2), which authorizes the
Oversight Board to require prior approval of ‘‘certain contracts’’ in order ‘‘to ensure
such proposed contracts promote market competition and are not inconsistent with
the approved Fiscal Plan.’’ Section 204(b)(3) explains that any Oversight Board con-
tract review policy should be designed to: (1) make the government contracting proc-
ess more effective; (2) increase the public’s faith in the contracting process; (3) make
appropriate use of the Oversight Board’s time and resources; (4) make the Common-
wealth government a facilitator and not a competitor to private enterprise; and (5)
avoid creating any additional bureaucratic obstacles to efficient contracting. The
Oversight Board’s current contract review policy provides that ‘‘any contract or se-
ries of related contracts with an aggregate expected value of $10 million or more’’
must receive prior Oversight Board review and approval. The Oversight Board be-
lieves this policy applies to all contracts in which the Commonwealth or a covered
instrumentality is a counterparty. However, because (i) section 204(b)(2) on its face
states that the purpose of any Oversight Board review is to promote market com-
petition and is limited to contracts between the Commonwealth and another Puerto
Rico Government entity, and (ii) section 204(b)(3) suggests that the purpose of the
law is to promote private enterprise, the Government believes that the Oversight
Board’s policy requiring its approval of all contracts valued at more than $10 million
is overbroad and at odds with section 204(b)(3).
In a collaborative effort to expedite the execution of the emergency contracts, the
Government and Oversight Board agreed to temporarily relax the Oversight Board’s
contract review policy, even though the Government still believes the contract
review policy is beyond the Oversight Board’s authority under PROMESA section
204(b)(2).
As to the Promedical COVID-19 test kits, on April 6, 2020, the Oversight Board
sent the Governor a letter asserting that such agreements should be canceled, and
recommending the Government seek reimbursements for any amounts disbursed in
connection to these agreements. AAFAF replied to the Oversight Board’s letter con-
firming that: (i) the purchase order for Promedical COVID-19 test kits was canceled
on April 2, 2020; and (ii) the Government was fully reimbursed on April 6, 2020.
AAFAF provided evidence of both the cancellation and reimbursement of the $19
million deposit. As noted, the Promedical COVID-19 test kits were requested
through a purchase order. In its April 9, 2020 letter to the Oversight Board, AAFAF
explained that the Promedical purchase order was not previously provided to the
Oversight Board because the Government’s agencies understood that, as written,
the Oversight Board’s contract review policy covered only formal contracts, and not
purchase orders.
Question 2. Puerto Rico is authorized to receive substantial funds from the Federal
Government for the distribution of needed school breakfasts and lunches during this
epidemic. However, I heard that Puerto Rico had difficulties distributing the school
meals. Can you please explain why that is so? Can you please also elaborate on the
lawsuit that was brought against the government on this matter? And please update
the Committee on the current process and procedure being utilized by the government
to distribute the meals to qualifying students.
Answer. The Government has made significant efforts to support its most vulner-
able citizens and to mitigate their health risks during the COVID-19 outbreak.
These efforts have been generally successful as Puerto Rico continues to be on the
lower end of COVID-19 cases per capita in the United States. In mitigating these
risks, the Government has made many difficult choices that factor in public health,
government support, and economic impacts. In determining the best way to feed
children and their families, the Government has determined that the best course of
action is to rely on existing food banks located throughout Puerto Rico. At the time
of this decision, Puerto Rico’s food banks had measures in place to ensure the safe
distribution of food to reduce the likelihood of COVID-19 exposure. Unlike the
68
Government’s School Food Authority, the Puerto Rico food banks were already able
to provide pre-packaged meals, which reduces the risk of contamination. In addition,
funding from other government programs would support the transportation of these
meals to areas where they are most needed. While the Family First Coronavirus
Response Act and CARES Act provided additional funding to support school food
programs, at the time, much of the costs associated with meal delivery would not
have been covered. The time and cost for retrofitting School Food Authority facilities
to provide the same public health protections that already existed within the Puerto
Rico food bank program seemed inefficient. Though these are difficult decisions, the
Government’s ability to slow the spread of COVID-19 while maintaining food sup-
port programs, indicates that the Government made the best choice under the cir-
cumstances. It is our understanding that all of the above is being explained to the
Court as part of the pending lawsuit.
Question 3. Why are there no work requirements in Puerto Rico for participants
of NAP?
Answer. NAP (or ‘‘PAN’’ for its Spanish acronym) is Puerto Rico’s largest welfare
program. It is similar to the mainland SNAP, but it is funded and administered sep-
arately and does not include a work requirement nor specific budget allocations to
administer such requirements. As part of the human capital and welfare reform
package, the Government will institute work requirements for able-bodied adults
without dependents in order to qualify for PAN benefits. Puerto Rico has already
submitted a work requirement language in its fiscal year 2019 Annual State Plan
to the Food and Nutrition Service Agency. During fiscal year 2019, the Government
will develop, alongside the Food and Nutrition Service Agency, the work require-
ment program policies, parameters, operational guidelines and compliance oversight
that will be included in its fiscal year 2020 Annual State Plan submission. The an-
nual state plan may be amended at any point throughout the fiscal year with the
proper request, review, and approval by the Food and Nutrition Service Agency.
The Government has maintained its stand in a phase-in of the work requirement
for NAP. Including a phase-in of the work requirement over a 4-year period
(Government proposal) versus launching a full work requirement (with a 3-month
transition time). The main reason for the phase-in instead of 1-year full deploy-
ments has been high unemployment (lack of supply of jobs) and high volume of
training and re-training (lack of skilled professionals), which represent a stumbling
blocks that could endanger the current benefits provided by NAP. Unlike U.S.
states, Puerto Rico receives the NAP benefits as a block grant and cannot
redistribute funds immediately in order to mitigate this potential economic impact
to over 150,000 citizens that would potentially qualify for work requirements.

The Chairman. Thank you very much, and I appreciate both wit-
nesses and your indulgence as we go through this process. Let me
now turn to Mr. Sablan for any questions or comments he might
have for the witnesses. And then we will alternate, as we do with
in-person meetings, to the Minority side. But first let me recognize
Mr. Sablan. Sir.
Mr. SABLAN. Yes. Thank you very much, Mr. Chairman, for
holding today’s hearing. Thank you also to Ms. Jaresko and Mr.
Marrero for their presentations. I have a question. I am going to
make this short for Ms. Jaresko, if I may. Ms. Jaresko, if Congress
were to amend PROMESA, as Mr. Marrero advised, to limit the
Board’s oversight over funding issues affecting policy, how would
that change the role of the Board going forward and affect your
ability to achieve the goals of PROMESA?
Ms. JARESKO. Thank you, Representative Sablan. The rec-
ommendation that Mr. Marrero makes is based on a false con-
struct. There have been four issues, four situations, where there
have been disputes between the government and the Board with
regard to our authority. Of those four cases, three were litigated,
were brought to the court by the government or the legislature of
Puerto Rico and won by the Board. In all four of those cases since
69

2018, the court has agreed on the clarity and the authority that
has been provided by PROMESA to the Board. If the amendment
were made as Mr. Marrero suggested, then I think you’d have to
change the definition of ‘‘fiscal sustainability’’ and ‘‘balancing
budgets.’’ If you change fiscal sustainability and the Board is no
longer responsible for fiscal sustainability, then it will be difficult,
if not impossible, to ever restructure the debts without clarity and
confidence that the debt is sustainable.
Mr. SABLAN. All right. Thank you very much. I have other ques-
tions, but I will submit them for the record and could potentially
probably get a response from you. Thank you very much, Mr.
Chairman. I yield back.
The CHAIRMAN. Thank you, Mr. Sablan. Let me recognize the
Ranking Member, Ms. González-Colón. Madam Commissioner, the
floor is yours.
Miss GONZÁLEZ-COLÓN. Thank you, Chairman. My first question
will be to Ms. Jaresko. As you are aware, there is a lot of frustra-
tion on the island in terms of how long it is going to take for the
Federal and local government for a lot of the disbursement of many
of those Federal funds. And I share that frustration. And that was
the reason a few weeks ago we met with the Governor, directly
with the Governor’s cabinet as well to see why it is taking so long.
And you have many, many reasons for that, some of them, Federal
agencies with a lot of red tape. But other ones are at the state
level.
One of the concerns that hit me most—and this was from all
cabinet members—was that they do not have the personnel with
the experience and the expertise to manage and comply with the
new requirements of Federal grants due to PROMESA board cuts.
I mean, that those reforms that were imposed by PROMESA are
limiting the budget to actually train and recruit employees in dif-
ferent Federal and local agencies to comply with Federal grants
and actually make that happen. How do you respond to this, and
how does the 2020 Fiscal Plan address this issue?
Ms. JARESKO. Thank you for the question, Representative
González. It is true that the fiscal plans and the budgets have re-
duced payroll spending over the past 3 years. However, none of
those payroll reductions should have been implemented through
frontline employees. The intention and the agreement reached with
the previous governor was that the bulk of the rightsizing would
happen through back-office consolidation, consolidation of bureaus
into single departments. And those actions actually haven’t
happened for the most part.
So, what has happened instead is the government has used a
very blunt tool, early retirement or voluntary transition, which has
been offered across practically all front and back office. And when
that has happened, it is very hard to direct who stays and who
leaves because people have a voluntary choice to early retire. And
indeed, by implementing the reductions in payroll in that fashion,
I believe that they have caused a problem in terms of capacity. But
that said, I don’t think you can allay the disbursement all at the
feet of the civil servants or payroll reductions. I think that in, for
example, the case of implementation of FEMA funding, it is just a
very long and complex process.
70

The COR3 Department is funded by the Federal Government,
not by the budget that is part of the fiscal plan. So, it is not a mat-
ter for COR3 and FEMA programming and FEMA disbursement
that has anything to do with the budget because their budget is not
part of the general fund that we are certifying. Similarly, for
CDBG-DR, there is an entirely new group of individuals, about
100, the last I recall, hired with Federal funds to implement the
CDBG-DR program.
That CDBG-DR program is very complex, and having to learn
Federal procurement rules and do what is required by the CDBG-
DR program is complex. But again, that capacity is not a capacity
funded by the general fund or part of the certified fiscal plan or
budgets. It is a separate Federal funding for that personnel.
Miss GONZÁLEZ-COLÓN. Ms. Jaresko, we also heard the complaint
that the Oversight Board takes too long to review some documents
and plans submitted by the government of Puerto Rico. And it goes
for the delays. So, I have two questions on this. How do you see
this, and how long does it typically take the Board to review that
documentation provided by the government? And if you can actu-
ally submit to the Committee a log of such requests and responses
as well as—you understand it is useful to require a fixed time
frame to the Board to either reject or approve, especially in the
case of expenditures that are already gone through the territory of
Federal regulatory agencies.
Ms. JARESKO. Thank you, Representative González. I am more
than happy to submit a log of our responses along with response
times. It varies depending on what the issue is. For contract re-
view, we typically take 7 working days. The issue with a review is
whether or not the submission is complete. That is probably the
most basic issue that we have. When a submission is complete, it
can take 1 day to 7 days. With regard to budget reapportionments,
similarly, documents, if they are complete, take up to a week,
sometimes a bit more. And again, I will get you that log. However,
the longer delays have to do with incomplete documentation, lack
of bids that go with the cost or other.
Miss GONZÁLEZ-COLÓN. Thank you. I don’t know how much time
I have left—I don’t see the timer here—but I will make a question
of Mr. Marrero.
The CHAIRMAN. Thank you. Let me now turn to Mr. Huffman.
Miss GONZÁLEZ-COLÓN. Mr. Chairman, is my time expired?
The CHAIRMAN. Yes.
Miss GONZÁLEZ-COLÓN. I can’t see the timer in my——
The CHAIRMAN. There is a timer—if your staff will call our
technical staff, it will appear on a screen that will ping you when
you have 1 minute left.
Miss GONZÁLEZ-COLÓN. OK.
The CHAIRMAN. Mr. Cox, if you have any questions or comments,
sir.
Mr. COX. Thank you for the witnesses being here today. As
chairman of the Oversight Subcommittee, I have observed that the
post-hurricane response to claims by first responding agency seem
unreasonably delayed by FEMA. And my question to both of you
is I understand your agencies have regular interactions with
PREPA. Can you tell me how much Puerto Rico requested for
71

