HUD Awards $18 Billion in CDBG Funds to the Island​

The US Department of Housing and Urban Development (HUD) announced it will award an additional $7.5 billion to Puerto Rico under the Community Development Block Grant (CDBG), bringing the total for Puerto Rico to $18.5 billion. Congress stipulated that a minimum of $11 billion must be awarded to Puerto Rico. The announcement was made by HUD Undersecretary Pamela Hughes Patenaude in the municipality of Canóvanas, one of the areas most affected by the storm. According to Governor Ricardo Rosselló, this is the single largest non-defense federal funding award in U.S. history.

So far, Congress has awarded a total of $20 billion in post-Hurricane Maria CDBG funding to rebuild Puerto Rico. Of these funds, $2 billion will be used to rebuild the energy grid and the remaining $18 billion is yet to be determined. These funds will be disbursed and managed under special oversight with federal and Commonwealth personnel overseeing government transactions in real time.

Pension Systems Are Broke; Fixes Could Make Matters Worse for Retirees, UPR​

The Retirement Systems Administration (RSA) has only $543 million in assets on their books, including $36 million in COFINA bonds. The RSA is the only retirement plan included in Title III bankruptcy proceedings. Almost 120,000 current retirees, as well as 107,000 future retirees, depend on the RSA for their retirement. In order to address the funding shortfall, the Fiscal Oversight Board (FOB) plans to cut 10% of all existing pension benefits and transfer management of the RSA’s defined contribution plan to the private sector. Last week, Governor Ricardo Rosselló submitted a fiscal plan that did not include the FOB’s proposed pension cuts.

Previous reforms to the pension system have failed to stabilize it: several reforms—that included benefit cuts and other savings—have been implemented since the late 1990s, but the government did not make appropriate employer contributions and thereby failed to shore-up the accounts.

The FOB’s plan could hit teachers especially hard, since teachers in Puerto Rico are not required to pay into Social Security. The average Teacher’s Retirement System (TRS) pension, on which 43,776 retirees depend, is $1,443 a month; TRS pays out $820 million a year in benefits. The FOB’s proposal impacts over 31,000 retired teachers.

Hearing Held on Constitutionality of COFINA Bonds​

Unsecured Creditors—a group comprised of retiree groups, labor unions, and others—as well as General Obligation bondholders (GOs) and the Commonwealth government, are challenging the constitutionality of the Sales Tax Corporation Fund (COFINA in Spanish). Participants argue that the law that created COFINA is unconstitutional under the Constitution of the Commonwealth of Puerto Rico. They believe that, under the Constitution, sales tax revenue must first go through the General Fund. 

On the other side of the equation are COFINA bondholders, who argue that the revenue-backed bonds are ironclad and that a reversal of the law would make it much harder for Puerto Rico to return to the markets for liquidity. The lawyers in the case made their final arguments on Tuesday before Judge Laura Taylor Swain in New York. Swain said she will issue a written ruling soon.

Congressional Hearings This Week on Puerto Rico

Congressional committees on both sides of the Capitol held hearings this week related to Puerto Rico and the aftermath of Hurricane Maria. On Wednesday morning, April 11 at 10am, the Senate Homeland Security and Governmental Affairs Committee held a hearing titled “FEMA: Prioritizing a Culture of Preparedness.” Later that day at 2pm, the House Energy & Commerce Subcommittee on Oversight and Investigations held a hearing titled “Update on the Restoration of Puerto Rico’s Electric Infrastructure.”

In addition, a bipartisan group of U.S. senators sent a letter to Senate Energy and Natural Resources Committee leadership requesting that they hold a hearing to examine the ongoing electricity restoration work in Puerto Rico. Senators Bill Nelson (D-FL), Marco Rubio (R-FL), Richard Blumenthal (D-CT), Richard Durbin (D-IL), Bernie Sanders (I-VT), Thomas Carper (D-DE), and Robert Casey (D-PA) sent the letter to Chairwoman Lisa Murkowski (R-AK) and Ranking Member Maria Cantwell (D-WA). The letter urges the committee to examine the issue anew—they held a similar hearing on November 14 of last year—given that there are still intermittent power outages, the U.S. Army Corps of Engineers is reportedly drawing down their electricity reparation crews from the Island, and there are still multiple municipalities with little or no electricity.