White House Sends Welcome Signal on Puerto Rico Reforms

Will public officials on both ends of Pennsylvania Avenue soon pay greater attention to one of NTU's top priorities for addressing the economic plight of Puerto Rico, as well as severely indebted state and local governments on the U.S. Mainland? Based on the White House's Statement of Administration Policy (SAP) on recently introduced Omnibus spending legislation covering the remainder of Fiscal Year 2017, there's hope for a shift in emphasis toward economic growth for the island. 

The Omnibus bill contains praiseworthy, and pan-worthy, provisions for taxpayers -- along with many items in between. Sitting in the last category is some $296 million in federal funding to prevent what's been called a "Medicaid Cliff" for Puerto Rico. Without this infusion of cash, the Commonwealth's health program for lower-income residents would have suffered fiscal withdrawal symptoms from funding levels elevated by Obamacare. 

Though hardly an ideal solution, the underlying issue is complex. The federal Medicaid formula for Puerto Rico leaves the island with less money than a state would receive, a situation that the bipartisan Congressional Task Force on Economic Growth in Puerto Rico called on Washington to fix. Furthermore, a case can be made (though sometimes exaggerated for political effect) that the overall longer-term finances of Medicaid would be even worse off without the money provided to the Commonwealth in the Omnibus. It is less expensive for taxpayers to treat Puerto Rican patients in Puerto Rico; if the Medicaid system collapses there and accelerates the already-alarming exodus of residents to the Mainland, the burden on taxpayers could be even heavier. In any case, lasting remedies to Puerto Rico's woes are grounded in economic growth and reinvigorated investment, backed by rule of law. Accordingly, a recent NTU letter to Congress urged lawmakers to consider federal tax law revisions and regulatory relief for Puerto Rico that would work in concert with systemic reforms under discussion in Washington. 

For these reasons, NTU was encouraged to read the White House's SAP yesterday, which noted:

The Administration is also disappointed that this bill provides almost $300 million for Puerto Rico’s Medicaid program without underlying reforms to Puerto Rico’s struggling healthcare system, which, like so many aspects of the United States healthcare system, has been badly damaged by the Patient Protection and Affordable Care Act. The Administration believes that any sustainable solution to Puerto Rico’s dire fiscal situation must include the enactment of pro-growth policies for the island.

The last sentence above is a welcome emphasis compared to the Obama Administration, which spent a great deal of time and effort on "Super Chapter 9" and other debt restructuring schemes. This left thoughtful Members of Congress such as Rep. Tom MacArthur to stress the tax reform message; thanks to MacArthur's work in the last Congress, the PROMESA legislation affecting Puerto Rico eventually called on leaders to work for “permanent, pro-growth fiscal reforms which feature, among other elements, a free flow of capital between possessions of the United States and the rest of the United States."

Statements of Administration Policy are of course not binding, but neither are they easily dismissed. They are meant to be what their name implies -- official expressions of intent from the Executive Branch. By voicing full throated support for pro-growth federal policies toward the Commonwealth, the Trump Administration has given an important boost for taxpayer advocates like NTU who recognize that a healthy economy for Puerto Rico must receive timely attention from federal policymakers. Given today's disturbing news that the Commonwealth would seek formal debt reorganization under PROMESA, this work is more urgent than ever before.