emergency power restoration work performed following Hurricanes
Irma and Maria? What is the current status of FEMA reimburse-
ment for this work, and how much of the request is still pending
FEMA review? As you know, these storms occurred in September
2017, almost 3 years ago. And there just seems to be an undue
delay with FEMA’s processing these requests for a reimbursement
to some of the utility companies, particularly the utility companies
there in Florida that did a lot of this important work.
Ms. JARESKO. I don’t know if Mr. Marrero wants to go first. I can
speak generally to FEMA as a whole. And then maybe, Omar, you
can talk to PREPA.
Mr. COX. OK.
Ms. JARESKO. We have estimated in the Fiscal Plan, total, in
terms of FEMA funding we expect. And the government is gen-
erally in agreement—it is $48 billion over a period of 15 years. Of
that $48 billion, $17.4 billion has been obligated. And of the $17.4
billion obligated, $13 billion or so has been disbursed to date. It is
a long process. I won’t speak again to the specifics of the
emergency generators.
But in general for PREPA, I understand that great progress has
been made and we are expecting an agreement to be reached hope-
fully by the end of the summer, all else being equal. But the dam-
age assessment process has been very long, tedious, and requiring
incredible civil engineering work and a lot of incomplete work.
Omar?
Mr. MARRERO. Sure. Thank you, Natalie. Thank you, Congress-
man, for the question. I am trying to log into our transparency
portal. I don’t know if you are familiar, but Congressman, if you
go to recovery.pr, that is our transparency portal. It is updated on
a weekly basis. And it has all the information concerning FEMA
funding, not only how much money has been obligated, disbursed,
how much has been waiting and also by subrecipient and by
project.
I am having some technical glitches to getting information. But
if you go to recovery.pr—it is in English and in Spanish, and it has
all the information concerning FEMA funding for both Irma and
Maria. And it has graphics. You can download the information. But
if the Committee wants, I can submit it for the record as well. But
it is all publicly available through our recovery portal.
Mr. COX. Thanks so much. And I understand that the Adminis-
tration has assigned a reconstruction coordinator, Rear Admiral
Peter Brown, to oversee the disbursement of recovery funds in
Puerto Rico after Hurricane Maria. How is that relationship with
the government of Puerto Rico, with the coordinator—what support
has it received, and how can we be of assistance?
Mr. MARRERO. Well, Congressman, I am going to be honest. The
relationship with the rear admiral, Peter Brown, has been phe-
nomenal. I think that he has been instrumental to help to convey
the message to the Administration on what we are doing and what
we need in order to expedite the recovery process in Puerto Rico.
So, everything that I have is just to congratulate him for not only
his commitment to work but also his real involvement with the
government of Puerto Rico, his meeting with us on a regular basis
as well as the Governor.
72

Mr. COX. Right.
Mr. MARRERO. Next week, we are going to have a 1-week visit
from him. So, we are going to be working with him. And, again,
he has been great, has been phenomenal. And hopefully he is going
to be the chief operating officer that we have been waiting on.
Mr. COX. Great. That is super to hear. And finally, Ms. Jaresko,
given the obligations that have been incurred for this emergency
restoration work following the hurricanes, how does—really, I am
worried about the delay in receiving FEMA funding. How does that
impact Puerto Rico and other debtors in the payment of these obli-
gations which have to be paid. My fear is that if contractors don’t
get paid when they do the work after the disaster, they are going
to be less likely to step up the next time a disaster hits Puerto
Rico. So, if you could comment on that very briefly——
Ms. JARESKO. I agree with you that that type of practice, not
being paid, creates consternation on the part of bidders and private
sector players. At this point, though, again, I have to say that I
don’t see any reason why, if the monies have been obligated, why
they haven’t been disbursed. So, if there are those who have bills
outstanding or invoices outstanding that have not been approved
by FEMA, I think that is a separate category and COR3 and the
government need to look into that. But I have to remind you that
we are outside of the Federal funding. We don’t have oversight over
that level of detail in the Federal funding, so I’d have to turn to
my colleague.
Mr. COX. OK. Well, we can follow up. We’re out of time here so
thank you so much.
The CHAIRMAN. Thank you. The gentleman yields. Mr. Gohmert?
Mr. McClintock? Mr. McClintock, you are recognized.
Mr. MCCLINTOCK. Thank you, Mr. Chair. Welcome. I am deeply
disappointed that this Committee hearing is conducted in a man-
ner that makes a mockery of the constitutional process of govern-
ment that is set forth in our Constitution. You know, the founders
might not have had Zoom and the internet, but they had a very
effective mail system. And there was nothing to stop them from
mailing their speeches and questions and votes to each other. But
that is not the system they created. In those days, getting to
Washington was dangerous, arduous, and time-consuming, and yet
through world wars, pandemics, epidemics, a civil war and sleet
and snow, they all managed to get here to do their jobs until this
Congress.
Congress, the very word means the act of getting together and
meeting. The Constitution calls for representatives to attend,
assemble, and meet. Congress is a deliberative body and by its very
nature, that requires the people’s representatives to interact with
each other both through formal proceedings as well as through the
countless informal conversations that are the unique product of
coming together and meeting. That can’t be done on a Zoom call.
We can’t do our jobs in the manner our responsibility demands by
phoning it in from our living rooms and our bathrobes.
Nobody is lounging around the pool today with a mai tai. I say
just give it time. There is nothing in these bizarre new rules to
stop it. Mr. Chairman, I hope you will take a step back and con-
sider the damage that you’re doing to this institution by conducting
73

our affairs this way. I know it is much easier to sit at home and
phone it in. It is not what our constituents have a right to expect
of us. There are a few of us here present in the Committee room
today, and yet we’re staring at laptops.
If you persist in this farce, I am sure, one by one, we’re all going
to conclude it is a lot easier to sit in our homes too. I am certainly
tempted. I could be home with my family today too. And at some
point soon, I will probably take you up on this slovenly, sloppy, and
extraconstitutional process. But at that point, we might as well
rent out the capitol for weddings and banquets because there is no
other use for it. So, shame on this Committee.
Next, to the business at hand, I have been an opponent of
PROMESA since it was first introduced. And after 4 years of
watching this fiasco, I am more convinced than ever that it was a
terrible idea. I hold to the old-fashioned belief that a government
debt secured by a constitutional guarantee is sacrosanct and the
governments that created their own problems must deal with their
own problems without seeking a bailout from others who have re-
sponsibly managed their affairs.
PROMESA’s unelected management board is an affront to, little
D, democratic values and, little R, republican institutions. And its
repudiation of constitutionally protected debt threatens to under-
mine the full faith and credit of every state and territory in this
Nation. It was enacted with the promise that it would set the fiscal
affairs of Puerto Rico in order. And yet here we are 4 years later,
as far as I can tell, no better off. Self-government means not only
electing our representatives, but it also means dealing with the
consequences of their decisions.
In a democracy, we are always guaranteed to get the government
we vote for or, as Lincoln put it, the voters get their backsides too
close to the fire, they will just have to sit on the blisters a while.
It is a painful experience, but it is a learning experience from
which voters may go away sadder but wiser. So, I will ask both of
our witnesses, wherever they are, what would be wrong with re-
pealing PROMESA, disbanding its management board and then
handing the whole mess back to the people who created it, Puerto
Rico’s elected government and the voters who elected it? And I will
wait for an answer.
Ms. JARESKO. Congressman McClintock, I will attempt to an-
swer. I understand your frustration. And I believe that the people
of Puerto Rico are equally frustrated that we are not through this
bankruptcy yet and on the road to prosperity and sustainability.
We need to work harder. We need to do more. The elected govern-
ment needs to do more in terms of structural reforms to build a
revenue base from which we couldn’t possibly pay back any/all of
that debt.
Mr. MCCLINTOCK. And our other witness wherever he is——
Mr. MARRERO. Thank you, Congressman McClintock. Thank you
for your statement. I do, sir, think that we all have to share, we
all have to assume the responsibility. And I believe also the
Congress has to share the responsibility in making sure that the
people of Puerto Rico have the tools not only to exit bankruptcy but
also to pave the way for economic recovery. So, definitely, I agree
74

with you. I think that we will have to assume our responsibility.
That is the second——
Mr. MCCLINTOCK. Thank you. Mr. Chairman, since I don’t have
a timer, I don’t know how much time I have left. But any that I
do have left, I will yield to Ms. González-Colón.
The CHAIRMAN. You went over 11 seconds, Mr. McClintock. And
I am going to turn to——
Mr. MCCLINTOCK. Show me.
The CHAIRMAN [continuing]. Mr. Huffman. Sir, the floor is yours.
Mr. HUFFMAN. Thank you, Mr. Chairman. We are hearing some
pretty rich stuff from the usual high tower of partisan sanctimony.
But let me say I am grateful that you are forging ahead, getting
this Committee back on the field so we can do our work. We are
trying to weather a deadly pandemic that has killed over 110,000
Americans. This is no time to put the interests of partisan politics
above common sense and basic public health protection. And I
think in prior congresses, if it had some of the tools during pre-
vious periods of difficulty, some of the tools we are using right now,
they would have used them too. So, I wish that we were all pulling
in the same direction and trying constructively to make this work.
But when you hear these arguments that you have to use words
like ‘‘attend,’’ ‘‘assemble,’’ and ‘‘meet’’ in the exact meaning that
someone thinks they had in 1787, I just have to say why can’t we
apply that same standard to the Second Amendment right to bear
arms, which apparently you see very differently. There is no mod-
ern weapon of war that you’re not willing to interpret back into
that word from 1787.
This is disingenuous stuff, Mr. Chairman. I am so sorry that on
a subject that should be of great interest and importance to all of
us regardless of party lines that we see these games and this ob-
structionism. But I want to apologize to our panelists that they had
to suffer through too much of it as they gave us their very impor-
tant feedback on how we are recovering from these disasters and
whether we’re keeping faith with our fellow American brother and
sisters in Puerto Rico. With that, Mr. Chairman, I will yield the
balance of my time to yourself or to Ms. Velázquez if you’d like to
ask any more questions.
The CHAIRMAN. Ms. Velázquez, the time is yours. The gentleman
has yielded to you.
Ms. VELÁZQUEZ. Yes, sir. This will not count against my 5
minutes, right?
The CHAIRMAN. Absolutely not.
Ms. VELÁZQUEZ. OK. Very good. Thank you. And thank you, Mr.
Huffman. You know, it is really sad. And I am sorry for the people
of Puerto Rico that in an issue that is so important and that is not
only the public debt restructuring but everything that is happening
regarding the rebuilding of Puerto Rico, the earthquakes, the hurri-
canes, and the public policies enacted by the U.S. Congress,
Congress gives something to Puerto Rico and then takes it away.
And we have a responsibility with the people of Puerto Rico be-
cause they are our colony.
When it comes to the unequal treatment, yes, that is right. But
some people in Puerto Rico feel that resolving the political limbo
where Puerto Rico is today or unequal treatment doesn’t mean
75

statehood for Puerto Rico. Some other people in Puerto Rico feel
that it might be enhanced Commonwealth. Some other people
might think that that might be statehood. But for anyone to come
here and say that to respect the civil rights of the people of Puerto
Rico, you have to give them statehood, well, that is for the people
of Puerto Rico to decide.
And, by the way, PROMESA was written by the Republican
Majority. And thank God that some of the Democratic members
were there. You tried to water down the impact of that legislation
toward the people of Puerto Rico. Ms. Jaresko, according to the
government of Puerto Rico, the consequences of COVID-19 will sig-
nificantly impact UPR’s available cash before debt service. This
amount is expected to decrease from $198 million to $98 million by
June 30. So, my question to you is what is the Board going to do
to ensure that the University of Puerto Rico system has enough
working capital for Fiscal Year 2021 and beyond?
Ms. JARESKO. Thank you, Representative Velázquez. The num-
bers that you state are never heard. I don’t believe UPR is actually
utilizing its cash. Most of the cash has been set aside for capital
expenditures. So, that is news to me. That said, what we have done
is, as I described earlier, we have left the subsidy from the
Commonwealth to UPR at the same level.
Ms. VELÁZQUEZ. You are telling me that the government of
Puerto Rico is not providing real data? Those numbers are not
correct?
Ms. JARESKO. I don’t know what those numbers are. I know that
UPR should not have to use its cash right now, that its budget is
sufficient for its operations this fiscal year. So, if it is using its
cash, I am unaware. And they have not let me know that or I
might be behind. But I am unaware of them utilizing their cash.
Ms. VELÁZQUEZ. OK. My time is up, and then, Mr. Chairman,
you will recognize me a second time.
The CHAIRMAN. Mr. Gosar, you are recognized, sir.
Dr. GOSAR. Thank you, Mr. Chairman. And I yield to the
gentlewoman from Puerto Rico, Ms. Colón.
Miss GONZÁLEZ-COLÓN. Thank you.
The CHAIRMAN. The floor is yours.
Miss GONZÁLEZ-COLÓN. I am sorry. Thank you, Gosar, for yield-
ing. One of the questions I do have now is to Mr. Marrero. And yes,
I can see you. In the past, we heard that the governor of Puerto
Rico only participates in or competes in just 214 out of 841 Federal
competitive programs, failing to receive over $1 billion in Federal
programs just because we are not even competing or submitting in
proposals or even matching the funds for a lot of the programs that
need to have at least a state chair. What actions will the govern-
ment of Puerto Rico need to pursue to increase this participation
in Federal programs? What do you need from the fiscal board to
make that happen? And how does the Fiscal Plan build these
capabilities?
Mr. MARRERO. Excellent question, Congresswoman. Thank you
for it.
Miss GONZÁLEZ-COLÓN. You are in mute. I can’t hear you.
Mr. MARRERO. Hello. Can you hear me?
Miss GONZÁLEZ-COLÓN. Now, yes.
76

