[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]



 
        PROMESA IMPLEMENTATION DURING THE CORONAVIRUS PANDEMIC

=======================================================================

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             SECOND SESSION

                               __________

                        Thursday, June 11, 2020

                               __________

                           Serial No. 116-35

                               __________

       Printed for the use of the Committee on Natural Resources
       
       
       
       
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                           ______                      


               U.S. GOVERNMENT PUBLISHING OFFICE 
 40-637 PDF              WASHINGTON : 2020           
          
          
          
          
                     COMMITTEE ON NATURAL RESOURCES

                      RAUL M. GRIJALVA, AZ, Chair
                    DEBRA A. HAALAND, NM, Vice Chair
   GREGORIO KILILI CAMACHO SABLAN, CNMI, Vice Chair, Insular Affairs
               ROB BISHOP, UT, Ranking Republican Member

Grace F. Napolitano, CA              Don Young, AK
Jim Costa, CA                        Louie Gohmert, TX
Gregorio Kilili Camacho Sablan,      Doug Lamborn, CO
    CNMI                             Robert J. Wittman, VA
Jared Huffman, CA                    Tom McClintock, CA
Alan S. Lowenthal, CA                Paul A. Gosar, AZ
Ruben Gallego, AZ                    Paul Cook, CA
TJ Cox, CA                           Bruce Westerman, AR
Joe Neguse, CO                       Garret Graves, LA
Mike Levin, CA                       Jody B. Hice, GA
Debra A. Haaland, NM                 Aumua Amata Coleman Radewagen, AS
Joe Cunningham, SC                   Daniel Webster, FL
Nydia M. Velazquez, NY               Liz Cheney, WY
Diana DeGette, CO                    Mike Johnson, LA
Wm. Lacy Clay, MO                    Jenniffer Gonzalez-Colon, PR
Debbie Dingell, MI                   John R. Curtis, UT
Anthony G. Brown, MD                 Kevin Hern, OK
A. Donald McEachin, VA               Russ Fulcher, ID
Darren Soto, FL
Ed Case, HI
Steven Horsford, NV
Michael F. Q. San Nicolas, GU
Matt Cartwright, PA
Paul Tonko, NY
Jesus G. ``Chuy'' Garcia, IL
Vacancy

                     David Watkins, Chief of Staff
                        Sarah Lim, Chief Counsel
                Parish Braden, Republican Staff Director
                   http://naturalresources.house.gov
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, June 11, 2020..........................     1

Statement of Members:

    Gonzalez-Colon, Hon. Jenniffer, a Resident Commissioner in 
      Congress from the Territory of Puerto Rico.................     3
        Prepared statement of....................................     4
    Grijalva, Hon. Raul M., a Representative in Congress from the 
      State of Arizona...........................................     2

Statement of Witnesses:

    Jaresko, Natalie, Executive Director, Financial Oversight and 
      Management Board for Puerto Rico...........................     9
        Prepared statement of....................................    12
        Supplemental testimony submitted for the record..........    22
        Questions submitted for the record.......................    27

    Marrero, Omar, Executive Director, Puerto Rico Fiscal Agency 
      and Financial Advisory Authority...........................    49
        Prepared statement of....................................    51
        Questions submitted for the record.......................    58

Additional Materials Submitted for the Record:

    Hispanic Federation, Letter dated June 15, 2020 to Chair 
      Grijalva...................................................   101
                                     



  OVERSIGHT HEARING ON PROMESA IMPLEMENTATION DURING THE CORONAVIRUS 
                                PANDEMIC

                              ----------                              


                        Thursday, June 11, 2020

                     U.S. House of Representatives

                     Committee on Natural Resources

                             Washington, DC

                              ----------                              

    The Committee met, pursuant to notice, at 3:31 p.m., via 
Webex, Hon. Raul M. Grijalva (Chairman of the Committee) 
presiding.

    Present: Representatives Grijalva, Napolitano, Sablan, 
Huffman, Lowenthal, Gallego, Cox, Haaland, Cunningham, 
Velazquez, DeGette, Soto, San Nicolas, Cartwright, Tonko, 
Garcia; Bishop, Gohmert, McClintock, Gosar, Westerman, Graves, 
Hice, Radewagen, Webster, Gonzalez-Colon, and Hern.

    The Chairman. Thank you very much. The Committee on Natural 
Resources will come to order. The Committee is meeting today to 
hear testimony on PROMESA Implementation During the Coronavirus 
Pandemic.
    Under Committee Rule 4(f), any oral opening statements at 
this hearing are limited to the Chair and the Ranking Minority 
Member or their designee. This will allow us to hear from our 
witnesses sooner and help Members keep to their schedules.
    Therefore, I ask unanimous consent that all other Members' 
opening statements be made part of the hearing record if they 
are submitted to the Clerk by 5 p.m. today or at the close of 
the hearing, whichever comes first.
    Hearing no objection, so ordered.
    Without objection, the Chair may also declare a recess 
subject to the call of the Chair. As described in the notice, 
statements, documents, or motions must be submitted to the 
electronic repository at [email protected]. Additionally, 
please note that, as in-person meetings, Members are 
responsible for their microphones and Members can be muted by 
staff only to avoid inadvertent background noise.
    Finally, Members or witnesses who experience technical 
problems should inform Committee staff immediately. At this 
point, I will read my opening statement. Then I will recognize 
the designee for the Ranking Member for her opening statement.
    I want to thank my colleagues for taking time to join us in 
this remote Natural Resources Committee oversight hearing on 
how the coronavirus pandemic is impacting the implementation of 
the Puerto Rico Oversight Management and Economic Stability 
Act, also known as PROMESA. I want to welcome our witnesses, 
Ms. Natalie Jaresko, Executive Director of PROMESA Financial 
Oversight and Management Board, and Mr. Omar Marrero, 
representing the Governor of Puerto Rico. Thank you so much, 
both of you, for joining us.

