Velazquez on Puerto Rico Congressional Task Force Report

Washington, DC – Rep. Nydia M. Velázquez (D-NY) released the following statement regarding the release of the Congressional Task Force on Economic Growth in Puerto Rico’s report:

“The Task Force has put forth a robust set of recommendations for Puerto Rico that, if enacted, would represent powerful change for those that call the island home. In doing so, the Task Force has bridged many divides and has come together in a bipartisan manner for the good of Puerto Ricans. In this regard, I want to thank Chairman Hatch for his leadership and recognize all of the Members for their hard work and input in crafting this report. However, make no mistake, much work needs to be done to turn these ideas into law.

“The most critical recommendations in this report regard funding for the island’s health care system, which is severely stressed. The report calls for Congress to enact legislation to address Puerto Rico’s Medicaid crisis and to stabilize its Medicare program, including Medicare Advantage, which accounts for 50 percent of all health care dollars on the island.

“I am proud that the report also calls for an expansion of the child tax credit. It is projected that this change could channel nearly $3 billion to the island’s economy over the next ten years, helping more than 400,000 children.

“I was also pleased by the inclusion of a number of small business provisions I authored, which will provide a path for the island to embrace entrepreneurship and create greater opportunity for those who live there. One such provision would increase the availability of small business loans on the island, while reducing their cost to borrowers. Additionally, the report calls for a local contracting preference for Puerto Rican businesses. This would help reverse the trend that sees prime federal contracts awarded to firms located on the mainland, only to see the island’s firms hired as subcontractors. Together, increasing the flow of capital and contracts to the island has real promise to create economic growth and the jobs the island needs.

“Finally, the Task Force also agreed on the importance of accelerating the restoration of Caño Martín Peña. Doing so will not only improve the economy, but it will help protect our environment and the public health. We have a moral obligation to ensure this distressed area is not left behind.

“Now that the Congressional Task Force has acted, it is incumbent on the new Congress to begin enacting recommendations quickly. Puerto Ricans have suffered for far too long and I will be working with my colleagues to see these measures passed into law.”

A summary of the Task Force’s recommendations prepared by the offices of Reps. Velázquez and Pierluisi (D-PR) is below.

The full report is available online here.

Summary of Puerto Rico Task Force Report Key Recommendations

Health Care

Medicaid
• The TF recommends that Congress enact fiscally-responsible legislation to address the impending Medicaid cliff. The TF recommends that Congress begin to address the funding issue early in 2017 to enable PR’s Medicaid agency—ASES—to engage with more certainty when signing contracts with its Medicaid managed care organizations for PR Fiscal Year 2017-2018. The TF recommends that, going forward, federal financing of the Medicaid programs in PR should be more closely tied to the size and needs of its low-income population. The TF recommends that any additional federal Medicaid funding provided to PR be paired with appropriate oversight of and safeguards on PR’s Medicaid program through use of the Medicaid Fraud Control Unit (MFCU) and Medicaid Management Information System (MMIS) mechanisms.

Medicare
• The TF recommends various steps to improve PR’s treatment under Medicare Part A (hospital services), Part B (physician services), Part C (Medicare Advantage), and Part D (prescription drug coverage).

o On Part A, the TF recommends that Congress consider providing increased flexibility to the U.S. Department of Health and Human Services (HHS) to ensure that island hospitals are being fairly compensated under a federal program that provides extra payments to hospitals that treat a large percentage of low-income and other vulnerable patients.

o On Part B, the TF recommends that Congress amend federal law so that Medicare beneficiaries in PR are automatically enrolled in Medicare Part B with the option to opt out of coverage, the same way their counterparts in every state and other territory are treated. Thousands of island seniors are paying lifetime late penalties as a result of PR’s disparate treatment in current law.

o On Part C, the TF notes that 75 percent of Medicare beneficiaries in PR are enrolled in a Medicare Advantage plan, the highest penetration rate in the nation. The TF recommends that Congress and the Centers for Medicare and Medicaid Services (CMS) consider whether additional legislative or administrative steps may be warranted to ensure that MA plans in PR are being fairly and properly compensated for the services they provide to beneficiaries.