Mr. MARRERO. OK. Thank you for your question, Congress-
woman. As you recall, one of the initiatives that we were trying to
achieve in order to optimize Federal funding, was to create a
Federal opportunities OGP or the local—what we need is to fulfill
the commitment of the Oversight Board with the OMB in order to
increase the staff which the Oversight Board has said that it will
support OGP not only to optimize their system but also to increase
the staff necessary in order to make that work. So, one of the prin-
ciple initiatives at OGP is essentially to create this structure that
will not only advise but also support the different government
agency that does not have Federal funds to—local expertise in
order to provide that expertise to make sure that we participate.
Not only that, but in addition to that, as soon as I was appointed
to AAFAF, we also created an internal Federal funds division in
order to support not only the different receiverships that we have
been supporting through AAFAF but also the different agency that
may need support in order to access Federal funding. So, not only
the OGP has the intent and the initiatives in order to pursue it but
also AAFAF will be supporting in that regard. And that is why, in
one of the best examples that we have been doing that is with the
CRF fund.
Miss GONZÁLEZ-COLÓN. Mr. Marrero, my second question will be
I do know that Congress approved some funds through the CARES
Act directly to the Governor’s Fund. And I am aware that there are
some provisions regarding the Department of Education that they
are not allowing the government of Puerto Rico to actually use
those funds. And those funds are going to be subject to third-party
monitoring for the Oversight Board. What is the reality behind
that? And is that happening in any other territory or state?
Mr. MARRERO. Well, the quick answer, it is not happening in any
other state or territory. As you know, those funds that were avail-
able not only for the Governor but also for the education agencies
from the states are funding for emergency assistance. Unfortu-
nately, the Department of Education at the Federal level informed
the local Department of Education that in order to access that
emergency aid, they needed to finalize the engagement of the third-
party fiduciary. We have been back and forth.
The Committee—actually, the staff of this Committee—has been
helping the Puerto Rico government in order to make sure that the
Federal Education Department understands that the third-party
fiduciary engagement should not be a condition in order to access
emergency aid. That message has been conveyed not only by us but
also by different government agencies, the Governor, as well as the
staff. So, we will appreciate if you could also help in that regard
because we have been waiting for the Department of Education.
And unfortunately, the information is not totally accurate, what we
received from their end.
Miss GONZÁLEZ-COLÓN. Thank you. Ms. Jaresko, I have another
question. You say you were expecting $48 billion in disaster aid
over the next 15 years. But the past fiscal plans have $72 billion.
So, why the lower estimate and why do we need to speak about 15
years? Have you done that in five?
Ms. JARESKO. The number has not decreased—$48 billion is the
FEMA portion of the hurricane funds. The number remains
77

approximately the same, but it is made up of multiple components.
So, there is approximately $20 billion you could add to that for
CDBG-DR. There are private-sector insurance funds that are added
to that. And in total, it is the same as it was previously—$83
billion. In terms of the 15 years, frankly speaking, that is not un-
known. After Hurricane Katrina, the 15-year process, given the
level of destruction on the island, it would not—in the best-case
scenarios and how FEMA has implemented reconstruction and
other major areas of devastation—it was very similar. So, it is not
a testament to anything out of the——
Miss GONZÁLEZ-COLÓN. My time has expired, Chairman.
The CHAIRMAN. If the gentlelady, Commissioner, would yield to
me for a second, I wanted to ask you a question, if I may, Ms.
González-Colón. Given the specificity of your questions and your
comments and the details that you know from representing the is-
land and from being involved in these issues, I have a question
that is puzzling me from the time you took the initial vote to ad-
journ. Why would you vote to adjourn if this issue is of critical im-
portance to the people of Puerto Rico and the people you represent?
I am just curious.
Miss GONZÁLEZ-COLÓN. So, Chairman, you are questioning me as
a member of the Committee on my decisions on how to vote?
The CHAIRMAN. No. That is not——
Miss GONZÁLEZ-COLÓN. The Chairman of the Committee is ques-
tioning one of the Members. How much time do I have to answer?
Do I have 5 minutes?
The CHAIRMAN. I just wanted to know. I think a lot of people
want to know because I think this discussion that we planned from
this was to talk about what the response to the pandemic was. And
my assumption is that this is of keen interest. But having said
that, I yield back.
Miss GONZÁLEZ-COLÓN. Yes, I am willing to answer. My question
is do I have 5 minutes?
The CHAIRMAN. I am sure.
Miss GONZÁLEZ-COLÓN. OK. I will answer my question. First of
all, I never expected this Committee to be so partisan that the
Chairman of the Committee needs to have time to question one of
the Members but I will do it. I am here in Washington, DC——
The CHAIRMAN. I am constantly questioned myself by you
Members.
Miss GONZÁLEZ-COLÓN. I am answering the question. If I am
here in DC willing to work and represent the people of the island,
why can’t the rest of Congress do that? The Senate is having hear-
ings. The Senate are meeting. People in the airlines, people in the
hospitals, everybody is working, and we are not doing that in
Congress. I do believe that we should be present doing the people’s
job in the Capitol, as many other Members. That is the main rea-
son I voted to adjourn for this. And why the Committee has to have
a different procedure to do that? I am always meeting with
Jaresko. I am always meeting with Marrero. I am always meeting
with the cabinet members on the island. I am always doing my job
in Puerto Rico. What is a shame is that you use this Committee
to have informal forums without even inviting the members of this
78

Committee like me and Amata Radewagen when you are
discussing territory issues.
So, if you want to talk about why you are using this Committee
and having this hearing, this one that we were invited to, but not
in the rest of the informal Zooms, that is one of the reasons that
if we have present meetings, hearings like we used to have, like
they have in the Senate, like they are doing actually in Puerto
Rico—the House and the Senate, they are meeting and they are
having session as we speak. Why can’t Congress do the same thing
we are asking for all Americans and all businesses among the
nation? And that is why I voted to actually adjourn the Committee
and have a formal meeting.
The CHAIRMAN. I appreciate your response and thank you. Not
really an answer but, nevertheless, an attempt. Let me now
recognize Ms. Velázquez. The time is yours.
Ms. VELÁZQUEZ. Well——
The CHAIRMAN. Oh, Ms. Haaland. I am——
Ms. VELÁZQUEZ. Oh, OK.
The CHAIRMAN. I am sorry. I didn’t look at the list. Ms. Haaland,
the gentlelady from New Mexico, the time is yours. Thank you.
Ms. HAALAND. Thank you, Chairman, and I’d like to thank the
witnesses for being here today and would like to thank every single
one of my colleagues as well. I appreciate having all of you here.
I would like to yield my time to Ms. Velázquez if she would like
my time.
Ms. VELÁZQUEZ. Thank you so much. Sure. And thank you for
yielding your time to me. You know, I was stricken by COVID-19,
and I self-quarantined here in my apartment in New York. It was
quite an experience when you have to be by yourself and you are
not allowed to bring anybody else to take care of yourself. So, the
fact of the matter is that there is a lockdown here in New York.
And there is a lockdown in many states in the country. And if you
look at the market today, the Dow Jones is 1,400 points down. You
know why? Because the spike of coronavirus in other states.
So, the fact that we are not conducting business in Washington
is related to the lack of strategy, a national strategy, to deal with
the coronavirus pandemic. It is quite simple. Yesterday, I held a
hearing in my committee. And one member of the Republican Party
was using my committee. And he was just chastising off because
we were not in Washington. And I said to him, ‘‘Well, now when
you leave, we are going to have to send a crew to disinfect the
hearing room because that is the guidance by the physician in the
Capitol.’’
So, until we have a national strategy to deal with the pandemic,
until we have testing, until we have PPE, I can assure you that
I am not going to put the lives of my staff at risk and that is the
issue here.
Ms. Jaresko, this past month San Juan Power Station 5 and 6
were converted to LNG under a $1.5 billion contract awarded to
New Fortress Energy.
Back in March 2019, the Oversight Board expressed concerns
that the New Fortress Energy agreement for the conversion of San
Juan 5 and 6 had a pricing structure 30 to 40 percent higher than
79

industry benchmark. Why did the Oversight Board decide to
approve this agreement notwithstanding the pricing structure?
Ms. JARESKO. Thank you, Congresswoman Velázquez. We take
the situation at hand when we are provided those contracts. And
we try to move forward to the extent possible. Moving to LNG was
a critical part of reducing the cost of electricity on this island and
moving to cleaner fuel on the island from the bunker fuel, bunker
oil that is used currently in the——
Ms. VELÁZQUEZ. Yes, I hear you but then——
Ms. JARESKO. We reviewed the contracts the best that we could.
Ms. VELÁZQUEZ [continuing]. You opposed the agreement or you
criticized the agreement because you said that the pricing struc-
ture, 30, 40 percent higher than the industry benchmark. How is
that going to reduce the cost of energy in Puerto Rico?
Ms. JARESKO. Because it was still cheaper than oil, cheaper than
the fuel that they were using at the time. The RFP process did not
bring in other players. So, those industry benchmarks are what we
use and what we know. But that doesn’t mean that the industry
benchmark necessarily is available to Puerto Rico. In particular,
available to PREPA, which remains in bankruptcy so that every
bidder sees that there is financial and fiscal risk in bidding.
Ms. VELÁZQUEZ. Ms. Jaresko, Mr. Jaramillo reported that San
Juan 5 and 6 are still using diesel because New Fortress Energy
has failed in the LNG safety tests. Are you aware of this situation,
and how does that impact PREPA’s fiscal plan?
Ms. JARESKO. I saw this in the news as you did this morning,
and I do not know whether it is true or not that New Fortress has
failed in turning on the LNG.
Ms. VELÁZQUEZ. And were you going to investigate whether or
not that is true?
Ms. JARESKO. Of course.
Ms. VELÁZQUEZ. Mr. Marrero, the Washington Post—well, my
time is up.
The CHAIRMAN. Thank you, Ms. Velázquez. Let me now turn to
Mr. Westerman. Mr. Westerman, the floor is yours. Am I muted?
Would the staff indicate to Mr. Westerman’s staff that he is still
muted.
Miss GONZÁLEZ-COLÓN. He is unmuted, Mr. Chairman. I don’t
know why we couldn’t hear him.
The CHAIRMAN. Thank you.
Mr. WESTERMAN. OK. I am using another computer now. Can
you hear me, Mr. Chairman?
The CHAIRMAN. Absolutely. Thank you, Mr. Westerman.
Mr. WESTERMAN. OK. And before my time starts, can I make an
inquiry?
The CHAIRMAN. Please.
Mr. WESTERMAN. OK. I don’t know what the problem was with
the sound on my computer. We checked it out beforehand. I logged
on last week. Everything worked. But when we voted the first time,
my computer would not unmute even though it unmuted on the
screen. Ms. Radewagen couldn’t be recognized, and Mr. Graves
couldn’t get into the system. So, I don’t know what the problem is
there, but it is ironic that it is just happening to Republican
members or to Minority side members.
80

And also, I have an inquiry as to who controls the mute button
because I don’t think Members’ microphones should be muted un-
less they mute them. And an unelected staff member shouldn’t be
controlling when a Member of Congress gets to make a point of
order or interject in a meeting.
The CHAIRMAN. It is my understanding from all the specific
guidelines that were sent to all the Members that the only time
that the staff is involved in any muting is if there is inadvertent
background noise. Other than that, that responsibility is wholly the
Members’. We are not gagging anybody. There is no conspiracy to
make sure you don’t get on but Ms. Haaland does get on. Those are
technical issues above my pay grade. And I would suggest that
your staff work with the technical staff of the Committee about any
of these glitches. They are——
Mr. WESTERMAN. Well, we had a committee hearing in
Transportation and Infrastructure earlier this week. We met in the
committee room. They used the equipment. There was no problem
with Members being muted or not being able to be recognized. So,
I mean, if we’re going to use this system, let’s at least try to get
something that works and have it so that Members can speak up
when it is time for them to speak up or when they wish to speak
up. I was trying to notify you that Mr. Garret couldn’t get logged
on, and he missed the vote because—finally Mr. McClintock on his
machine was able to make a point of order.
The CHAIRMAN. Yes. I should note for the record that Mr. Gallego
on the Majority side has had technical problems, hasn’t been able
to join us and is still attempting to do that. Like I said, this is the
first hearing that we have had for the Natural Resources
Committee as a full committee. And the difficulties that you have
encountered are purely of a technical nature, not of a conspiratorial
nature. And as such, those can be worked out. The conspiracy
thoughts that anybody might have, I can’t help you with that.
Mr. WESTERMAN. Well, I am not raising a conspiracy. I am just
stating the facts of what happened. And I know that in the T&I
Committee there weren’t any problems.
The CHAIRMAN. And I was just giving a disclaimer. That is all.
Mr. WESTERMAN. I will move on to questions now. And since the
rules seem to be changing here, if you want to put a suggestion box
in, my first suggestion would be to let Members have control of
their own mics.
Mr. Marrero, in the interest of transparency, did the government
of Puerto Rico submit agreements to purchase medical products
from 313 LLC, Apex General Contractors and perhaps other ven-
dors for review by the Oversight Board established in PROMESA
that is required under Section 204(b)(2) of PROMESA?
Mr. MARRERO. Congressman, thank you for your question.
Unfortunately, those purchase orders that you are referring to were
not submitted to PROMESA with the contract review policy.
Mr. WESTERMAN. I am sorry. Could you repeat that, please?
Mr. MARRERO. Yes, sir. The purchase orders that you are refer-
ring to, they were not submitted to the Oversight Board. However,
other contracts that had been executed during the crisis have been
submitted to the Oversight Board according to the contract review
policy.
81

