The Puerto Rico Oversight Board published a revised five-year fiscal plan Monday that projects an improved debt position through 2023.
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The plan is scheduled to come to a vote at Tuesday's meeting of the Oversight Board, which was created in 2016 to oversee fiscal policy in the debt-strapped territory.
Monday's report estimated that the island will receive $82 billion of total disaster relief funding from public and private sources. Around $66 billion of the funding is expected to arrive from the Federal Emergency Management Association and Community Development Block Grants. A previous Puerto Rico fiscal plan from late June had projected $66 billion of disaster assistance.
Howard Cure, director of municipal bond research at Evercore Wealth Management, said the projected federal assistance numbers would go a long way toward helping Puerto Rico create jobs and stabilize the economy. He cautioned, though, that it is unknown if Puerto Rico would receive the full available funding because of politics.
“I am particularly concerned since Puerto Rico doesn’t have any direct, voting representation in Washington to help lobby for greater federal funding,” said Cure. “The CDBGs are more advantageous to the Commonwealth as the Commonwealth has more discretion on how to use those monies.”
The oversight board approved a commonwealth fiscal plan on June 29 that projected a $6.47 billion surplus from fiscal year 2019 to fiscal year 2023. The board later stated in August that the plan would have to be revised because of new estimates for tax revenue and population trends. The revised fiscal plan projects a $6.7 billion surplus for 2023 if recommended fiscal measures are implemented.
“Puerto Rico has been mired in economic decline, in part because of fiscal mismanagement, for decades,” José Carrión, Chairman of the Board, said in a statement. “And our government still has much more difficult work to do, even with these changes, for the people of Puerto Rico to be closer to achieving the dynamic and prosperous economy they deserve.”
The board’s new report notes that more than 10% of Puerto Rico’s population is estimated to leave the island in the next five years with the declines improving year-to-year over that period. The analysis also forecasts Puerto Rico’s median age will rise to 52 by the 2058 fiscal year from 42 in 2018. More than 40% of the current Puerto Rican population lives below the poverty line.
Cure said stopping the tide of major population losses is one of the “most significant variables” in need of correction to combat the downward spiral of Puerto Rico’s economy. The oversight board report noted due largely to increasing outmigration numbers for more than a decade, Puerto Rico’s economy is $16 billion smaller than 2005 with the population smaller by half a million peopler.
“Clearly, if the economy doesn’t continue to improve, there is no stopping the exodus from the island, particularly since all people need to do to leave and go to the mainland is a one-way plane ticket,” said Cure.
The revised fiscal plan forecasts a surplus through 2023 with deficits then returning unless additional structural reforms are implemented. Natalie Jaresko, the oversight board’s executive director, stressed during a media conference call that labor reform was especially important for Puerto Rico’s long-term recovery, but that hard decisions need to be made at a local level.
“Going forward we will try to work and increase the political will to do future changes,” she said. “We need to do this in a collaborative fashion.”