o On Part D, Medicare beneficiaries in the states with incomes at or below 150 percent of the federal poverty level are eligible to receive a low-income subsidy (LIS) from the federal government, which eliminates or reduces their monthly premium and other costs related to prescription drug coverage. Low-income seniors in PR are not eligible for the LIS. Instead, PR receives a relatively small annual block grant, under the enhanced allotment program (EAP), which it can use to help low-income seniors afford prescription drugs. PR must pay 45 cents in order to draw down 55 cents of EAP funding. Because of PR’s difficult fiscal condition, it has recently been unable to access about half of its $50 million in annual EAP funding. The TF recommends that Congress eliminate the matching requirement for PR and that Congress consider increasing the annual EAP allotment by a reasonable amount and in a fiscally responsible manner, so that the allotment is more closely tethered to actual need in PR. In addition, the TF recommends that Congress explore the feasibility and cost of extending LIS to residents of PR and eliminating the EAP program.

o The TF recommends that Congress consider giving CMS the authority to make adjustments to any formula providing for payments to physicians, hospitals or health plans in PR, where the formula is dependent in whole or in part on data that are unavailable or unreliable for PR, or dependent on factors that are inapplicable to PR.

Family-to-Family Health Information Center Grant Program
• F2F centers are non-profit organizations operated by families with children with special health care needs. They help other families of children with special health care needs navigate the health care system. The TF recommends that Congress consider amending the law authorizing the program to enable PR to receive funding for a center.

Maternal, Infant, and Early Childhood Home Visiting Program
• This program supports home visiting services for families with young children who reside in communities that have concentrations of poor child health. Home visits are conducted by nurses, mental health clinicians, social workers, and others with specialized training. The funding formula established by HRSA is based in part on the relative share of children under age five in families at or below 100 percent of the federal poverty line living in each state and territory. However, the poverty data are derived from the U.S. Census Bureau’s Small Area Income Poverty Estimates, which are not available for the territories, resulting in allocations to PR that are insufficient. The TF recommends that HRSA utilize an appropriate alternative source for child poverty data, such as the PR Community Survey, when making allocations to PR.

Federal Tax Policy
• The TF recommends that Congress amend IRC Section 24 to authorize otherwise eligible families in PR with one or two children to claim the additional child tax credit, providing them with the same treatment that is currently provided to island families with three or more children. It has been estimated that this proposal could inject $2.9 billion into PR’s economy over the next decade, benefitting about 355,000 families and 404,000 children, with an average annual household payment of $770.

• The TF does not intend to foreclose debate on whether further modifications to federal tax policy toward individuals and families in PR may be appropriate. Potential options for examination include: (1) authorizing PR families to claim the additional child tax credit without any limitation; (2) extending the earned income tax credit to eligible PR households, and (3) providing federal wage subsidies to employees and employers in PR.

• The TF recommends that Congress make the full amount of the rum cover-over payment to PR permanent, rather than permanent in part and subject to periodic extension by Congress in part. The TF recommends that Congress increase the cover-over payment from the current rate of $13.25 per proof gallon to the generally applicable distilled spirits rate, currently $13.50 per proof gallon.

• The TF recommends that Congress amend the Internal Revenue Code Section 199 domestic production activities deduction so that it applies to PR on a permanent basis. This deduction reduces federal taxes for U.S. companies that operate in PR in branch form.

• The TF recommends that Congress amend Internal Revenue Code Section 181 so that film and television producers can receive the same tax benefit for filming in PR that they receive for filming in the 50 states.

• The TF believes that PR is too often relegated to an afterthought in congressional deliberations over federal business tax reform legislation. The TF recommends that Congress make PR integral to any future deliberations over tax reform legislation.

• The TF recommends that Congress continue to be mindful of the fact that PR is a U.S. jurisdiction, home to U.S. citizens, and that jobs in PR are American jobs.

• The Task Force is open to the prospect of Congress providing U.S. companies that invest in Puerto Rico with more competitive tax treatment as long as appropriate guardrails are designed to ensure the company is creating real economic activity and employment on the island.