Mr. WESTERMAN. And why were those contracts not submitted?
Mr. MARRERO. Unfortunately, sir, it was an interpretation at a
local government agency that because it was a purchase order,
which is a mechanism that some agencies use to purchase goods
and services during emergency that they thought they were not re-
quired to submit those purchase orders under the contract review
policy.
Mr. WESTERMAN. There was a May 19 article in El Nuevo Dia
which states that one of the lawyers for Apex General was quoted
as saying the deal would, ‘‘make millions of dollars.’’ Why was this
contract not recorded through PROMESA, and what is the govern-
ment doing about it to ensure transparency going forward?
Mr. MARRERO. Excellent, excellent question. Well, first of all,
after we have been collaborating with the investigation and the re-
view that has been conducted by the Oversight Board, the
Department of Justice, the local Department of Justice, has also
conducted an investigation of those contracts. However, as to the
Federal funds for COVID-19, I will invite you to go to the AAFAF
COVID-19 website, which is a transfer in the portal similar to
what we did at the FEMA level as well as in the CDBG. And you
are going to be able to see information related to the funds and the
programs that we are implementing with those Federal funds.
Mr. WESTERMAN. Mr. Chairman, I would like to give Mr.
McClintock his machine back and yield the remainder of my time
to the gentlewoman from Puerto Rico, Ms. González.
The CHAIRMAN. Ms. González-Colón. The time is yours.
Miss GONZÁLEZ-COLÓN. Thank you, Mr. Westerman. Thank you,
Mr. Chairman. I just want to clarify some of the issues that were
said a few minutes ago—I think the Republican Minority never
wrote PROMESA. Actually, PROMESA was brought by a
Democratic governor, Garcı́a Padilla, at the time when he con-
tracted John Ravitch—Richard Ravitch, actually, from New York.
And then it was pushed by the Treasury Department at that time
supporting that legislation.
And actually it was President Obama’s Treasury Department.
And it passed because of the Democrats and the Republicans. That
is true, and actually the gentlelady from New York helped out with
that time the Minority leader, today, Speaker of the House because
the Republicans were divided in the House. That is the reality be-
hind it. Republicans and Democrats voted for it. And President
Obama signed it.
So, saying that this was just a Republican bill, that is incorrect.
But I do have another question to Mr. Marrero. And I want you
to tell me what are the recent developments on Title V.
Mr. MARRERO. On the Title V of PROMESA, Congresswoman,
unfortunately, the Title V of PROMESA has been stalled. The proc-
ess—I believe that the executive director could shed some light on
it. But the recovery coordinator position has been vacant for over
a year. And I believe that only one project was being worked
through that process. However, I would avail my time of this op-
portunity to say that we believe that the Title V could be more pro-
ductive. However, it should be amended, particularly for the
Federal permitting processes. But I will allow Ms. Jaresko to
answer.
82

Ms. JARESKO. Representative Colón, the demand for the Title V
permitting has not been very great. The demand that came into the
pipeline when established was primarily PREPA-related. And all
the PREPA contracts needed to first be either approved or rejected
in the Title III court. PREPA only last week announced what they
were going to do with the bulk of those contracts. And that process
is ongoing.
I expect that the demand for Title V will grow now that those
contracts are in place. We have also started to see some other pri-
vate sector investment. Remember Title V is the only private sector
investment coming in. We have a new project that has been put
into the pipeline. So, as we encourage and as the business environ-
ment gets better, hopefully, you will see more private sector invest-
ment. And I believe they will take advantage of Title V. We have
a candidate that we are prepared to hire. We have already dis-
cussed preliminary fashion with the Governor’s representative, Mr.
Marrero.
Miss GONZÁLEZ-COLÓN. Mr. Chairman——
The CHAIRMAN. Thank you. The time is up on the time yield.
Miss GONZÁLEZ-COLÓN. I would like the——
The CHAIRMAN. Let me now turn to Ms. Velázquez for her 5
minutes. Ms. Velázquez.
Ms. VELÁZQUEZ. Yes. The Chairman at the time was Mr. Bishop,
and we worked with him. But basically he carried the bill, and we
worked to make it more feasible for the people of Puerto Rico to
confront the public debt. Mr. Marrero, previous press reports have
indicated numerous problems with the department’s capability to
process unemployment insurance claims. How many pending
claims currently exist?
Mr. MARRERO. Thank you for the question, Ms. Velázquez. As
you know, Puerto Rico, as any other jurisdiction, has faced a strug-
gle a lot with the pandemic insurance benefits. Right now, of the
300,000, approximately, applicants, 180,000 are already receiving
the benefits. And the remaining 100,000 are being worked as we
speak.
Ms. VELÁZQUEZ. How many pandemic unemployment assistance
claims for the self-employed are still pending?
Mr. MARRERO. I will submit that information in a reasonable
time frame, Ms. Congresswoman, because I don’t want to inform
any, or provide any incorrect or inaccurate information.
Ms. VELÁZQUEZ. What safeguards have you employed to address
the issues in unemployment insurance processing as reported by
the press? Has the Puerto Rico government designed a transition
plan at the Department of Labor considering the recent change in
leadership?
Mr. MARRERO. Yes, ma’am. Not only do we have our recently ap-
pointed or our newly appointed Secretary of Labor but also he is
already partnering up with the Secretary of Hacienda to see how
we can avail ourselves of the technology that has been deployed at
the Department of Hacienda. The provider of the technology that
we have been using at Hacienda in order to expedite the disburse-
ment to taxpayers—the same provider has a solution that has been
able to implement it stateside for the pandemic unemployment ben-
efits. So, right now, part of the transition plan not only is to have
83

several distribution channels, several lines in order to serve the
people, but also to implement new technologies that have been
successful stateside in order to expedite those——
Ms. VELÁZQUEZ. Well, we hope so. We all know how the people
of Puerto Rico are suffering. Particularly, 65 percent of the children
in Puerto Rico live in poverty. And every week, it is promised that
the money is going to get there. And then 5 months later, 3 months
later, still people are waiting for their unemployment insurance
claims to be processed. So——
Mr. MARRERO. We will not rest until that happens, ma’am.
Ms. VELÁZQUEZ. Ms. Jaresko, at the start of the lockdown, you
claimed in the Puerto Rican press that the measures taken by the
Oversight Board have led to the successful response by the Puerto
Rico government. But just this week, the Washington Post included
Puerto Rico and seven other states that are, right now, dealing
with a spike in coronavirus.
As we all know, the local Department of Health has been incapa-
ble of providing timely and reliable data and administering the re-
quired diagnostic tests. This is partly due to consistent personnel
cuts and efforts to privatize key functions to the local health sys-
tem, a position that the Oversight Board advocates. Are you willing
to accept that many of the shortcomings in the local Department
of Health have been caused by the rightsizing and austerity meas-
ures that the Board has implemented since Day 1? In other words,
do you also claim responsibility for this debacle?
Ms. JARESKO. With all due respect, Representative Velázquez, we
do not. The Board has made it possible in a very difficult environ-
ment for the Department of Health and for the government of
Puerto Rico to have funds available even prior to the President’s
declaration of a disaster. So, with $160 million in an emergency re-
serve, the capacity to spend those funds to purchase test kits was
there from Day 1.
Ms. VELÁZQUEZ. Ms. Jaresko, the problem is not the money that
you are giving them now. The problem is the money that was taken
away and the lack of infrastructure that they needed to have in
place in order to tackle the pandemic. That is the issue, an infra-
structure that basically has been destroyed by the austerity meas-
ures taken by the Board at the expense of the people of Puerto
Rico. I yield back my time. My time has expired, Mr. Chairman.
The CHAIRMAN. Thank you. The gentlelady yields back. Mr.
Graves, the time is yours.
Mr. GRAVES. Thank you, Mr. Chairman. Mr. Chairman, I actu-
ally want to first thank Mr. McClintock for watching my back
earlier. But I also want to associate some of my concerns with the
gentleman from Arkansas, Mr. Westerman. Mr. Chairman, we had
three different people in the office, myself included, trying to log
on during the vote. Couldn’t get in. Finally sometime after the vote,
using the exact same credentials, we were able to get in. So, you
can call me a conspiracy theorist if you want, but I want to
reiterate it was the exact same credentials.
No. 2, in regard to the dialogue previously with Ms. González-
Colón, I want to make note, Mr. Chairman, I have sat here and
listened to speakers virtually raising a concern about Puerto Rico,
about the Oversight Board, about FEMA, about Federal agencies,
84