  STATEMENT OF THE HON. RAUL M. GRIJALVA, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF ARIZONA

    The Chairman. Some could say that the people of Puerto Rico 
can't seem to catch a break. First the island's residents had 
to deal with a debt burden that their governor declared in 2015 
could not be repaid, which led to the enactment of PROMESA in 
2016 and the imposition of the Oversight Board. While PROMESA 
was designed to allow the island to restructure its debts, many 
Puerto Ricans view it and the Oversight Board as an 
undemocratic colonial takeover of the island's government.
    In 2017, Puerto Rico was hit not by one but two Category 5 
hurricanes. Hurricanes Irma and Maria devastated the island, 
leaving billions of dollars in damage and island-wide loss of 
electricity lasting months and nearly 4,000 deaths.
    Then in 2019 and 2020, as the residents of the island were 
recovering from the hurricanes, they were hit with a series of 
earthquakes that caused widespread damage in the south of the 
island. And they are still experiencing aftershocks even as we 
speak today. Puerto Ricans and the government of Puerto Rico 
have been recovering from these natural disasters without 
adequate Federal assistance, since the Trump administration has 
delayed the disbursements and opposed that the appropriation of 
much-needed disaster relief aid to Puerto Rico was included.
    Finally, if that devastation was not enough, the island, 
like the rest of the planet, was hit with COVID-19 pandemic, 
which put a significant strain on the island's already fragile 
healthcare infrastructure and public services. Moreover, the 
coronavirus pandemic is projected to severely affect Puerto 
Rico's financial and economic recovery for years to come.
    Puerto Rico is in an extremely vulnerable financial and 
economic position. It is against this backdrop that we 
scheduled today's hearing to better understand how the 
government of Puerto Rico has been responding to the COVID-19 
outbreak.
    We also expect to discuss the recently certified 2020 
Fiscal Plan and discuss strategies to reduce the island's debt 
burden, what plans are there to grow the economy and create new 
jobs, how to provide clean, affordable, and reliable 
electricity and an efficient public sector. It is also 
important for us to hear which of the oversight and government 
of Puerto Rico's policy and budget priorities will include the 
quality of life for the residents of the island.
    Has having to function under the supervision of the 
Oversight Board led to delays and other complications in the 
Puerto Rican government's response to the pandemic? It is a 
question. Were issues involving contracting and not being able 
to acquire sufficient coronavirus testing equipment the result 
of having to jump through too many hoops imposed by the Board, 
or were these simply the result of poor performance on the part 
of the central government? Question. I firmly believe that we 
will receive answers to these and other questions from the 
witnesses today. We cannot condemn the people of Puerto Rico in 
the wake of a debt crisis, devastating storms, earthquakes to 
an inadequate response to the coronavirus pandemic because they 
are ruled by an oversight board.
    And now it is my pleasure to yield to the Ranking Member 
designee, the Resident Commissioner of Puerto Rico, Ms. 
Gonzalez-Colon.
    Madam Commissioner, the time is yours.

  STATEMENT OF THE HON. JENNIFFER GONZALEZ-COLON, A RESIDENT 
   COMMISSIONER IN CONGRESS FROM THE TERRITORY OF PUERTO RICO

    Miss Gonzalez-Colon. Thank you, Chairman. I am the Ranking 
Member for the Republicans for this Committee, so it is not 
just, obviously, me for today. Puerto Rico today shares with 
many other parts of the Nation the challenge of facing COVID-
19. In our case, we have added complications and limitations: 
(1) First, rebuilding from the 2017 hurricanes; (2) this year's 
earthquakes; and (3) PROMESA's debt restructuring and other 
fiscal challenges.
    The way Puerto Rico accesses and uses all its resources, 
both emergency as well as regular obligations, everything is 
controlled by PROMESA. Congress imposed PROMESA even though 
many, like me, were opposed. Many of the Members who voted for 
it in 2016 are still in the Committee. After different legal 
challenges ever since, it is here and it is what we have to 
build with.
    That is why I think we need to focus on what the people I 
represent expect from Congress, Federal agencies, and local 
government: (1) First, that the many tens of billions of 
dollars in Federal aid that we have secured in Congress, 
including those recently passed in response to the pandemic, 
but also those passed over the last 3 years for disaster 
recovery, are disbursed and finally reach those in need; (2) 
how to get rid of the unnecessary red tape and bureaucracy in 
the disbursement of these funds; (3) concrete proposals to 
create a government and business environment favorable to 
growing our economy, creating well-paying jobs, and reducing 
poverty levels on the island; (4) a true picture of the 
management of both locally raised and federally allocated 
funds; (5) how the pandemic has affected the plans for the 
territory's budget, public services and economy; and (6) last 
but also of course not least, the efforts to improve Puerto 
Rico's less than equal treatment in Federal programs.
    We should work in a bipartisan way and a pragmatic manner 
to help Puerto Rico. Some people should resist the temptation 
to cater to those who would rather use the island as a 
political talking point, a weapon against an opponent or a 
platform for impractical solutions that would never happen. We 
must focus on proposals and legislation that could pass and get 
enacted into law, such as the bipartisan Puerto Rico Recovery 
Accuracy in Disclosures Act, which addresses the need for 
increased transparency in PROMESA proceedings and between those 
employed by the Oversight Board, among others.
    Let's become informed about what is happening on the 
ground, on what challenges are pressing upon Puerto Rico's 
fiscal resources so we can address them in a bipartisan way, in 
a bicameral manner, and with the input from the people of 
Puerto Rico. Targeting supposed villains and announcing utopian 
proposals may get us good retweets and engagement on social 
media but won't help the people of Puerto Rico. The people that 
I am honored to represent in Congress do not have the luxury of 
those political gains.
    I must point out that in June of this year, the Supreme 
Court of the United States validated an appointment process of 
the Oversight Board, reaffirming that we are a possession, a 
colony of the United States, without any political power. And 
as long as this is the case, we will continue to be treated as 
a second-class state. The citizens I represent will only be 
able to have equal treatment and opportunity by becoming a 
state. Today, actually, 65 percent of all Puerto Ricans are 
living in a state. And Puerto Rico is obtaining that equality 
individual by individual, family by family.
    The island can never really prosper without equality and 
democracy within the United States. This is the fundamental 
problem ignored by Congress, ignored by PROMESA, with the 
exception of its recognition that the people of the territory 
have the right to determine its future political status 
otherwise.
    That is the reason we are here today in this hearing, and I 
look forward for the testimony and questions of our witnesses, 
and saying that with me today are Representative McClintock and 
Representative Westerman. The three of us are here in 
Washington in the Natural Resources Committee. With that, I 
yield back.

    [The prepared statement of Miss Gonzalez-Colon follows:]
      Prepared Statement of the Hon. Jenniffer Gonzalez-Colon, a 
      Representative in Congress from the Territory of Puerto Rico
    Thank you, Mr. Chairman.

    Puerto Rico today shares with many other parts of the Nation the 
challenge of facing CoVid-19. But, in our case, we have added 
complications and limitations: (1) Rebuilding from the 2017 hurricanes, 
(2) this year's earthquakes, and (3) PROMESA's debt restructuring and 
other fiscal challenges.
    The way Puerto Rico accesses and uses ALL its resources, both 
emergency as well as regular obligations, is controlled by PROMESA. 
Congress imposed PROMESA even though many like me were opposed. Many of 
the members that voted for it in 2016 are still here. After different 
legal challenges ever since, it's here and it is what we have to deal 
with.

