Looming decision by Trump administration on Puerto Rico has implications for taxpayers

In the weeks since the passage of the Tax Cuts and Jobs Act, more and more U.S. companies are announcing new hiring, higher wages and bonuses to pad the pockets of the middle class. Americans are quickly realizing the real benefits of tax reform, with the vast majority seeing a larger paycheck. But unfortunately, the American taxpayer can’t let their guard down just yet. The federal government continues to funnel hundreds of billions into dubious projects that do little for taxpayers while enriching a cadre of connected bureaucrats and special interests. In particular, Puerto Rico’s recovery continues to be jeopardized by corrupt officials that jeopardize billions of tax dollars on shady deals and crony contracts.

In the coming days, the Trump administration will consider using funds available under the Stafford Act to issue a Community Disaster Loan (CDL) to the government of Puerto Rico. A CDL is a short term, small dollar loan normally used for municipalities to recover lost revenues and other damages following a natural disaster. 

When providing Puerto Rico this supplemental loan, Congress rightly understood that the issues facing Puerto Rico were much more challenging than that facing U.S. states affected by Maria. The island has large public corporations, some of which are in bankruptcy, which have been mismanaged and poorly run for decades. The continued lack of electricity for significant parts of the island, months after the storm, is a reflection of the ineptitude and mismanagement of Puerto Rico’s leadership. Hurricane Maria, which severely damaged the island in September, exposed just how bad things have gotten there. 

Now, it is up to the Trump administration to decide whether the Puerto Rican government is able to access almost $5 billion in FEMA loans. 

Before the Trump administration considers providing loans from the U.S. taxpayer to Puerto Rico, OMB should require a complete and full disclosure of both the Commonwealth’s finances, including the balance sheets of public corporations.  These disclosures should be posted on the OMB website for taxpayers and lawmakers to see.  This simple transparency measure will help policymakers evaluate the true financial need of the Puerto Rican government and its public corporations for the CDL program. 

Financial transparency has been severely lacking in Puerto Rico for decades.  For years, Senate leadership have repeatedly called for enhanced transparency from Puerto Rico’s government. Sen. Orrin Hatch (R-Utah) correctly called it, “beyond irresponsible to offer aid to Puerto Rico without taking at least some action to improve […] reporting and transparency.”  His call for increased transparency still rings true today.  Just last month, after a Federal Court ruled to allow bondholders discovery into Puerto Rico’s opaque finances, it was discovered that the Commonwealth and the Oversight Board had been conspiring to hide billions in assets while telling Washington and the Court that these assets didn’t exist.  

Additionally, to protect taxpayers, tying federal funding to the adoption of the Open Contracting Data Standard (OCDS) would keep contracts in the light of day for every step of the process. These and similar measures would put Puerto Rico in a better position to exit its default and tap into private capital markets for longer-term financing needs.  The administration should also delegate a retired general or respected financial “watchdog” to oversee the use of any federal monies sent to Puerto Rico. 

The Taxpayers Protection Alliance (TPA) has urged from the onset – along with some unlikely allies in Minority Leader Chuck Schumer (D-N.Y.) and Rep. Nydia Velazquez (D-N.Y.) – for a czar to be put in charge of Puerto Rico’s recovery.  Given that neither the governor nor the Oversight Board has the capacity to competently dole out recovery dollars, such a move is necessary to hold officials accountable for taxpayer money. 

TPA’s concerns about mismanagement and waste were proven justified once again recently, when a large cache of electrical grid supplies was found in a Commonwealth-controlled “warehouse” last week.  The recovery of these materials required armed federal agents to ensure their release and distribution to communities across Puerto Rico.  

In passing tax reform, Congress and the Trump Administration made significant inroads in restoring sound fiscal stewardship. Policymakers should be equally vigilant in protecting scarce federal dollars from misuse and abuse in Puerto Rico

David Williams is president of the Taxpayers Protection Alliance.