yet grocery stores, barbershops that I need to visit, tattoo parlors
and other entities have opened right now, yet the U.S. Congress as
we sit here and beat the heck out of what’s going on in Puerto Rico,
we can’t meet and actually devise solutions.
I don’t believe that our role is less important than a grocery store
in a global pandemic, a civil rights crisis, and many other chal-
lenges that are facing our Nation today. With that being said, I ac-
tually do have some questions. No. 1, in the 2020 certified fiscal
plan for Puerto Rico, the plan indicates a contracted or a shrinking
of the economy of Puerto Rico. It indicates a 65 percent reduction
in savings or funds available. I am struggling—and it appears to
blame largely on coronavirus. While I fully appreciate the dev-
astating economic consequences of the virus and, in some cases,
exacerbated by government response, I don’t think that I fully un-
derstand how in the world we could have that type of contracting
projected over that period of time with the extraordinary influx of
Federal funds. Could I get an understanding there, please?
Ms. JARESKO. Of course. Representative Graves, the 65 percent
decline that you referred to is a 65 percent reduction in the surplus
over a period of time, not in revenues. Revenues are not——
Mr. GRAVES. Availability of funds or savings, yes.
Ms. JARESKO. No. It is the excess of spending. So, it has to do
with the level of spending as much as it has to do with the reve-
nues. The decline in revenues is only about 12 percent this year.
We are in about the median of the U.S. states. And it is about the
same, about 10 percent next year. So, the surplus declining is pri-
marily for that reason but the issue in terms of overall also has to
do with the second element, which is structural reforms that have
been delayed.
The second change that is critical to the fiscal plan from 2019 to
2020 is the delay in the structural reforms. And by delaying them,
they don’t start to provide growth, and the growth doesn’t start to
generate revenues. So, revenues are down as well because of the
delay in full implementation of the structural reforms. But that has
a larger impact farther out, not in the next 2, 3, 4 years because
that accumulated growth is later.
Mr. GRAVES. I am probably going to have some follow-up
questions because I don’t want to belabor the question. But I had
a little bit different understanding of the out-year projections and
will submit some questions for the record. But I do have another
question on the Oversight Board. After President Obama appointed
members of the Oversight Board, the audited financial statements
went from being submitted within approximately 1 year—and that
was for about a 5-year period. It was fairly consistent to now here
we are in 2020, and we still don’t have certified statements from
2017. Can you help me understand why that is happening?
Ms. JARESKO. During the time of PROMESA, we saw the 2016
fiscal year financial statements be completed. But, yes, the 2017
remained incomplete. The targeted date by the Secretary of
Hacienda, the Secretary of the Treasury, is July 30 for those finan-
cial statements. But it has been a long slog. And we have been
doing everything we can to urge, to press the auditors, to press the
government, to meet with those elements of government that are
delayed. In this case, the government is waiting for PREPA, the
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electricity utility, to complete its 2017 to be able to consolidate. So,
I can’t explain. Perhaps Mr. Marrero can.
Mr. GRAVES. I apologize for interrupting but I am out of time. I
just want to ask. Could you please submit something to the
Committee in writing? I believe we are approaching 1,500 days
after the end of the appropriate 2017 period to actually have these
documents available. We are talking tens of billions of dollars in
Federal funds. And it is difficult for us to have an understanding
of the financial situation without audited statements. Thank you
and I yield back. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you, sir.
Ms. JARESKO. Representative Graves, but the question also needs
to be answered by the government because I am not in control of
the financial statements.
The CHAIRMAN. Ms. DeGette.
Ms. DEGETTE. Thank you so much, Mr. Chairman. And I want
to thank you for having this hearing. I went to Puerto Rico in 2017
with Representative González-Colón and others on a trip. And
what you said in your opening statement, Mr. Chairman, really
resonated with me. Puerto Rico has had one, two, three, four
punches. They had the two hurricanes. Then they had the earth-
quake. And now they have COVID. And I frankly think that the
residents of Puerto Rico and everybody in this country concerned
about COVID are a lot more concerned about having these facts get
out into the open than to hear Republicans griping about the proc-
ess and having trouble using their technology. So, thank you for
doing this. And I know we’re all going to get better and better at
it as it goes along.
I want to ask the witnesses today about something that I have
been amazed hasn’t been asked before. And that is what’s going on
in Puerto Rico with how they are dealing with the COVID-19
pandemic. Currently, as you may know, as our witnesses may
know, Puerto Rico has one of the lowest testing rates in the United
States.
And we don’t see much in the way of contact tracing protocol. So,
I’d like to ask you, Mr. Marrero, through the CARES Act, the
Federal Government assigned $2.2 billion to Puerto Rico to address
the coronavirus pandemic. And these funds were then factored into
the 2020 Fiscal Plan, which outlines how the funds will be allo-
cated by the government. As of today, Mr. Marrero, how much of
the CARES Act funds have been distributed to Puerto Rico? How
much have they gotten?
Mr. MARRERO. Of the coronavirus relief fund? $2.2 billion,
ma’am.
Ms. DEGETTE. So, they got the whole $2.2 billion amount, right?
Mr. MARRERO. Of the coronavirus relief fund.
Ms. DEGETTE. OK. And how much of the funding has already
been used by the government?
Mr. MARRERO. We are talking about—well, right now you have
to factor in also the——
Ms. DEGETTE. OK. How much has actually been used by the
government?
Mr. MARRERO. Of the $2.2 billion, we are talking about $300
million that has been disbursed through the different programs.
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Ms. DEGETTE. OK. So, a tiny fraction of it, really. Are you con-
fident that the government is going to be able to make use of the
available funds before the December 31, 2020, deadline that has
been established by the CARES Act?
Mr. MARRERO. Yes, ma’am. As opposed to any other jurisdiction,
we unveil a very comprehensive plan, which is publicly
available——
Ms. DEGETTE. So, you’re going to have to do that all between
now and the end of the year and you think you can do that?
Mr. MARRERO. Oh, yes.
Ms. DEGETTE. OK. Now, also you mentioned in your testimony
that $500 million is being allocated to health-related expenses. Is
the government prioritizing rapid deployment of testing capability
as part of these funds?
Mr. MARRERO. Yes, ma’am.
Ms. DEGETTE. Thank you. Is the government using the funds to
also support better data collection?
Mr. MARRERO. Yes, ma’am.
Ms. DEGETTE. And is the government using the funds to develop
and deploy a contact tracing system for the island?
Mr. MARRERO. Yes, ma’am.
Ms. DEGETTE. OK. Now, I know we don’t have time in this
hearing, but I would appreciate it if you could supplement your tes-
timony to give us a detailed written breakdown of the $500 million
for healthcare-related expenses and where it is going to go. Can
you do that for us and when?
Mr. MARRERO. I will provide you the detailed response for the
entire $2.2 billion.
Ms. DEGETTE. Thank you, sir. That would be fantastic. Now, Ms.
Jaresko, I’d like to talk about the role that the Oversight Board is
playing in Puerto Rico’s coronavirus pandemic response. The
Oversight Board recently sued the government of Puerto Rico for
not turning over documents related to the controversial purchase
of rapid test kits for $38 million that never arrived. What are the
systemic issues that you have identified that led to the decision to
enter into the contract with the Australian company, Promedical
Equipment, for the testing kits?
Ms. JARESKO. Thank you, Congresswoman. Unfortunately, I can’t
answer that question because to answer that question, we need to
get the documents that come before any contracted purchase order.
The documents that show the procurement process, the e-mails, the
memos.
Ms. DEGETTE. And have you requested those documents?
Ms. JARESKO. We have requested them seven times but have not
received them from any contract.
Ms. DEGETTE. Well, Mr. Chairman, maybe we can get those doc-
uments. And then we can have Ms. Jaresko answer that question.
And let me just ask one more question of you, Ms. Jaresko. As we
continue to address the challenges of the COVID-19 pandemic, you
recently said that you would postpone austerity measures for a
year and acknowledged the austerity plan needs to be redrawn. If
you’re forecasting economic contractions, why not shelve the
austerity altogether and focus on economic growth?
87

Ms. JARESKO. Economic growth is something that is primarily in
the government’s hands. We have included economic growth efforts
in terms of structural reforms, but they have to be implemented by
the government, by the elected government of the island. So, the
only portion of this that is within PROMESA’s mandates to man-
age is the expenditure side of the budget. I can’t grow the reve-
nues. I can’t change the tax incentive structure that is on the
island.
In that light, to the extent that the economy continues to become
smaller, unfortunately, if we don’t take these measures, we will
have to cut even more later. So, the combination of non-action on
the structural reforms to increase revenues and not cutting costs,
not making the government more affordable, more efficient, more
limber, will actually put us in a worse position as the economy gets
smaller.
Ms. DEGETTE. Thank you. Thank you very much, Mr. Chairman.
Thank you for your commenting.
The CHAIRMAN. Thank you.
Mr. Fulcher, the time is yours. Is he there? Mr. Fulcher? Mr.
Hern?
Mr. HERN. Thank you, Mr. Chairman. It is good to see everyone
today. These are long calls, doing it this way. But it is good to be
able to talk to our friends here. I thank the witnesses for being
here as well. It is always troubling to see—we have had so many
of these conversations about Puerto Rico and about the economy
there and what’s going on. And somebody that has been in business
my entire life prior to getting into Congress this term, I am
shocked to see that Puerto Rico has amassed about $72 billion in
debt, bonded debt, $40 billion—$49 billion in unfunded pension li-
abilities and has effectively lost all access to the capital markets.
With that said, Ms. Jaresko, in your testimony, you touched on
this. And you state that the Oversight Board has worked with the
Puerto Rican government to implement numerous structural re-
forms, but there has been little meaningful progress. You state that
this is a result of disasters, poor implementation of the Board’s rec-
ommendations. Could you explain how the lack of structural
reforms has hurt Puerto Rico’s growth and how implementation of
the recommended structural reforms for the last fiscal plan would
improve Puerto Rico’s economy on both a short-term and a long-
term basis?
Ms. JARESKO. Thank you, Congressman. The structural reforms
are meant to do a couple things in terms of changing the nature
of the economy: (1) to increase labor participation; (2) to improve
the environment for attracting investment, Puerto Rican invest-
ment, national investment, international investment; and (3) to im-
prove the quality of electricity and resiliency of electricity and the
infrastructure of the island, all taken together to make Puerto Rico
a more competitive place for businesses to invest and for jobs to be
created.
In terms of the human welfare and human capital reforms that
would improve labor participation, the government did implement
an earned income tax credit. We did agree and put money in the
budget. However, they haven’t made it well-known throughout the
island such that individuals could make time-sensitive decisions
88

about whether or not to stay in the formal economy and get that
credit or leave and go into the informal economy or, worse yet,
leave the island.
So, that EITC has to be developed further in terms of getting
people to understand it. On the welfare to work plan, we asked for
it to be implemented in a 1-year so that it could be quick, so that
people could actually understand and start moving slowly, not nec-
essarily to work but education, to volunteer, along with the plan.
And that has only been implemented—or they agreed to implement
it over 4 years.
Those delays mean our labor participation rate remains low. It
also means that the labor market is going to be more difficult. We
have a massive unemployment level right now, close to 40 percent.
And for those folks to re-enter the market is going to be harder be-
cause labor participation rates are low, and the environment for
labor is complex. Not having those structural reforms in the short-
term has a $200 million effect on the surplus, over the long-term,
over 30 years, almost $25 billion.
Mr. HERN. Thank you. And you also talked about what is equiva-
lent to the SNAP in the United States. And you talked about re-
form. And I was very happy back earlier in my first time in
Congress here to sign on with 64 other Members about some re-
forms to SNAP. I noticed that there are no work requirements
whatsoever for your nutritional assistance program. And in your
opinion, what should we do to change that in the last few seconds
that I have here?
Ms. JARESKO. It is up to the government to file the plan with the
FNS, with USA FNS and commit to making it possible. There is
not a great deal more that is required.
Mr. HERN. So, there is really no encouragement to go back to
work, then, but to get assistance from the government? Is that
what you’re saying? That is what you’re alluding to?
Ms. JARESKO. No. I am not saying that. I am saying that it would
be better to have that work/volunteer/education requirement such
that people can start to make the move toward work and we don’t
have that requirement at this time. The government is committed
to do it but only in the course of 4 years.
Mr. HERN. Well, I appreciate your details of what we need to do.
There is a lot of work to do. And as we’re following this on the
Oversight Board’s recommendation in helping to incentivize people
to join the workforce, as you just mentioned, just unfortunately
doesn’t seem to be happening right now. If we are going to help,
we have to get people back to work. As we know, Ronald Reagan
once said, ‘‘The greatest social program in the world is a job,’’ and
we need to get people back to work. Mr. Chairman, I yield back.
Thank you.
The CHAIRMAN. Thank you, Mr. Hern.
Mr. Soto. Sir, the time is yours.
Mr. SOTO. Thank you, Mr. Chairman. And it is important to start
by getting the record straight. We saw recession hit Puerto Rico
well before the Great Recession even hit the United States, in part,
by the loss of the 936 exemption and, unfortunately, pharma-
ceutical companies and others leaving the island. Then we saw
PROMESA because bankruptcy was taken away from them for
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absolutely no reason. So, PROMESA represented a compromise, an
imperfect one.
The we saw Hurricane Maria and Hurricane Irma leading to the
largest death toll of Americans in modern history, over 3,000
people dying because of the terrible response by the Trump admin-
istration. Then we saw earthquakes hit where this House has
passed $5 billion with some bipartisan support while the Senate
sits there and does nothing.
Now add COVID-19 on top of it, and it is just one after other
after another. And it is important to get the record straight be-
cause it is very difficult to be able to speak up accurately, particu-
larly for many elected officials back on the island who have to work
with the Trump administration and are concerned about President
Trump’s well-known vengeful nature. So, they have to tiptoe
around. But we need to keep the record straight so this Committee
knows what actually is happening. We know that Americans in
Puerto Rico continue to be treated like second-class citizens.
The territorial status is part of this problem. There are 3.2
million Americans living in Puerto Rico. It is 20 times the second-
largest territory. It is also more populous than 20 states—so it just
doesn’t work for them. So, having two U.S. senators, four Members
of Congress, and a vote for president would go a long way to help-
ing fix a lot of these things. I do agree the people of Puerto Rico
have to determine this future, and they will have a vote on a sim-
ple statehood yes-or-no question this November, a simple question
in a high-turnout election. And we need to respect the results and
act upon them, regardless of what they are.
And I do want to talk a little bit about the PROMESA reforms
that this Committee has already filed. Mr. Marrero, you had talked
about legitimate concerns about there is not a good dividing line of
what essential services are in protecting Puerto Rico’s sovereignty.
So, the new definition of essential services, including public edu-
cation, public safety, health care, pensions, and the University of
Puerto Rico, does that better protect—does that get the dividing
line right on protecting Puerto Rico’s sovereignty to handle its day-
to-day affairs?
Mr. MARRERO. Thank you, Congressman Soto, for your support
with the people of Puerto Rico. I am going to be completely honest.
Since the beginning, we have been reluctant to support this addi-
tional language because current interpretation of essential public
services has been very beneficial for the people of Puerto Rico.
Even though the including word can be interpreted as expansively
and not necessarily limited essential public services—however, we
believe that in order to make that workable, we will also need to
amend other sections of PROMESA to make sure that the
Oversight Board does not use other provisions of PROMESA to cir-
cumvent what you are trying to achieve there.
Mr. SOTO. OK. So, there are additional suggestions you have of
potentially improving the legislation. We appreciate it. If you
wouldn’t mind sending those to the Committee, that would be help-
ful. Do you think us going to define this better—let’s say we adopt
the recommendations you just stated. Would this help ensure bet-
ter response to COVID-19? I know it has been difficult to get tests
there. And would this help improve the healthcare system to
90