    That is why we need to focus on what the people I represent expect 
from their Federal and local governments:

  1.  First, that the many tens of billions in Federal aid we've 
            secured in Congress, including those recently passed in 
            response to the pandemic, but also those passed over the 
            last 3 years for disaster recovery, are disbursed and 
            finally reach those in need;

  2.  Second, how we get rid of unnecessary red tape and bureaucracy in 
            the disbursement of these funds;

  3.  Third, concrete proposals to create a government and business 
            environment favorable to growing our economy, creating 
            well-paying jobs, and reducing poverty levels on the 
            Island;

  4.  Fourth, a true picture of the management of both locally raised 
            and federally allocated funds.

  5.  Fifth, how the pandemic has affected the plans for the 
            territory's budget, public services, and economy; and

  6.  Last but not least, efforts to improve Puerto Rico's less than 
            equal treatment in Federal programs.

    We should work in a bipartisan and pragmatic manner, to help Puerto 
Rico.

    Some people should resist the temptation to cater to those who 
would rather use the Island as a political talking point, a weapon 
against an opponent or a platform for impractical solutions that will 
never happen; we must focus on proposals and legislation that could 
pass and get enacted into law--such as the bipartisan Puerto Rico 
Recovery Accuracy in Disclosures Act, which addresses the need for 
increased transparency in PROMESA proceedings and between those 
employed by the Oversight Board, among others.
    Let's become informed about what is happening on the ground, on 
what challenges are pressing upon Puerto Rico's fiscal resources, so we 
can address them in a bipartisan, bicameral manner and with input from 
the people of Puerto Rico. Targeting supposed villains or announcing 
utopian proposals may get us good retweets and engagement on social 
media but won't help the people of Puerto Rico. The people that I am 
honored to represent do not have the luxury of these political games.
    I must point out that, on June 1, the Supreme Court validated the 
appointment process for the Oversight Board, reaffirming that we are a 
``possession'', a colony without political power. As long as this is 
the case, we will continue to be treated as a second-class state and 
the citizens I represent will only be able to obtain equal treatment 
and opportunity by becoming a State. Today, 65 percent of all Puerto 
Rican now live in a State. Puerto Rico is obtaining equality individual 
by individual and family by family. The Island can never really prosper 
without equality and democracy within the United States. This is the 
fundamental problem ignored by Congress and PROMESA, with the exception 
of its recognition that the people of the territory have the right to 
determine its future political status otherwise.

    I look forward to the testimony and questioning of our witnesses.

