WASHINGTON – Experts and Puerto Rican lawmakers are encouraging Congress and commonwealth officials to include fiscal responsibility laws in any legislative package designed to help the island.
The comments were made during a panel discussion here on Wednesday hosted by the Puerto Rico-based Center for a New Economy, an independent and nonpartisan group focused on creating a more prosperous, balanced and equitable economy for Puerto Rico, according to its website. CNE has been actively engaged in discussions in Congress about the state of Puerto Rico's fiscal crisis and Wednesday's event marked its first independent event held in Washington.
The group's plan would have the Puerto Rico legislature pass local fiscal responsibility laws that would keep spending fairly stable in a way that is unaffected by movements in the business cycle from year to year.
Under the CNE's guidelines for creating the rules, the commonwealth would, among other things, establish integrated financial management information systems, improved internal controls and audits, as well as real-time monitoring capabilities. Various countries have used tailored fiscal responsibility laws to create institutional mechanisms to control their finances since the 1990s, according to CNE.
Sergio Marxuach, CNE's public policy director, said the fiscal responsibility laws would have to be coupled with restructuring to help Puerto Rico as it prepares for two major debt payments coming due in May and July.
"[It is] inevitable that some debt resolution mechanism will have to be implemented," Marxuach said. "At this point it's useless to argue otherwise."
Members of Congress, led by House committees with jurisdiction over Puerto Rico, have been considering possible solutions to the commonwealth's fiscal and debt crisis and in recent weeks have seemed to converge on the necessity of pairing some type of restructuring authority with a federal oversight board.
Two House committees held hearings on Puerto Rico last week and legislators have now said they are working to draft a legislative package to be completed before a March 31 deadline imposed by House Speaker Rep. Paul Ryan, R-Wis.
Marxuach and CNE president Miguel Soto Class said they have had conversations with federal legislators both about CNE's plan for fiscal responsibility laws and possibilities for the larger, comprehensive solution. While the legislators have not given much reaction to the CNE plan yet, both Marxuach and Soto Class said they believe the lawmakers are currently trying to hammer out details of what a fiscal oversight authority would do in Puerto Rico after numerous proposals have been floated for congressional consideration.
CNE members said that responsibility laws that provide more flexibility -- coupled with an oversight board that could monitor compliance, help with implementation, and address the many technical details of implementing law -- would provide a strong basis for sustained fiscal management and the opportunity for economic growth on the island.
They warned that a board the federal government would unilaterally impose or one that tries to dictate smaller operational details would be rejected by Puerto Rico's residents.
Resident Commissioner Pedro Pierluisi, Puerto Rico's non-voting member in Congress, called the report from CNE on the proposed rules "clear-eyed and wise" and promised that if he is in a position to do so, he will try to implement most if not all of the recommendations.
Gordon Gray, director of fiscal policy for the center-right American Action Forum, said the idea of including fiscal responsibility laws in the larger restructuring and oversight board framework is good in concept, but would have a difficult time being implemented locally, where political agreements can be hard to reach.
"This is all great, but would it be perceived as credible in the context of the current environment politically and economically?" Gray asked of his fellow panelists.
Marxuach, recounting past conversations he has had with people knowledgeable about local Puerto Rico politics recalled a saying that politics is a blood sport in Puerto Rico.
"It's going to be hard, we're not denying that," he said.
Puerto Rico Senate President Eduardo Bhatia, who also attended the meeting, would be one of the main people charged with negotiating agreeable laws locally in Puerto Rico. He agreed with CNE that the commonwealth should have strict fiscal rules.
Marxuach said that CNE has already started having discussions with people in Puerto Rico because of the recognized challenges of both drafting and then gaining support for the laws.
"Turning around this aircraft carrier is going to take a while," he said referring to Puerto Rico's plethora of problems. "But we have to start now so two years from now we have a fiscal policy to [guide us]."—