improve your COVID-19 response? Would this be a help to you on
that?
Mr. MARRERO. Being honest, Congressman, I don’t see one as a
significant requirement for the other. I believe that the challenges
that we have faced in Puerto Rico during the COVID-19 are very
similar to what other states and other jurisdictions in the world
have been facing. I think that the most important amendment that
PROMESA needs right now is to delineate the powers of the work,
to make sure that the public policy of the government—the elected
government at the time because this is not only for the present or
the current government of Puerto Rico but also for any other gov-
ernment of Puerto Rico—is to make sure that the public policy,
that it has been elected at the ballot with the power of the vote.
It is totally respected.
Mr. SOTO. Well, that is the intent that we are seeking in this
legislation, to define essential services in a way that protects the
day-to-day responsibility and the duty and powers of the duly elect-
ed central government. So, please continue to work with us on that
because we want to get that definition right. We have the same
goal in mind, which is to protect services and the sovereignty of the
island. It also includes relief for unsecured debt, an audit, which
I know a lot of folks have asked about.
I want to first thank you, Ms. Jaresko, for mentioning in your
past testimony that you would be happy to cooperate to supply doc-
uments for any independent audit. That certainly would be helpful.
Let’s assume for a moment this became law. How would you be
able to implement the conflict of interest provisions of it that are
in the pending legislation?
Ms. JARESKO. Very supportive, Mr. Congressman, of the conflicts
of interest provisions in general. We have been very supportive of
Congresswoman Velázquez’s approach to that amendment. I think
that the current version, frankly, is over-expansive. To be very
clear, the conflict of interest as written currently would force every-
one to clarify whether there was a conflict with over 165,000
creditors that have made claims in the courts against the govern-
ment of Puerto Rico. For anyone, whether it is Mr. Marrero or
whether it is a Board member, or whether it is an advisor, to
clarify 165,000 conflicts of interest at every level would be an im-
possible exercise. So, we are in favor of and we are supportive of
improving conflict of interest disclosure. But I believe that the cur-
rent language is overly expansive.
Mr. SOTO. Well, we look forward to your additional guidance on
that so that we could get it right. And certainly having Federal
funding for the Board will allow you to be a little more independent
of having to utilize the current revenue from the island, which
certainly makes it more——
The CHAIRMAN. Thank you, Mr. Soto.
Mr. SOTO. Thank you, Chairman.
The CHAIRMAN. The gentleman yields back. Ms. Radewagen? Is
she still with us? I had called her before.
Mrs. RADEWAGEN. Thank you, Mr. Chairman.
The CHAIRMAN. Thank you.
Mrs. RADEWAGEN. Can you hear me?
The CHAIRMAN. Yes. The floor is yours.
91

Mrs. RADEWAGEN. I yield my time to the gentlelady from Puerto
Rico.
The CHAIRMAN. The gentlelady yields. Ms. González-Colón.
Miss GONZÁLEZ-COLÓN. Thank you. Thank you, Amata, for yield-
ing and Chairman for recognizing. I have a question to Mr.
Marrero. In terms of—we have been losing a lot of money and a
lot of revenue during the last 3 months with the situation of
COVID-19. Many people may not be aware. But the first lockdown
in the Nation actually was in Puerto Rico since March 15. There
was a curfew. There was a lockdown. I think at that time, there
were proper decisions. The Governor just announced a few minutes
ago that they are getting rid of the lockdown and moving the cur-
few to 10 p.m., which is good. I do understand that we should open
and be prepared for living with this kind of pandemic. Today, it is
COVID. It will be another in a few months, sadly.
But my concern is there is a projection that we are going to be
losing between $1.5 billion to $3 billion during the next 3 years be-
cause of the revenue that we lost. What is the plan of the govern-
ment of Puerto Rico to close the budget due to the loss of revenue
and the measures that need to be taken in order to comply with
the fiscal plan?
Mr. MARRERO. Excellent question, Congresswoman. Thank you
for it. As you mentioned for Fiscal Year 2020, the government, as
well as the Oversight Board, anticipates a decrease in revenue of
around 18.9 percent—but a small increase the next fiscal year of
1.7. However, we have to stress the timing difference that we have
because there are several tax returns that has been postponed or
delayed for the next fiscal year. So, that takes into account also
that percentage or that high percentage of decreasing revenues.
However, as any other government in the Nation, we will use re-
served funds to manage some of the shortfall as provided in the fis-
cal plan and the budget. However, I think that this brings the
question, more importantly, that we would like to support and we
would like to ask Congress to act and pass legislation to provide
support to state and local governments across the Nation as well
as territories that we are dealing with lost revenue because, as you
know, the funds that have been available through the coronavirus
relief fund under the CARES Act are not allowed to be used for lost
revenue, only expenses.
Miss GONZÁLEZ-COLÓN. I know, and actually, my second question
will be—and this is for you and for Ms. Jaresko. There are many
in Congress discussing even another phase of recovery process for
COVID-19 through the Nation. What specifically will we need in
Puerto Rico—like in Florida, the tourism industry has been im-
pacted, the hospital industry as well. What specifically should be
included in the case of Puerto Rico, Mr. Marrero, Ms. Jaresko?
Mr. MARRERO. Obviously lost revenue for state and local govern-
ments, as well as public corporations, which have been hit by
COVID-19. And also, I would say that, in addition—the govern-
ment, hospitals, and the tourism industry definitely should be a
priority in Puerto Rico because of the lockdown, how they affected
not only the revenues and the visitors but also the elective oper-
ations and elective procedures the hospital used to be making
before COVID-19.
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Miss GONZÁLEZ-COLÓN. Ms. Jaresko?
Ms. JARESKO. I would just add that I would hope, in addition to
what Mr. Marrero has said, that you would consider the Governor’s
request and ours to support including Puerto Rico in the pandemic
EBT program such that in case—God forbid—we’re back in this sit-
uation again in the autumn when the children are back in school
that we can more easily get the breakfast and lunch to them on
the EBT cards, as is allowed under the SNAP program.
Miss GONZÁLEZ-COLÓN. We are pushing for that as well, sending
letters and dealing with that with the USDA since the beginning.
So, once we’re in that, I think the poverty level on the island is
more than 60 percent. It is actually among children, women. But
if we do have specifics—because we have been having meetings
with the hospital industry and medical industry. And we are facing
at the same time the new hurricane season. My third question, Mr.
Marrero, will be specifically do we have enough——
The CHAIRMAN. I am going to have to go to another—Miss
González-Colón, your time has already passed.
Miss GONZÁLEZ-COLÓN. I do have 13 seconds, sir, so I am not
finished.
The CHAIRMAN. When it turns that color, that means you went
over.
Miss GONZÁLEZ-COLÓN. No. Actually, it is saying 4, 5. When it
is over, it is going red.
The CHAIRMAN. OK. Thirteen seconds. Start counting.
Miss GONZÁLEZ-COLÓN. Thank you, and stop chasing me, sir.
The CHAIRMAN. I am just asking the question.
Miss GONZÁLEZ-COLÓN. Mr. Marrero, you should be giving us a
complete number of what specifically you understand the industry
is requesting in terms of power. Do we have enough resource for
back-up for the industry on the island?
Mr. MARRERO. I will provide that information in more detail but
definitely. We will need more back-up in order to make sure that
we are as resilient——
Miss GONZÁLEZ-COLÓN. Thank you. I am waiting.
The CHAIRMAN. Mr. Tonko, you are recognized, sir.
Mr. TONKO. Can you hear me, sir?
The CHAIRMAN. Absolutely.
Mr. TONKO. OK. Thank you, Mr. Chair, for hosting this impor-
tant discussion. And let me just state that I regret that this
hearing has been so contentious. It breaks my heart that the peo-
ple of Puerto Rico have to deal with this. We shouldn’t have this
kind of partisan trouble to talk about aid to peoples who are des-
perately in need. Like many of my colleagues, I am concerned
about the speed at which aid has been delivered, Mr. Chair, to our
Puerto Rican brothers and sisters.
I have heard that up to $3.1 billion in community development
block grant dollars under the disaster recovery have been approved
for Puerto Rico. Only $47.3 million has been disbursed. Can some-
one tell me what the hold up is, and how can the government or
the Board help solve that concern?
Mr. MARRERO. Well, definitely. Thank you for that question,
Congressman Tonko. The reality is the CDBG-DR program, it is
not as straightforward as we would like. Since the beginning of the
93

allocation by Congress, we have been working very actively to
make sure that we have the action plan in place, the structure, the
policies, and procedure. Everything has been done at the Depart-
ment of Housing locally. However, once the grant agreement
included additional requirements for the second tranche or the sec-
ond allocation of the CDBG funds, additional structure, additional
policies needed to be put in place. However, the government, the
governors and myself, it is a priority to make sure that we expedite
the CDBG funding. Right now, obviously, the COVID-19 and the
earthquakes prior to the COVID-19 delayed the launch date for
several of the 26 programs included in the action plan. However,
the Secretary of Housing has already launched the R3, which is the
most important housing program.
However, I am going to be honest. It is not up to the speed that
we would like to see it. The Governor, nor myself, nor anyone with-
in the team is satisfied with the speed of those fundings. So, again,
we are looking for ways within the four corners of the law to make
sure that we can expedite the funding to make sure that who needs
it the most have them, obviously, as soon as possible.
Mr. TONKO. OK. I appreciate that. Any other response?
Ms. JARESKO. I would just add that our only role in that program
is the certification that was included in the grant agreement and
in the Federal Register. We did do that very expeditiously, in less
than 45 days, so that there would be no hold-up in that second ap-
proval. But other than that, we don’t have any visual entry into
what’s going on in the disbursement.
Mr. TONKO. Well, it seems to me that there should be some effort
to coordinate so that the people can rightfully get the dollars that
they so desperately need. Puerto Rico is poor. Their power grid is
particularly fragile after Hurricane Maria and the earthquakes in
Southern Puerto Rico. And after the earthquakes this January, the
Costa Sur Power Plant has been out of service. What are some of
the preparations that the Puerto Rico Power Electric Authority is
taking for the upcoming hurricane season?
Mr. MARRERO. Thank you, Congressman. As opposed to what
happened when we got into office in 2017 when Maria hit, this hur-
ricane season, we have several warehouses across the island. Not
only do we have several warehouses, but we also have around $150
million in materials and equipment across the island to make sure
that, if something happens, PREPA, the electric utility, is able to
respond in a swift manner. Not only that—we have made sure that
also PREPA has entered into initial aid agreements with the utili-
ties stateside to make sure that if there is any help that we may
need when a disaster strikes that we can, again, go through those
initial aids and be able to get that help from our counterparts on
the mainland.
So, as opposed to Maria and Irma, we believe that we are in a
situation better prepared because we have the materials, equip-
ment, the initial aid, and obviously the lessons learned from it.
Mr. TONKO. And how will that all be impacted by the upcoming
privatization of the power utility?
Mr. MARRERO. Excellent question, Congressman. When we
designed the old operation and maintenance agreement, when we
designed the structure of this agreement for PREPA, we made sure
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that only we preserve the access to current and future disaster
funding. But also we made sure that doesn’t derail or affect the
tax-exempt financing. This is quite technical, but, again, we made
sure that any agreement that we enter will not affect the require-
ments of the Stafford Act under FEMA as well as the health regu-
lation for the CDBG funding. And that is because we are retaining
the ownership of the title for the people of Puerto Rico.
Mr. TONKO. OK, thank you so much. Mr. Chair, do I have any
time remaining?
The CHAIRMAN. No.
Mr. TONKO. Oh. Well, I yield back then, Chair.
The CHAIRMAN. Thank you, sir. Ranking Member Bishop, sir, you
are recognized. Mr. Bishop.
Mr. BISHOP. Yes. All right. Am I on here? Have all the other
Republicans already gone? Am I the last one? You can’t hear me,
can you?
The CHAIRMAN. As far as I can tell, you are the last member of
the Minority to speak.
Mr. BISHOP. All right. Well, fine. Mr. Chairman, a couple of com-
plaints, obviously, as we go forward with this. The voting that took
place earlier on was a huge kerfuffle. We will be asking some spe-
cific questions of how we can avoid those kinds of problems in the
future and avoid staff telling how Members should or should not
be voting.
Mr. Grijalva, I also wanted to take issue with you on some of the
conversations you have had with the Ranking Chairwoman of this
particular portion. It is better than that. You are a better person
than that. I also realize that this is unique in some situations. You
have had a whole lot of these kinds of hearings going on. This is
probably the first time you have had more than one point of view
that has been presented with it. And that presents some difficult
situations.
And some of those in the past have been on issues that I think
are somewhat extreme. However, I just want this Committee to re-
alize, despite this vehicle that we are using which is so inappro-
priate, that any discussions on solutions or changes of what will
take place in Puerto Rico without the discussions or the commit-
ment and inclusion of the Resident Commissioner from Puerto Rico
are futile. She is the Representative and the spokesman for the
island, and her point of view must be considered at all times. And
because of that, Ms. González-Colón, if you have another question,
I would like to yield the remainder of my time to you.
Miss GONZÁLEZ-COLÓN. Thank you. Thank you, Mr. Chairman,
for always allowing us to represent the people of Puerto Rico. And
that is what I am doing here in Congress. The people voted for me
for 4 years even when some people want to represent the island in
their own views. I am the one elected to do the job. And I appre-
ciate my delegation for always being available and allowing me to
do my job as every other member of this Committee do represent
their districts.
And this is the same thing we are all doing, representing our
people. So, in that sense, we have been always available to work
in a bipartisan way. Actually, all my bills in this Committee and
in the rest of the committees are bipartisan, all of them. And the
95