                                 ______
                                 

    Dr. Gosar. Mr. Chairman, this is Gosar.
    The Chairman. Thank you, Mr. Gosar. The gentleman seeks 
recognition for what purpose, Mr. Gosar?
    Dr. Gosar. I have filed a motion to adjourn, and I move 
that we adjourn this Committee.
    The Chairman. The gentleman is recognized, and the Clerk 
has confirmed that that motion has been circulated to the 
Members?
    Ms. Locke. We will be circulating shortly.
    The Chairman. If we could pause for a second to allow 
Members to have that motion, it is important for the record and 
it is important for what follows----
    [Pause.]
    The Chairman. We are presently waiting for confirmation 
from the Clerk and Counsel assuring that the motion has been 
circulated as per the rules for online as adopted by the House 
of Representatives. And as soon as we do that, then we will 
turn to Mr. Gosar to reaffirm his motion and any comments he 
might have at that point. So, we are waiting.
    [Pause.]
    Ms. Locke. The motion should have been distributed via e-
mail.
    The Chairman. Thank you, and the motion to adjourn is not 
debatable. The gentleman from Arizona, Mr. Gosar, has motioned, 
and the motion has been circulated and confirmed by the Clerk 
and Counsel. Move that the Committee do now adjourn. The 
question is on the gentleman from Arizona's motion, Mr. Gosar.
    All those in favor, indicate by saying aye. All those 
opposed, say no. In the opinion of the Chair, the noes have it. 
The motion is not----
    Dr. Gosar. I ask for a recorded vote.
    The Chairman. A recorded vote has been requested on the 
question on the motion to adjourn this hearing. The Clerk shall 
call the roll.
    Ms. Locke. Mr. Grijalva?
    The Chairman. No.
    Ms. Locke. Mr. Grijalva votes no.
    Mr. Bishop?
    Mrs. Napolitano?
    Mr. Young?
    Mr. Costa?
    Mr. Gohmert?
    Mr. Sablan?
    Mr. Lamborn?
    Mr. Huffman?
    Mr. Huffman. No.
    Ms. Locke. Mr. Huffman votes no.
    Mr. Wittman?
    Mr. Lowenthal?
    Mr. McClintock?
    Mr. McClintock. Aye.
    Ms. Locke. Mr. McClintock votes aye.
    Mr. Gallego?
    Mr. Gosar?
    Dr. Gosar. Aye.
    Ms. Locke. Mr. Gosar votes aye.
    Mr. Cox?
    Mr. Cox. No.
    Ms. Locke. Mr. Cox votes no.
    Mr. Cook?
    Mr. Neguse?
    Mr. Westerman?
    Mr. Levin?
    Mr. Graves?
    Ms. Haaland?
    Ms. Haaland. No.
    Ms. Locke. Ms. Haaland votes no.
    Mr. Hice?
    Mr. Cunningham?
    Mrs. Radewagen?
    Ms. Velazquez?
    Mr. Webster?
    Ms. DeGette?
    Ms. DeGette. No.
    Ms. Locke. Ms. DeGette votes no.
    Ms. Cheney?
    Mr. Clay?
    Mr. Johnson?
    Mrs. Dingell?
    Miss Gonzalez-Colon?
    Miss Gonzalez-Colon. Aye.
    Ms. Locke. Ms. Gonzalez-Colon votes aye.
    Mr. Brown?
    Mr. Curtis?
    Mr. McEachin?
    Mr. Hern?
    Mr. Hern. Aye.
    Ms. Locke. Mr. Hern votes aye.
    Mr. Soto?
    Mr. Fulcher?
    Mr. Case?
    Mr. Horsford?
    Mr. San Nicolas?
    Mr. Cartwright?
    Mr. Cartwright. No.
    Ms. Locke. Mr. Cartwright votes no.
    Mr. Tonko?
    Mr. Garcia?
    The Chairman. If the Clerk will read the names of any 
Members that are not recorded.
    Ms. Locke. Mr. Bishop?
    Mrs. Napolitano?
    Mr. Young?
    Mr. Costa?
    Mr. Gohmert?
    Mr. Sablan?
    Ms. DeGette. I believe Mr. Sablan needs to unmute.
    Ms. Locke. Mr. Sablan, your----
    Mr. Sablan. Sablan is present. Hello?
    Ms. Locke. How do you vote, Mr. Sablan?
    Mr. Sablan. No.
    Ms. Locke. Mr. Sablan votes no.
    Mr. Lamborn?
    Mr. Wittman?
    Mr. Lowenthal?
    Mr. Gallego?
    Mr. Cook?
    Mr. Neguse?
    Mr. Westerman? Mr. Westerman, how do you vote?
    Mr. McClintock. He has voted aye. A point of order, Mr. 
Chairman. Mr. Westerman has repeatedly tried to vote. I am 
witness to it right here in the hearing room, and you are not 
recording it.
    The Chairman. Mr. Westerman would you indicate your vote?
    Mr. Westerman. I vote aye.
    Ms. Locke. Mr. Westerman votes aye.
    The Chairman. Thank you.
    Ms. Locke. Mr. Levin?
    Mr. Graves?
    Mr. Hice?
    Mr. Cunningham?
    Mrs. Radewagen?
    Ms. Velazquez? Ms. Velazquez, your mute button is on. Ms. 
Velazquez, how do you vote?
    Ms. Velazquez. Yes.
    Ms. Locke. Ms. Velazquez votes aye.
    Mr. Webster?
    Ms. Cheney?
    Mr. Clay?
    Mr. Johnson?
    Mrs. Dingell?
    Mr. Brown?
    Mr. Curtis?
    Mr. McEachin?
    Mr. Soto?
    Mr. Fulcher?
    Mr. Case?
    Mr. Horsford?
    Mr. San Nicolas?
    Mr. Tonko?
    Mr. Garcia?
    The Chairman. Yes. Are all----
    Miss Gonzalez-Colon. Mr. Chairman?
    The Chairman. Yes?
    Miss Gonzalez-Colon. Point of order. Amata Radewagen is 
connected, and she is saying that she is voting aye but it is 
not recorded.
    Ms. Locke. I do not visually see Mrs. Radewagen.
    The Chairman. If she would just indicate that she was 
voting aye, according to the rules, that is sufficient. Where 
is she?
    Ms. Velazquez. Is she connected? She has to be connected 
either by phone or by video.
    Ms. Locke. I don't have an audio or a video.
    Miss Gonzalez-Colon. Mr. Chairman, she was connected, but 
now it looks like she is disconnected.
    The Chairman. The situation, Miss Gonzalez-Colon, is that 
we need to verify that. It can be by hand signal, yes, thumbs 
up, or it can be verbally, but the requirement that it be, at 
the minimum, that visual confirmation. We don't have that at 
this point.
    Mrs. Radewagen. Hello. This is Amata Radewagen.
    The Chairman. Yes.
    Mrs. Radewagen. Can you hear me?
    The Chairman. Yes.
    Mrs. Radewagen. Yes.
    Ms. Locke. Yes.
    The Chairman. Ms. Radewagen votes yes.
    Ms. Locke. Ms. Radewagen votes yes.
    The Chairman. Are there any Members who wish to vote that 
have not voted or other Members who wish to change their vote? 
Hearing no request for recognition, let me now turn to the 
Clerk, and the Clerk will report the vote.
    Ms. Locke. Mr. Chair, on this vote, the yeas are seven and 
nays are seven.
    Ms. Velazquez. Mr. Chairman? Mr. Chairman?
    The Chairman. Ms. Velazquez, you are recognized.
    Ms. Velazquez. Did I make a mistake?
    The Chairman. Ms. Velazquez's vote was what, Clerk?
    Ms. Locke. Ms. Velazquez's vote was a yea.
    Ms. Velazquez. And that was supposed to be yes.
    Ms. Locke. Correct.
    The Chairman. And the Clerk will report.
    Ms. Locke. Mr. Chair, on this vote, they yeas are seven and 
the nays are seven.
    Mr. Sablan. Point of inquiry. This is Sablan.
    The Chairman. Mr. Sablan?
    Mr. Sablan. Yes. Is my vote consistent with the Chairman's 
vote?
    The Chairman. Yes, the Chair voted no so that the hearing 
could proceed.
    Ms. Velazquez. Mr. Chairman?
    The Chairman. Yes?
    Ms. Velazquez. This is Ms. Velazquez.
    The Chairman. Thank you, Ms. Velazquez.
    Ms. Velazquez. I am supposed to vote no, and I want to 
clarify that.
    The Chairman. Ms. Velazquez is recognized, and she has 
changed her vote to a no vote. Clerk will report.
    Ms. Locke. Mr. Chair, on this vote, the yeas are six and 
the nays are eight.
    The Chairman. The nays have it. The motion fails, and I 
will now introduce our witnesses. Let me remind the witnesses 
that under our Committee Rules, they must limit their oral 
statements to 5 minutes, but their entire statement will appear 
in the hearing record. When you begin, the timer will begin, 
and it will turn to 5 minutes and count down from there.
    When you have 1 minute remaining, I recommend that Members 
and witnesses joining remotely use grid view so that they may 
pin the timer at that point. After your testimony is complete, 
please remember to mute yourself to avoid any inadvertent 
background noise. I will also allow the entire panel to testify 
before questioning. The Chair now recognizes Ms. Natalie 
Jaresko, who was designated Executive Director of the Financial 
Oversight and Management Board for Puerto Rico in March 2017. 
She is responsible for approving and certifying the fiscal 
plans for the government of Puerto Rico and representing the 
government during debt restructuring negotiations.
    As Executive Director, is an American-born Ukrainian 
investment banker who served as Ukraine's Minister of Finance 
from December 2014 until April 2016. She also held several 
economic-related positions at the U.S. Department of State.
    Ms. Jaresko, the floor is yours for your time.