SSI/AABD
• The SSI program provides monthly benefits directly to low-income aged, blind, or disabled persons in the 50 states, DC, and the Northern Mariana Islands. PR participates in a federal program called AABD, which is administered by ACF within HHS. The TF believes that it is important for Congress to debate the adequacy of the AABD program in PR. The TF reviewed the historical record and was unable to identify a hearing conducted in Congress on this issue. The TF recommends that Congress examine the costs and benefits of: (1) including PR in the SSI program with full benefits; (2) including PR in the SSI program with reduced benefits; (3) increasing the annual AABD grant provided to PR; (4) indexing the AABD and TANF caps to inflation; or (5) maintaining current law.

Support for Small Businesses
• The TF recommends that Congress take a number of actions to improve PR’s treatment under programs administered by the Small Business Administration (SBA). Among the recommendations are to:

o temporarily increase the percentage of a small business loan that SBA guarantees in PR,

o temporarily eliminate or reduce fees that firms in PR must pay to receive an SBA-approved loan,

o consider providing PR with a contracting preference to address the fact that about 60 percent of (the relatively few) federal contracts performed in PR are awarded to firms located outside of PR, and

o authorize SBA to make loans available to help small firms in a state or territory recover from any substantial economic injuries they have experienced as a result of health-related travel advisories, such as those issued by the CDC in connection with Zika.

Energy
• The TF recommends that the government of PR continue efforts to make operational reforms at PREPA, improve the efficiency of electricity generation and transmission, and diversify PR’s energy supply—with the ultimate goal of making electric power more reliable and affordable.

• The TF recommends that PREPA and the PR Energy Commission seek technical assistance from USDOE, and recommends that USDOE provide all authorized forms of technical and financial assistance.

• A federal law requires the U.S. Department of Energy to appoint a team of technical, policy and financial experts to develop an “energy action plan” for PR. The TF recommends that USDOE appoint a team of experts as soon as practicable, that the team prepare and publish the plan in a timely manner, and that USDOE annually update Congress on the efforts that PR has made to implement the plan.

• The TF recommends that USDOE assess whether PR receives equitable treatment relative to other jurisdictions under grant programs for energy-related research and, if it does not, recommends that USDOE resolve any inequities.

Former Naval Station Roosevelt Roads
• The TF recommends that the government of PR, in conjunction with the Revitalization Coordinator established in PROMESA, elected leaders of the surrounding communities, federal government partners, and the private sector, prioritize the redevelopment of the NSRR. The TF recommends that the LRA responsible for overseeing the redevelopment effort develop a sensible and sustained strategy.

Caño Martín Peña (Martín Peña Channel)
• The TF believes that the project to restore CMP can provide a significant return on investment for the federal government in terms of improving the economy, protecting public health, and restoring the natural environment in some of PR’s most distressed communities. The TF recommends that the U.S. Army Corps of Engineers and the non-federal sponsor (ENLACE) finalize the Project Partnership Agreement for the project as soon as feasible; that Congress consider appropriating funding to construct this project; and that Congress consider relaxing the cost-sharing obligations of the non-federal sponsor or otherwise taking steps to ensure that the government of PR’s fiscal crisis does not result in progress on this project being halted.

Arecibo Observatory
• The TF recognizes that the Arecibo Observatory is vital to PR in a variety of ways, and believes that science-focused and education-focused operations should be continued at the site. The TF recommends that the National Science Foundation, in collaboration with other government and non-government stakeholders, take all feasible steps to achieve this result.

Municipal Solid Waste Landfills
• The TF is concerned with the state of PR’s municipal solid waste landfills, and the potential impact on public health and the environment. The TF recommends that Congress examine this issue to determine whether there are additional steps that should be taken.

U.S. Department of Commerce

Bureau of Economic Analysis
• The TF recommends that BEA calculate Gross Domestic Product (GDP) for PR, just as BEA does for every other U.S. state and territory. The TF recommends that the federal government fund this effort. The TF believes that BEA’s longer-term objective should be to include PR in BEA’s national-level GDP estimates.