reason for that is that not having the power of vote in the Floor,
not having a formal Delegation of four or five members, not having
a Senate representative of Puerto Rico, that is the way to do things
in a bipartisan way. And I am so sorry that some folks would try
to do politicking or trying to do this in a partisan way. I think that
if you really want to help Puerto Rico, that is not the way to do
it. It is sitting. It is having discussions. It is having a reflection and
actually working to that end.
And I want to say thank you to all the members of this
Committee that actually—every time I reach to them asking for
their help, they have been doing that. Many of them here today are
being sponsors or leading sponsors in many of those legislation so
thank you for all the people that have voted for Puerto Rico not
once, but many times. And I am not going to aim at all of you, but
you all know who you are.
Ms. Jaresko, I do have other questions. I want you to provide the
Committee a list or log of the issues that you understand may be
helpful if we amend the PROMESA law. What can be expedited?
How can we cut red tape and bureaucracy, not just at the Federal
level but what should be done at the government of Puerto Rico
level to access, enhance a clear way to move the Federal funds.
In terms of Mr. Marrero, my question will be how to make that
happen. How the people of Puerto Rico can access—honestly, if it
were not for the Federal funds, how bad would the situation on the
island be right now?
Ms. JARESKO. Of course, Congresswoman, we will get that to you.
Miss GONZÁLEZ-COLÓN. Thank you. Mr. Marrero, how bad would
the situation in terms of the fiscal plan, in terms of the budget, be
right now for the people of Puerto Rico if not for the Federal funds
that were approved in the last 3 years?
Mr. MARRERO. Definitely, without the Federal funds, with the
Federal support that we have gathered from Congress and the
Administration, Puerto Rico will not have the resources to recover
from Irma, Maria, earthquake, COVID-19 and everything that we
have been suffering since 2006 of the fiscal economic crisis.
Miss GONZÁLEZ-COLÓN. What is your understanding of what
should be the first priority right now if you got the access to make
a change in the law?
Mr. MARRERO. On the PROMESA, to make sure that the public
policy in Puerto Rico is fully respected. Again, I think that the best
idea to describe this, Congresswoman, is PROMESA, the Board,
should be able to set the size of the room. But the government, the
elected government of Puerto Rico, this current government as any
other future government, should have the ability to decide how to
arrange the furniture to the extent that you are within the size of
the room. As simple as that.
Miss GONZÁLEZ-COLÓN. Thank you. My time is expired,
Chairman. I yield back.
The CHAIRMAN. Mrs. Napolitano. The time is yours. You are
recognized.
Mrs. NAPOLITANO. Thank you. And I won’t tell Bruce and Garret
that I have been trying to get on for an hour and a half. So, don’t
feel like you go arrange your swords—it is bipartisan. Mr. Marrero,
on the task force, the Governor created a medical task force. Can
96

you go into detail on the role of the task force and address the im-
pact during the last four events that you have had that are horrible
and give statistics or how much funding is addressed to mental
health? Nobody has addressed the issue of mental health, and it is
a critical thing for the people who are facing unemployment, who
are facing just everything else that you can think of.
Mr. MARRERO. Thank you, ma’am, for the question. First of all,
as to the mental health area, I really want to make sure that you
know this. Not only were we able to identify or earmark $150
million for private hospitals, but we were also able to for mental
health institutions, private hospitals that are aimed to treat those
important patients that are participating. And then we are able to
assign money in order to cover those expenses——
Mrs. NAPOLITANO. How much money? And is it sufficient
personnel?
Mr. MARRERO. I will provide every detail to you, ma’am. We are
making sure that all this information is publicly available on your
website. But I will provide it with the detail that you requested.
Mrs. NAPOLITANO. I would really like to know any information
you may be able to provide on it because it is an important issue
for the people of Puerto Rico. Another question has to deal with the
Army Corps of Engineers and the power grid. Have they done
everything they are supposed to, and what status do you have on
that?
Mr. MARRERO. On the power grid, ma’am, the Corps of
Engineers, their main responsibility was during the emergency re-
sponse phase. Now, as we are transitioned into the reconstruction
work and as FEMA obligates the permanent work funding, the
Army Corps does not have that leading role that they used to have
during the emergency response phase, ma’am.
Mrs. NAPOLITANO. Are they done with their part of it?
Mr. MARRERO. Yes, ma’am.
Mrs. NAPOLITANO. OK. I yield my extra time to Nydia Velázquez.
The CHAIRMAN. The gentlelady yields. Ms. Velázquez.
Mrs. NAPOLITANO. Has she left?
The CHAIRMAN. I think she has left.
Mrs. NAPOLITANO. Well, I would appreciate if those questions
were answered for the whole Committee, not just for us. Thank
you, and I yield back.
The CHAIRMAN. Thank you very much, Mrs. Napolitano. Mr.
Garcı́a, you are recognized.
Mr. GARCÍA. Thank you, Mr. Chairman. Can you hear me?
The CHAIRMAN. Yes, sir.
Mr. GARCÍA. And I apologize. Just to show fairness, I was not
able to get on via my computer, so it is a bipartisan effect. Thank
you, Chairman and Ranking Member, for convening this hearing.
And thank you, Ms. Jaresko, from the FOMB and Mr. Marrero
from the government of Puerto Rico. Natural disasters and crises
are not new to Puerto Rico and neither is a poor government re-
sponse. In the last few years, the people of Puerto Rico have faced
hurricanes, earthquakes, and now a pandemic. This comes after
decades of disinvestments, ineffective economic policies, and a
broken, shortchanged healthcare system due to its status.
97

The U.S. citizens of Puerto Rico have suffered too much for too
long. While much-needed funds from the CARES Act and other
relief packages reach the island, we know that it falls short. And
despite the worsening fiscal crisis, Puerto Rico was excluded from
the Federal Reserve’s emergency loan program during this public
health crisis.
The Puerto Rican government is already anticipating a $1.6
billion deficit by the end of this month due to the virus. Congress
approved trillions of dollars worth of relief to help fix our economy.
It still isn’t enough. What has been clear throughout this process,
however, is that communities need stimulus and investment to
come back strong, not austerity and cuts. That is not how
economics works.
And even Mitch McConnell and President Trump recognize that
in working to pass the CARES Act that was the case. So, why are
we acting like cuts and austerity will work for Puerto Rico if it
doesn’t work for the 50 states? I appreciate that the FOMB delayed
the implementation of its plan of adjustment, but I still hear talk
about leaner government, rightsizing, and pension cuts.
These words mean the same thing for the people in Guayanilla
and San Juan that they mean for my constituents in Chicago. And
they mean less money for communities and longer, harder economic
recovery. The sacrifices are made by working-class people and in-
vestors take profits. Question No. 1, in February, Researcher Cate
Long from the Puerto Rico Clearinghouse wrote a letter to
Bankruptcy Judge Laura Swain and mediator Barbara Houser
with some alarming allegations.
She provided data indicating that people involved in this winter’s
mediation negotiations have traded bonds based on information
that was not available to the public. In other words, bondholders
may have conducted insider trading. Ms. Jaresko, are you aware of
these allegations of insider trading? And is the Board investigating
them?
Ms. JARESKO. Thank you, Congressman. Yes, I am aware that
allegations have been made. But, no, we are not investigating
them. They are in the hands of the court and the mediator.
Mr. GARCÍA. Do you think that there is a role for investigation
by you?
Ms. JARESKO. It wasn’t delivered to me. We weren’t asked to do
so. And I don’t have the means to do so, in fact. It really is a law
enforcement issue. And we would expect law enforcement to be
engaged.
Mr. GARCÍA. OK. Do you know what the consequences would be
if a bondholder in the mediation process was found to be insider
trading?
Ms. JARESKO. I am not a securities lawyer, but I can imagine
what the securities law would require.
Mr. GARCÍA. OK. On bankruptcy. Sometimes these plans look
like they are constructed backward, starting with payments to
creditors and then filling in the rest of the economy after that. The
fiscal plan certified by the FOMB last month admits that Puerto
Rico has not achieved significant growth after years of austerity.
The plan predicts more tough times ahead, projecting GNP growth
98

of .5 percent next year followed by a contraction when Federal
funds for fighting COVID wind down.
It looks like Federal funds are the only concrete positive input
to the Puerto Rican economy in the next few years. Other growth
factors seem much more vague. And the government of Puerto Rico
is blocked from spending its billions in reserves. Mr. Marrero, if
Puerto Rico’s economy fails to grow over the next 2 years, are you
concerned that the island will face another bankruptcy?
Mr. MARRERO. Definitely, sir. And more importantly than that,
I think that in the end, more than the bankruptcy, the more impor-
tant part is the people. The people will continue to leave the island,
and we will end up with less folks, not only to pay our debts but
also to maintain a government that needs to provide essential
services to the people.
Mr. GARCÍA. Thank you. I find it disgraceful that nearly 3 years
after Maria, our sisters and brothers on the island remain without
roofs. Children don’t have schools, and people continue to die as a
result of inadequate access to health care. This pandemic has only
exacerbated the situation on the island. One thing is clear. We
can’t continue squeezing the people, and we can’t go back to nor-
mal. Normal is what got us here in the first place. We must do
everything we can to put the people of Puerto Rico on the path to
long-term recovery and economic stability. Thank you, Mr.
Chairman and Members. I yield back.
The CHAIRMAN. Thank you very much, Mr. Garcı́a. I appreciate
it. And I believe that that is the end of the questions by Members.
I will be submitting some questions in writing to both our wit-
nesses and thank you very much. But just a couple of quick notes
before adjourning the hearing. Ms. Jaresko, the 2020 Fiscal Plan
relies on approximately $83 billion of disaster relief funding in
total to be disbursed from Federal and private sources, part of
Maria and Irma reconstruction effort. And of this amount, how
much has been disbursed so far by the Federal Government, and
how confident are you that the remaining balance would be
disbursed to the government of Puerto Rico?
Ms. JARESKO. Yes. Thank you, Chairman. Let’s take different
pieces of the numbers. And I will go through them individually.
The private sector funding, the private sector insurance, has, for
the most part, all been received to date. The FEMA funding, which
I described to you, is estimated to be $48 billion—$17.4 has been
obligated, and $13 billion of that has been disbursed.
If you ask me what my expectation is, my expectation is that
Puerto Rico will receive everything it is estimated to cover the full
$48 billion. The third large piece is the $20 billion that you have
all appropriated already for CDBG-DR. Of that, $3.1 has been obli-
gated. And actually, the current disbursement level is about $70
million. I think someone used something lower. But now that the
economy is starting to open, the disbursements are starting to flow,
in particular, in the construction area.
And I would expect all of the $20 billion appropriated to indeed
be received as it has already been appropriated. The last category
is a combination of various Federal programs, some of which has
been received—I don’t have that list in front of me right now—and
others which are still being received over time. Those are things
99

like Job Corps, like the USDA funding, incremental funding for
supplemental food assistance, and so on.
But the general answer to your question, I would expect all of
this funding to be received because all of it is necessary, needed,
and appropriate for the disaster. Chairman, I can’t hear you. You
are on mute.
The CHAIRMAN. Thank you because Congress does appropriate.
But the implementation on disbursement and the guidelines that
follow those kinds of appropriations have not always expedited the
money to get to the targets that it was intended for. We have many
examples of that. But Mr. Marrero, does the government of Puerto
Rico project it will receive the Federal aid that Ms. Jaresko just
talked to from the present Administration to rebuild? And if we
continue at this percentage that we are talking about, what would
be the impact if the funds aren’t received?
Mr. MARRERO. Well, sir, I am very hopeful that that promise will
be fulfilled and that Puerto Rico will receive the funding that has
been promised. However, if we don’t get that funding, definitely all
the entire fiscal plan, entire fiscal roadmap that we are trying to
lay out for the next couple years will not be attainable. Puerto Rico
will not only not be able to pay their debt as contracted, but it will
not be able to provide essential services. And the economy will not
grow.
The CHAIRMAN. Yes. And like I said, I have specific questions on
PREPA and specific questions on some things that haven’t been re-
quested by the government of Puerto Rico and the status of those
requests. I will send those forward. But Mr. Marrero, just one
question that was brought to my attention by a resident of the
island, a teacher, that as of 2 weeks ago, 141 of 834 school cafe-
terias in Puerto Rico were providing children with hot meals. And
the Puerto Rican Department of Education has argued in court the
department does not have the duty to provide meals. Could you
elaborate on why the department has taken this stance and how
will we deal with this, and have Federal funds already been
authorized for the ability to provide nutrition to children?
Mr. MARRERO. Definitely, sir. Well, first of all, the Governor and
myself have been committed to make sure that we can expedite the
opening of the school cafeteria to provide that food that is needed,
obviously, as the Resident Commissioner, Congresswoman
González-Colón, said. Sixty percent of our children live below pov-
erty levels, so we have to make sure that we can fulfill that duty,
particularly during COVID-19. The initial reluctance of the sec-
retary was because, at that time, the personnel of the school cafe-
teria were the vulnerable population that could be affected by
COVID-19. However, we have already opened several cafeterias,
several places around the island. Right now, it is making sure that
can be fulfilled through NGOs and through other organizations to
make sure that we can provide that food.
The CHAIRMAN. Thank you. And I want to thank the panel for
the testimony. And like I said, all of the full testimony was in writ-
ing. Members will follow up in writing. We will distribute it to the
rest of the Committee in terms of your responses before adjourning.
Let me thank you again. Well, I did want to say that I appreciate
the fact that we are trying to work through some of the newness
100