  STATEMENT OF NATALIE JARESKO, EXECUTIVE DIRECTOR, FINANCIAL 
         OVERSIGHT AND MANAGEMENT BOARD FOR PUERTO RICO

    Ms. Jaresko. Thank you, Mr. Chairman. As you said, I am 
Natalie Jaresko, Executive Director of the Oversight Board. 
Thank you for this opportunity to update the Committee. As you 
said and as we all know, when the Board began its work, Puerto 
Rico faced unsustainable debt of more than $70 billion and more 
than $50 billion in unfunded pension liabilities, a decade of 
economic decline, and significant outmigration. Shortly after 
the Board got underway, Hurricanes Irma and Maria struck. And 
most recently, we have endured major earthquakes.
    Only 2 months later, Puerto Rico was confronted with a 
pandemic. And overnight, the economy shut down except for the 
most critical activities as the government took prudent steps 
to mitigate the risk of a catastrophic public health crisis. 
The government acted promptly and decisively. The board's 
efforts over the past 4 years ensured that the government was 
not forced to make drastic cuts to its expenditures as revenues 
dropped.
    Budgeting practices enabled setting aside emergency funds 
at the onset and prior to the adoption of the CARES Act by 
Congress. The board and the government mobilized to deliver 
immediate support to residents and businesses. This included a 
$787 million package and temporary tax relief. However, there 
have also been several setbacks. The situation caused by the 
purchase of test kits shows poor procurement practices despite 
best intentions. Additionally, complications in distributing 
school lunches, payments to frontline and employed workers 
illustrate the challenges to efficiency.
    The shock of the pandemic on Puerto Rico is severe. 
Unemployment has skyrocketed. Our analysis shows that the 
economy will contract by 4 percent in the current 2020 fiscal 
year, just as it did after Hurricane Maria, a sharp decline in 
real GNP, the very mild projected recovery in the next fiscal 
year, further declines in 2022, 2023 and close to zero growth 
in 2024 and 2025. Simply put, the economy will contract over 
the next 5 years. So, reforms are more important than ever 
because the economic decline is even more severe.
    In that spirit, the 2020 Fiscal Plan reflects a 1-year 
delay in most budgetary reductions to allow the government to 
focus on implementation. This includes maintaining the 
subsidies to the University of Puerto Rico and the 
municipalities at current fiscal year levels. At UPR 
specifically, tomorrow, the Board will----
    Mr. McClintock. Mr. Chairman, point of order.
    The Chairman. Mr. McClintock?
    Mr. McClintock. Mr. Chairman, I am informed that Garret 
Graves, a member of this Committee, has been trying to get on 
this hearing and has not been able to. Is it the ruling of the 
Chair that Members can be excluded from the deliberations of 
this Committee because of this new process?
    The Chairman. No. That is not the ruling of the Chair. 
Let's not grab at straws right now, Mr. McClintock. This is a 
difficult process.
    Mr. McClintock. Well, I am trying to grab Garret Graves, 
who has been thwarted in his attempts to join this Zoom call.
    The Chairman. Mr. McClintock, every Member was given, 
including Mr. Graves, the process to call the technical staff 
on the Committee immediately if there were problems dealing 
with the technology and being able to go online. I will----
    Mr. McClintock. Then, Mr. Chairman, I would suggest that we 
suspend this until Mr. Graves can join the Committee to which 
he is duly appointed as an elected Member of the House of 
Representatives.
    The Chairman. Mr. McClintock, I would more than happily 
pause and see if he has talked to our technical staff or his 
staff has talked to our technical staff. And pending that short 
pause, we will proceed. If he is able to be put online, that is 
wonderful. And if there is some other technical issue that 
there is no resolution to, we will know that as well. But at 
this point, let me just pause for a second in the spirit of 
fairness and make sure that he has communicated with our 
technical staff. And I will also try to communicate with the 
staff as well. So, let's just recess for a second.
    [A brief recess was taken.]
    The Chairman. Now that we have the pleasure of Mr. Graves' 
company, we can proceed. The witness will continue her 
testimony.
    Ms. Jaresko. I think I lost a little bit of time. So, I 
will try to----
    The Chairman. We will accommodate that. Thank you.
    Ms. Jaresko. Thank you. As I was saying, in that spirit, 
the 2020 Fiscal Plan reflects a 1-year delay and most budgetary 
reductions to allow the government to focus on implementation. 
This includes maintaining the subsidies to the University of 
Puerto Rico and municipalities at the current fiscal year 
levels. At the University of Puerto Rico specifically, tomorrow 
the Board will be certifying an updated fiscal plan that will 
halt tuition increases by a year. Without the need to achieve 
incremental budget savings, the government should re-double its 
efforts to assure better delivery of services. The board has 
also articulated a comprehensive roadmap of the actions that 
must be taken to restore growth through economic development. 
However, the Board must rely upon the political will of the 
island's elected leadership in order to truly transform the 
government of Puerto Rico and the economic landscape.
    Even with implementation of far-reaching growth-inducing 
structural reforms, the 2020 Fiscal Plan projects that the 
government cannot afford to pay the public debt as originally 
contracted. Recognizing the importance of the ongoing Title III 
cases but taking into account these realities, on March 23, the 
Board presented a motion requesting the Title III court to 
adjourn consideration until further notice.
    The board also continues to work with the government on the 
transformation of PREPA to ensure reliable and low-cost energy. 
The board and the government are in full agreement that private 
generation and private management of the transmission and 
distribution system are key to these improvements, and we look 
forward to a positive announcement in the near future. 
Regarding the recently introduced amendments to the PROMESA 
Act, the Board supports several of the provisions on the 
proposed changes but is very concerned that other provisions, 
while well-intended, will compromise the Board's ability to 
fulfill its mandate under PROMESA.
    The board has a collaborative working relationship with the 
Governor. However, change is hard. And as PROMESA states--and I 
quote, ``a comprehensive approach to fiscal management and 
structural problems and adjustments that exempts no part of the 
government of Puerto Rico is necessary involving independent 
oversight.''
    While we will always collaborate in the best interest of 
the people of Puerto Rico, it is in this same interest that 
sometimes the Board must disagree with the government. In 
conclusion, PROMESA is not perfect, but it has provided the 
government with a stay on its debt payments while continuing to 
fund essential services. And this compromise provided the 
island with a way to restructure its debt under a bipartisan 
board, preventing chaos in 2016 when its debts became 
unpayable. The board's fiscal planning and budgeting discipline 
have helped the island be more resilient and responsive to 
crises. Unlike other states and local governments, Puerto Rico 
has not been forced to cut essential services.
    All said and done, however, debt restructuring and balanced 
budgets are unfortunately not enough to return prosperity to 
the people of Puerto Rico. Paramount is implementing the 
reforms that the people of Puerto Rico need and deserve. Thank 
you, Mr. Chairman.