International Trade Administration
• The TF recommends that ITA take all reasonable steps to educate stakeholders in PR about the multiple services that ITA provides to increase foreign direct investment, exports, and travel and tourism by foreign nationals, including by holding educational or technical assistance events in PR.

• The TF recommends that the government of PR consider whether the benefits of operating its own trade offices in other nations outweigh the costs, particularly if these benefits can be realized by tapping into existing ITA resources and expertise.

• The TF recommends that the government of PR publish annual statistics about foreign direct investment on the island, disaggregating the data so that investment from the U.S. mainland and investment from foreign nations are tabulated separately.

• The U.S. Travel and Tourism Advisory Board advises the Secretary of Commerce on matters relating to the travel and tourism industry in the U.S.. The TF recommends that the Secretary take reasonable steps to appoint at least one member who has special expertise on tourism in PR.

• The TF recommends that the private operator of the San Juan international airport, the PR Ports Authority, and the PR Tourism Company work with ITA with the goal of authorizing the Survey of International Air Travelers to be conducted at the airport, to help PR develop a strategy to attract visitors from foreign nations.

Economic Development Administration
• The TF recommends that a PR-based Economic Development Representative (an EDA employee) begin work as soon as possible, providing technical assistance and identifying projects on the island that may be suitable for EDA support. The goal should be to ensure that the quantity of EDA grants to PR-based applicants more closely corresponds with the size of PR’s population and the scale of its economic development needs.

• PR, with technical assistance from EDA, is preparing its 2017 Comprehensive Economic Development Strategy (CEDS). The TF recommends that the CEDS Committee obtain input from stakeholders in private and non-profit sectors. The TF recommends that that Committee, once the CEDS has been approved by EDA, make the CEDS available on-line and otherwise publicize the CEDS to stakeholders on the island, in the U.S. mainland, and abroad.

• Over 80 percent of the food consumed in PR is transported to the island from the U.S. mainland and foreign countries, and an extended disruption in maritime trade could result in PR’s supply of food being exhausted within a matter of weeks. The TF recommends that stakeholders explore the possibility of conducting an EDA-funded study aimed at increasing food security and self-sufficiency in PR, as was done in Hawaii.

Electronic Export Information
• The TF recommends that the U.S. Department of Commerce conduct a thorough evaluation of its regulations requiring Electronic Export Information (EEI) filings for shipments between the states and PR.

U.S. Department of the Treasury
• The TF recommends various steps designed to enable PR-based entities to better compete for competitive funding under multiple programs administered by the Community Development Financial Institutions (CDFI) Fund, including the New Markets Tax Credit program. For example, the director of the CDFI Fund is advised by a 15-member Community Development Advisory Board. The TF recommends that the CDFI Fund make efforts to appoint an individual to the Board with personal experience and specialized expertise in the unique lending and community development issues facing PR.

• The TF recommends that Congress continue to authorize the Treasury Department to provide technical assistance to the government of PR, in order to help it stabilize and strengthen its financial management and tax collection systems.

Investor Protection
• The TF recommends that Congress pass the U.S. Territories Investor Protection Act of 2016, which would, after a period of time, terminate the current exemption from the Investment Company Act of 1940 for investment companies located in PR.

Federal Statistical Programs
• The TF recommends that federal statistical agencies take all reasonable steps to include PR in its statistical programs.

Federal Interagency Advisory Council on Child Poverty
• As proposed by the Boys and Girls Clubs of PR and the Youth Development Institute (Instituto de Desarrollo de la Juventud), the TF recommends that the federal government consider establishing an advisory council to report to Congress on ways to address persistent child poverty in the United States, including its territories.

Public Safety
• The TF recommends that Congress continue to exercise oversight authority to ensure that federal agencies are working in coordination with each another, and with local law enforcement officials, to reduce drug trafficking and associated violence in PR and the USVI.

• The TF recommends that Congress make permanent the requirement that ONDCP publish a Caribbean Border Counternarcotics Strategy.

PR’s Political Status
• If the government of PR conducts a plebiscite authorized and funded by Public Law 113-76, the TF recommends that Congress analyze the result of this plebiscite with care and seriousness of purpose, and take any appropriate legislative action.

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