to say the least of the process that we’re going through to have
these hearings. I think it is important.
To sit on our hands for the next 45 days, 35 days, 60 days with-
out having hearings, oversight, without having markups and
moving legislation along, I think is a detriment to the people that
elected us to office. And that is No. 1. You know, discretion being
the better part of valor, some people choose to be there in face
versus the person right next door doing business. God bless you. I
personally think that some of the other Members that are indi-
cating their willingness to be part of an online process that has
been approved by Congress, by the House of Representatives, as
part of the rules, that we do so with discretion in the sense that
not only for self-preservation but also the preservation of others,
the staffs, the public that we come in contact. And as we see some
surges and some spiking going on in terms of the pandemic—and
Puerto Rico is not alone. Unfortunately, the state of Arizona is
right up there.
I think No. 1 on the hit parade list of least testing and the surge
coming back with a lot of ferocity and a lot of strength here in the
state of Arizona—so I mention those things. This isn’t about not
who was more macho, about being able to sit on the dais. This is
about getting business done. This is a vehicle to do it. I prefer the
in-person. I always have. The format is not the favorite thing that
I like to do. But we will be there at that other point as well.
I also want to say that this is not a partisan issue. I struggled
through this issue of Puerto Rico and what’s happened. And we al-
ready went through the accumulation, the cumulative effect of
what has occurred in Puerto Rico from nature to the virus and to
the economic collapse. And I think we struggled on how to balance
the sovereignty and the self-determination of the Puerto Rican
people and the need for the Federal Government to intervene and
provide supplemental support to Puerto Rico, for it to be able to not
only survive but develop and become sustainable. That is the goal.
It is not a partisan issue. It is not partisan when we want to do
reform for PROMESA to make the process more defined and pro-
vide the people of Puerto Rico a forum and transparency, making
sure that either government, whether it is the Federal Government
or the central government, are being transparent, clean, and free
of conflict.
H.R. 5687, that the House of Representatives passed, that the
Senate has killed, and the President has indicated he wouldn’t
sign, provides earned income tax credit for the people of Puerto
Rico, child tax credit, and additional support after the hurricanes
that was badly needed and is since in the abyss on the other cham-
ber. There are steps to go forward. And as we go forward to look
at markups for reforms to PROMESA, as we look at other pieces
of legislation in other oversight hearings, I am taking the advice
and the suggestions of my colleagues on both sides of the aisle on
how to technologically make ourselves better, not necessarily make
us more comfortable, but it should make us better. With that, let
me adjourn the meeting. Thank you for your attendance and——
Miss GONZÁLEZ-COLÓN. Mr. Chairman, just one point.
The CHAIRMAN. The meeting is adjourned.
[Whereupon, at 6:15 p.m., the Committee was adjourned.]
101

[ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

HISPANIC FEDERATION
SAN JUAN, PUERTO RICO

June 25, 2020

Hon. RAÚL M. GRIJALVA, Chairman,
House Committee on Natural Resources,
1324 Longworth House Office Building,
Washington, DC 20515.

Re: June 11, 2020 HNR Committee Hearing: PROMESA Implementation during the
Coronavirus Pandemic
Dear Chairman Grijalva:
Hispanic Federation (HF) is a leading social service and advocacy member organi-
zation with a national network of hundreds of Latino community-based health and
human service agencies working to promote the social, political, and economic well-
being of Latino communities. Founded in 1990 to support Latino institutions in New
York City, today the Federation works in twenty-two states, Puerto Rico, and the
District of Columbia.
On June 11, 2020, the House Committee on Natural Resources held a hearing
titled ‘‘PROMESA implementation during the Coronavirus Pandemic in Puerto
Rico.’’ We thank you and the Committee for holding this important hearing to ascer-
tain the impact of the PROMESA law on the island’s ability to respond effectively
to the current health crisis combined with the preexisting crises created by the
previous economic and natural disasters.
In our opinion, the following five areas are especially important for Puerto Rico’s
economic and social recovery, self-determination, and wellbeing:
1. A moratorium on debt payments and suspension of austerity policies until the
economy has fully recovered and the needs of the people struggling to recover
from years of economic and natural disasters have been met.
2. A commitment to investing in the development of human capital and expertise
instead of restricting the local government’s capacity to respond effectively to
the ongoing crises, as opposed to so-called ‘‘right-sizing’’ (Jaresko, p. 15) to
save money and hinder provision of government services and essential
services—especially in times of emergencies.
3. Compliance with provisions outlined in the Amendment to PROMESA Act
(H.R. 6975) that require full disclosure of conflicts of interest of all FOMB
members, employees, contractors, and advisors as well as public disclosure of
every document, record, or information relating to the public debt of the
Commonwealth of Puerto Rico.
4. Compliance with provisions outlined in the Amendment to PROMESA ACT
(H.R. 6075) requirement for full funding of essential services such as public
education, public safety, health care, and pensions, and any other essential
service, before prioritizing payments to bondholders.
5. A full and public evaluation of the FOMB’s effectiveness, utility, and success
achieving the goals set out in PROMESA to determine if the Board has failed
in its mission (which we believe), and, if so, to proceed with its disbanding
and respect Puerto Rico’s sovereignty and self-determination by providing the
mechanisms available to other U.S. states and municipalities to address its
ongoing debt and economic crisis.
102
In written testimony, the Executive Director of the FOMB, Ms. Natalie Jaresko,
states:
‘‘The 2020 Fiscal Plan reflects a one-year delay in most categories of
budgetary reductions to allow the Government to focus on implementation’’.1
This is a necessary but insufficient step. U.S. Congress and the FOMB must
understand that austerity measures, such as budgetary reductions, and continued
prioritizing of debt payments over the needs of the people of Puerto Rico will inhibit
economic growth in the island. In April, the G20 announced a year-long moratorium
on debt-payments and interest accumulation for low income countries in response
to the global pandemic and economic crisis that is going to hit vulnerable economies
hardest. Why didn’t the FOMB adopt a similar position given the already high
levels or debt, unemployment, and poverty in Puerto Rico which will only be
exacerbated by the Covid-19 crisis?
During the hearing, Ms. Jaresko argued that the FOMB can only reduce spending
and does not have the power to increase revenues, and therefore can only limit
budgets to ensure debt payment. This demonstrates a lack of creativity and willing-
ness to use the power of the FOMB budgetary oversight to increase revenues in
other ways. For example, it could authorize a budget that will increase Puerto Rico’s
capacity to spend money on instead of cutting spending on essential services and
needed human resources to promote sustainable economic growth in the island. It
has become widely apparent that austerity measures imposed by the FOMB have
only hurt the people of Puerto Rico while not increasing the island’s ability to create
a sustainable debt repayment plan. Therefore, harmful austerity measures and
policies must be ended, especially while the island is reeling from disaster after
disaster, and experiencing record high levels of poverty, food insecurity, and
unemployment.
Basic essential services must be defined, able to adapt to changing needs,
prioritized, and sustainably funded to ensure long term results. For example, the
FOMB keeps pushing for the University of Puerto Rico’s budget reduction and has
already promoted the closure of hundreds of schools across the island. These
closures in the name of ‘‘austerity’’ have promoted unemployment, displacement of
students, and inhibited the fulfillment of the right to education. Limited access to
higher education eliminates the best opportunity of poor, vulnerable, or dis-
advantaged populations to attain a college education and contribute to the island’s
professional force and long-term economic sustainability.
Last year, Hispanic Federation’s Puerto Rico team members visited a community
in the municipality of Carolina, Puerto Rico, and heard from local leaders how the
closing of their elementary school by the government as part of island-wide
austerity and cost-saving measures negatively impacted their lives. Every day, their
children struggle to get to other schools without adequate public transportation or
safety measures. Other community leaders shared their frustration with the bureau-
cratic hurdles to adapt the closed local school building into a center for community
development. This is only one example on how austerity measures that prioritize the
debt over basic services such as access to education negatively impact peoples’ lives
and abilities to access adequate public education—an essential public service.
The FOMB does not seem to understand that prioritizing the financial bottom line
can have long-term negative effects on the lives and futures of real people. Payment
of the debt should not hinder the ability of Puerto Rico’s essential services’ institu-
tions to pursue their prime objectives or sustain themselves as solvent institutions.
There will be no economic growth if education, physical and mental, food, energy,
water, employment, among other critical needs, are not adequately addressed.
Previous austerity measures imposed by the FOMB have caused the significant
reduction of human resources in Puerto Rico’s agencies. As Hon. Nydia Velázquez
mentioned in the hearing, these measures have significantly reduced the resiliency
and capacity of agencies to respond adequately to major disasters, such as hurri-
canes, earthquakes and/or pandemics. The U.S. government constantly asks Puerto
Rico to lead a successful recovery from repeated disasters yet, on the other hand,
imposed an FOMB with the power to limit the tools Puerto Rico needs to succeed.
This is a set up for failure and must end. The FOMB must stop prioritizing the pay-
ment of an unaudited debt over investments in sound governmental human

1 Written Testimony of Natalie Jaresko, Executive Director, Financial Oversight and Manage-
ment Board for Puerto Rico, at page 5 of 15, https://naturalresources.house.gov/imo/media/doc/
Written%20Testimony%20-%20Ms.%20Natalie%20Jaresko%20-%20Remote%20FC%20Ov%20Hrg
%2006.11.20%20(PROMESA%20COVID%20Response).pdf.
103
resources, adequate provision of essential services, and measures to reduce poverty
and stimulate the economy such as investments in education.
Hispanic Federation strongly refutes the following statement by Ms. Jaresko in
her written testimony (page 13) regarding the provision related to transparency and
accountability in the Amendment to PROMESA ACT (H.R. 6075):
‘‘Making public any document relating to the negotiations or restructuring
of the public debt would be prejudicial and detrimental to the Board’s effort
to effectively and expeditiously secure the best debt deal possible for Puerto
Rico and its people.’’ 2
The FOMB was created to protect the interests of the people of Puerto Rico and
the Board’s role is not to first protect the interests of Wall Street. The interests of
the people of Puerto Rico are best served with transparency and accountability. The
members of the FOMB are not negotiating personal debts. In fact, every document,
record, or information relating to the public debt of the Commonwealth of Puerto
Rico is a public document and must be accessible to any interested party. Congress
is correct in requesting full transparency and accountability from the FOMB.
Finally, Hispanic Federation believes that following its oversight duties, the
ultimate goal of the U.S. Congress should be the elimination of the FOMB which
has not accomplished the intended to help the people of Puerto Rico by renegotiating
its debt in ways that resolve its debt crisis and help move the island forward and
begin the long road of financial recovery. After 122 years of colonial oversight, the
United States of America has the obligation to respect Puerto Rico’s self-
determination. Instead of imposing a colonial FOMB, Congress should respect
Puerto Rico’s sovereignty and support its democratic institutions and right to self-
governance. Puerto Ricans were able to peacefully achieve the resignation of former
governor Ricardo Roselló, and keep standing up with dignity, pride, unity, and hard
work even after one of its worst natural disasters, Hurricane Marı́a in 2017. Only
through self-determination and democracy will Puerto Rico overcome its economic
crisis.
Thank you for your attention to these concerns. Hispanic Federation is committed
to remain on the front lines to ensure that rights of Latino communities across the
Nation are upheld.
Feel free to contact Laura M. Esquivel at lesquivel@hispanicfederation.org or
Charlotte Gossett-Navarro at cgossett@hispanicfederation.org should you have any
questions.
Cordially,

Charlotte Gossett Navarro, Laura Esquivel,
Puerto Rico Chief Director VP for Federal Policy and Advocacy

2 Written Testimony of Natalie Jaresko, Executive Director, Financial Oversight and Manage-
ment Board for Puerto Rico, at page 13 of 15, https://naturalresources.house.gov/imo/media/doc/
Written%20Testimony%20-%20Ms.%20Natalie%20Jaresko%20-%20Remote%20FC%20Ov%20Hrg
%2006.11.20%20(PROMESA%20COVID%20Response).pdf.

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