    [The prepared statement of Ms. Jaresko follows:]
 Prepared Statement of Natalie Jaresko, Executive Director, Financial 
             Oversight and Management Board for Puerto Rico
    Chairman Grijalva, Ranking Member Bishop, and members of the 
Committee, I am Natalie Jaresko, Executive Director of the Financial 
Oversight and Management Board for Puerto Rico (the ``Board''). Thank 
you for this opportunity to update the Committee on the challenges and 
the work of the Board during the COVID-19 pandemic. As soon as the 
pandemic hit the Island, the Board began working closely with the 
Commonwealth to provide the people of Puerto Rico critical support for 
public health and financial assistance during the crisis. In addition, 
the Board recently certified an updated 2020 Fiscal Plan which further 
addresses the needs of residents and the Puerto Rican Government. I 
would also like to take the opportunity to comment on the ``Amendments 
to PROMESA Act'' recently introduced by Chair Grijalva and members of 
the Committee.
I. Introduction

    To put the Board's work during the pandemic in context, please 
allow me to start by recounting some of the early work of the Board, as 
well as our work leading up to the pandemic.
    As you know, when the Board began its work, Puerto Rico faced an 
unsustainable burden of more than $70 billion in debt and more than $50 
billion in unfunded pension liabilities, a decade of economic decline, 
and significant outmigration. In PROMESA, Congress charged us with 
guiding and overseeing the restoration of the Island's fiscal health 
via long-term fiscal planning and annual balanced budgeting, the 
restoration of its ability to access private capital via both debt 
restructuring and economic development and, as part of that, the 
Island's transition to a sustainable economic model that provides 
opportunities for our citizens.
A. The Board's Work in the Aftermath of Hurricanes Irma and Maria and 
        the Resignation of Governor Rossello

    The pandemic afflicting the Island is not the first disaster Puerto 
Rico has faced since the adoption of PROMESA. Shortly after the Board 
got underway, Hurricanes Irma and Maria inflicted the most horrific 
natural disaster devastation to strike the U.S. in 100 years, 
compounding the financial and emotional distress of the Island and its 
people. As detailed in my testimony before this Committee on November 
17, 2017, the Board worked extensively with the Government in post-
hurricane efforts. On the day after Hurricane Maria hit, the Board 
immediately provided Governor Rossello authority to reallocate up to $1 
billion of the Commonwealth's budget to give the Government flexibility 
to respond during the first weeks of the crisis. The Board also worked 
closely with the Governor to help estimate the cash-flow shortfall and 
need for emergency liquidity assistance caused by the sudden drop in 
revenues and increase in expenditures. In the 2\1/2\ years since, the 
Board continues to do everything in its power to support the efforts of 
the Commonwealth and the U.S. Government to provide critical disaster 
relief funding to the Island and its residents.
    The subsequent political upheaval around the resignation of 
Governor Rossello was unfortunate and very disruptive to the Government 
and the people of Puerto Rico. The Oversight Board watched the protests 
with admiration for the fortitude of the people of Puerto Rico and with 
sadness for the crisis that made the protests necessary. For far too 
long the Island's residents have not been treated with the respect that 
they deserve. However, it did not deter the Board from carrying out its 
obligations under PROMESA. The Board continued to work with the leaders 
of Puerto Rico to provide its people with the stability needed by all 
stakeholders. Since Governor Wanda Vazquez Garced took office last 
August, the Board has engaged in a collaborative working relationship 
with the Governor and her team. In many respects, the increase in 
collaboration and engagement is a night and day difference as compared 
with previous Governors and their respective staffs.
B. Board's Work Leading up to COVID-19

    I think it is helpful to recap next the Board's progress leading up 
to the pandemic, which represents the culmination of our work from the 
start. In furtherance of PROMESA's mandates, the Board had taken the 
following steps:

     Section 201(b)(1) Budgetary controls and fiscal 
            discipline: Implemented best practices budgetary controls 
            and constraints on Government spending to avoid previous 
            overspending practices. Given the absence of audited 
            financial statements and previous spending practices, prior 
            multi-year appropriations are suspended with few 
            exceptions. Total Government spending must now be reviewed 
            and certified. All tax initiatives must have a neutral or 
            positive budgetary impact, and all expenses and revenue 
            must be conservatively estimated.

     Section 201(b)(1) PayGo Pension System: Moved to a PayGo 
            pension system allowing retirees to receive their pensions 
            without interruption, despite the insolvency of Puerto 
            Rico's pension funds, and enrolled police officers in 
            Social Security to increase their security and retirement 
            benefits.

     Section 202(e) Ensuring critical services: The Board-
            certified budgets carefully balance the need to maintain 
            funding for critical services commensurate with the size of 
            the population and prioritize critical services such as 
            education, public safety, and healthcare. These include (1) 
            funding of $200 million a year to support increased labor 
            participation; (2) funding for safe kits to insure proper 
            forensic analysis and long-await justice for victims and 
            the accused; (3) pay increases for teachers and police to 
            ensure more competitive compensation; (4) funding new 
            positions for Forensics to rebuild capacity; (5) funding to 
            repay 10 years of back pay to police officers; (6) creating 
            a reserve account to ensure the ability to act to protect 
            the population immediately in case of future emergencies; 
            (7) budgeted funds to cover any cost-share required for 
            Federal disaster funding; (8) funding to enable compliance 
            with certain consent decrees; (9) budgeting $400 million 
            annually in Commonwealth capital expenditures to improve 
            significantly underfunded infrastructure; and (10) over 
            $300 million in needs-based scholarships for University of 
            Puerto Rico students.

      Without the Board and associated fiscal plans, projections show 
            that Government spending would have ballooned from $19 
            billion in fiscal year 2018 to $22 billion in fiscal year 
            2025 (an increase of 16 percent). The Board, meanwhile, has 
            contained expenditures to a 2 percent increase between 
            fiscal year 2018 to fiscal year 2025, or up 12 percent on a 
            per-capita basis (given the decline in population), while 
            providing valuable investments in frontline services (in 
            the wake of multiple crises).

     Section 204(b) Transparency and accountability in 
            government spending: Fostered more transparency and 
            visibility into Puerto Rico's government finances, 
            including Puerto Rico's liquidity, budgets, and other 
            intergovernmental spending--notwithstanding the 
            Government's continued delays in completing its overdue 
            audited financial statements. Moreover, the people of 
            Puerto Rico now have access to public reports, including: 
            bank balances, quarterly budget to actuals, payroll and 
            attendance, and tax expenditures.

     Section 204(b) Contract Review: The Board reviews major 
            contracts before they can be ratified to ensure both 
            consistency with the certified fiscal plans and budgets, as 
            well as to ensure they promote market competition. This 
            process has brought much-needed transparency, with all 
            responses and analyses posted in the Board's website.

    Since the inception of PROMESA, the Board has played a critical 
role in helping Puerto Rico respond to crises. Moreover, it has worked 
with the Government to institute much more effective fiscal management 
after decades of mismanagement. The fiscal plans that the Board has 
certified have walked a very prudent balance between driving more 
effective and sustainable Government, while investing in critical needs 
on the Island. Last, the Board has articulated a detailed and 
comprehensive roadmap of the actions that must be taken to restore 
growth through economic development, with structural reforms being 
particularly critical. However, given the constraints of PROMESA, the 
Board must rely upon the political will of the Island's elected 
leadership in order to truly transform the Government of Puerto Rico 
and the economic landscape into what the people and businesses of 
Puerto Rico deserve.
II. COVID-19 and the Preceding Earthquakes

    Before I address the Board's work with the Government during the 
public health pandemic, I would like to update you on the earthquakes 
that shook Puerto Rico about 6 months ago. Beginning in late December, 
these were the most intense earthquakes on the Island in recent memory, 
causing structural damage to buildings across southwestern Puerto Rico. 
Residents of these communities were subjected to hundreds of 
aftershocks over several months, some approaching the strength of the 
first earthquakes. Communities face concerns over public safety as 
infrastructure was affected, businesses suffered further disruption, 
and the Government suffered damage to schools, prisons and other 
crucial infrastructure. The full extent of the damage is still unknown, 
and rebuilding efforts in some places have yet to begin.
    Only 2 months later, Puerto Rico--along with the rest of the 
world--was confronted with the COVID-19 pandemic. Overnight, the 
economy shut down except for the most critical activities, as the 
Government took prudent steps to mitigate the risk of a catastrophic 
public health crisis. The Government acted promptly and decisively by 
implementing a curfew, limiting entry to points to the Island monitored 
by the National Guard, and shutting down virtually the entire economy 
to enforce social distancing.
    At the onset of the COVID-19 crisis and prior to the adoption of 
the CARES Act, the Board in close partnership with the Government, 
mobilized to deliver immediate support and relief to residents. This 
included providing a $787 million package of measures including, among 
other things, (1) hazard pay for front-line workers of $213 million; 
(2) direct payments to residents of $160 million including a $500 one-
time cash payment to 20,000 self-employed individuals and a $1,500 one-
time cash payment to 40,000 small businesses; (3) essential supplies 
and equipment of $50 million; (4) distance learning equipment in the 
public education system of $255 million; (5) assistance in the face of 
lost revenues for municipalities of $100 million; and (6) funding of 
research and development of $2 million at UPR's Medical Sciences 
Department.
    The Board also supported Government executive actions to provide 
temporary relief on tax payment deadlines, as well as to authorize more 
than $50 million in sales and use taxes exemptions for prepared foods 
and first-necessity items. The Board further approved and supported a 
$400 million advance on Federal funding for economic rebate payments 
administered by the local Treasury Department, as well as a liquidity 
facility of up to $185 million for municipalities suffering from 
revenue collection deferrals.
    The Board also provided the Government with recommendations on how 
to effectively disburse the $2.2 billion allocated to Puerto Rico 
through the Coronavirus Aid, Relief, and Economic Security Act (CARES 
Act) to finance eligible unbudgeted expenses related to the pandemic in 
a way that is targeted to the most critical pandemic-related needs.
    Since certifying its first Fiscal Plan in 2017, notwithstanding the 
intervening emergencies, the Board has been able to drive meaningful 
progress in creating a more affordable Government. This has resulted in 
the ability of the Government to increase expenditures at a time of 
crisis, while ensuring that total expenditure levels remain within 
total available revenues. Puerto Rico was not forced to make urgent and 
drastic cuts to its expenditures and essential services as revenues 
dropped, as other states had to do. Moreover, budgeting practices 
introduced by the Board enabled setting aside an Emergency Reserve Fund 
to mitigate and contain COVID-19, as well as provide immediate support 
after the earthquakes.
    However, it cannot be denied that there have also been several 
setbacks. The situation caused by the Commonwealth's procurement of 
COVID-19 test kits shows that the Government gets easily trapped in its 
own poor procurement practices despite best intentions. Additionally, 
complications in ensuring the distribution of school lunches and the 
slow distribution of payments to front-line workers and unemployed 
workers illustrates the challenges to efficient implementation. The 
good news is the economy is slowly reopening, and hospital capacity 
remains ample, suggesting that the virus might be contained.
    Nonetheless, the shock of the COVID-19 pandemic on Puerto Rico is 
severe. Unemployment has skyrocketed, as many businesses have been 
forced to shut down, and local and federal governments have quickly 
mobilized to provide support. Many projections indicate the economic 
shock due to COVID-19 will be worse than that of the Great Recession. 
The pathway to economic recovery remains highly dependent on the 
overall public health response and the Federal Government's ability to 
provide economic support for those whose livelihoods are at risk.
    The Board's analysis shows that the Puerto Rico economy will 
contract by 4.0 percent in the current 2020 fiscal year. Financially, 
the impact to the Puerto Rican economy is as devastating as the impact 
of Hurricane Maria. There is a sharp decline in real GNP with a very 
mild projected recovery of 0.5 percent in the 2021 fiscal year, with 
the help of COVID-19-related Federal funds from the CARES Act, CDBG-DR, 
and other Federal programs. To illustrate, we estimate a revenue 
reduction of $1.3 billion in current fiscal year 2020, $1.2 billion in 
fiscal year 2021, and $774 million in fiscal year 2022, relative to the 
2019 Certified Fiscal Plan.
    Our projections show further declines in real GNP in fiscal years 
2022 and 2023, and close to zero growth in 2024 and 2025. Simply put, 
the Puerto Rico economy will contract over the next 5 years, and Puerto 
Rico can only recover if the Government implements the necessary 
structural reforms. These reforms are more important than ever because 
the economic decline is even more severe.
III. 2020 Commonwealth Fiscal Plan

    The Board spent the last months analyzing the effects of the COVID-
19 pandemic on the Puerto Rican economy and the path to recovery in 
times of uncertainty. Based on careful study of the data, in 
particular, Congressional Budget Office data, the Board believes its 
certified 2020 Fiscal Plan is the best possible forecast under the 
current circumstances.
    The 2020 Fiscal Plan is a road map for Puerto Rico's recovery and 
prosperity. It outlines necessary Government action to improve fiscal 
responsibility and foster economic growth. The effect of the 
destructive hurricanes, political upheaval, earthquakes and COVID-19 on 
the economy is severe and is exacerbated by the lack of structural 
reform implementation necessary to improve economic growth in Puerto 
Rico. With the ongoing support of the U.S. Government, this crisis 
presents an opportunity to redouble all efforts to reform the economy 
for the benefit of the people of Puerto Rico.
    In that spirit, the 2020 Fiscal Plan requires commitment to swift 
implementation of an agenda that will transform government services. 
The 2020 Fiscal Plan reflects a one-year delay in most categories of 
budgetary reductions to allow the Government to focus on 
implementation. This pause in rightsizing includes maintaining the 
subsidies to the University of Puerto Rico and the municipalities at 
current fiscal year levels. Most agencies will maintain their fiscal 
year 2020 budgets in fiscal year 2021.
A. Investments

    The 2020 Fiscal Plan includes substantial investments in the 
Government's response to the COVID-19 public health and economic 
crisis, as well as critical investment in the Island's human capital 
and telecommunications infrastructure to spur recovery and growth. It 
continues several investments outlined in the 2019 Fiscal Plan and 
provides new substantial investments of about $6 billion in fiscal 
years 2020 through 2025. Some examples include investments in: (1) 
healthcare, including capital expenditures for public hospitals, hiring 
public school nurses, funding for opioid treatment, and increased 
reimbursement rates for primary care and outpatient specialty 
providers; (2) public education, including to improve English language 
teaching, to incentivize schools to achieve better educational 
outcomes, and payment of disputed salary increases to transitory 
teachers; (3) public safety, including the third and final year of back 
pay for police, the second half of their 30 percent salary increase, 
funding for recruitment and training of cadets, and equipment for 
firefighters; (4) technology, to improve access to broadband in rural 
areas and increase business training; (5) a study for the private 
sector and the Government to define a comprehensive and actionable plan 
to reactivate the manufacturing sector; and (6) hurricane 
reconstruction to expedite efforts by providing $750 million in working 
capital to kick-off project work.
B. Financial Projections

    As mentioned, the 2020 Fiscal Plan is based on the Board's 
projection that the Puerto Rico economy will contract by 4.0 percent in 
the 2020 fiscal year, with a mild 0.5 percent recovery in the 2021 
fiscal year, dependent upon the support of Federal funds related to 
COVID-19, and recent hurricanes and earthquakes. However, even with 
complete and timely implementation of all structural reforms outlined 
in the 2020 Fiscal Plan, the Board projects that the economy of Puerto 
Rico will contract over the next 5 years, with meager economic growth 
in some years.
    The 2020 Fiscal Plan projects a Government deficit from fiscal year 
2032 onward, 6 years sooner than the Board's 2019 Fiscal Plan 
projected, and a total primary surplus of about $8 billion between 
fiscal years 2020 and 2032, compared with an approximate $23 billion 
surplus projected in the 2019 Fiscal Plan. That amounts to a 65 percent 
decline in projected surplus.
    Estimates of Federal funding in the 2020 Fiscal Plan include: (1) 
hurricane-related funds amounting to $83 billion of disaster relief 
funding to be disbursed over 15 years, of which $48 billion is 
estimated to come from FEMA, $8 billion to come from private and 
business insurance pay outs, $7 billion to come from other sources of 
Federal funding, and $20 billion to come from CDBG-DR; (2) earthquake-
related funds amounting to $595 million from FEMA; and (3) COVID-19 
related funds amounting to $14 billion based on U.S. Government 
sources, Federal agency announcements, and past allocations under ARRA 
of 2009.
    Given the Board's projections, we consider it imperative that the 
Government use the next year to implement critical, overdue structural 
reforms. The 2020 Fiscal Plan continues to require an agenda of 
Government transformation to efficiency, and outlines the minimal 
reforms needed to change the structural nature of the Puerto Rican 
economy. It requires commitment to swift implementation of an agenda 
that will transform the Government and the economic landscape.
C. Structural Reforms

    Since 2017, the Board has worked with the Government to implement 
numerous structural reforms, but there has been little meaningful 
progress in most areas. The structural reforms in the 2020 Fiscal Plan 
are those where the Government has aligned with the need to pursue 
change. Nonetheless, each year, as a result of disasters and poor 
implementation, the reforms have been delayed. As such, the 2020 Fiscal 
Plan provides an updated forecast reflecting such delays but also 
outlining the potential positive impact looking forward, specifically:

     Human capital and welfare reform: Promoting participation 
            in the formal labor force by creating incentives to work 
            through Earned Income Tax Credit (EITC) benefits and 
            Nutritional Assistance Program (NAP) reform, as well as 
            providing comprehensive workforce development 
            opportunities.

     K-12 education reform: Transforming the K-12 education 
            system to dramatically improve student outcomes and 
            contribute to an effective workforce long-term.

     Ease of doing business reform: Improving the 
            competitiveness and attractiveness of Puerto Rico's economy 
            in order to attract a greater amount of investment and job 
            creation. Promoting economic activity and reducing the 
            obstacles to starting and sustaining a business in Puerto 
            Rico. This includes comprehensive reform to permitting, 
            registering property, and tax administration. Establishing 
            best-in-class entities that can attract investment and 
            increase tourism.

     Power sector reform: Providing lower cost and more 
            reliable energy through: (1) the transformation of PREPA; 
            (2) the establishment of an independent, expert, and well-
            funded energy regulator; and (3) the development of cleaner 
            and lower cost power generation.

     Infrastructure reform: Prioritizing economically 
            transformative capital investments with Federal funds 
            available as a result of recent disasters and on a regular 
            basis from annual obligations, for example from the Federal 
            Highway Administration.

     Strengthening Puerto Rico's technology sector: Addressing 
            the digital divide is critical to ensuring that all 
            residents of Puerto Rico can take advantage of the well-
            documented socioeconomic benefits afforded by Internet 
            connections (e.g., telehealth, distance learning, remote 
            work). Important infrastructure gaps remain, particularly 
            across rural areas of the Island. The 2020 Fiscal Plan 
            includes $400 million to expand access to broadband for the 
            residents of Puerto Rico, thereby improving economic 
            opportunities for those in rural areas. The 2020 Fiscal 
            Plan also recognizes that technology skills are critical 
            for the future of the workforce; it thus includes $50 
            million in funding to invest in workforce development, 
            specifically focused on business- and technology-related 
            disciplines.

D. Government Efficiency

    Finally, the main measures in the 2020 Fiscal Plan aimed at 
efficiency and cost reduction, some of which have not been implemented 
since the 2018 Fiscal Plan, include: (1) agency efficiencies; (2) 
creation of the Office of the CFO; (3) Medicaid reform; (4) enhanced 
tax compliance and optimized taxes and fees; (5) reduction of 
appropriations; and (6) comprehensive pension reform.
    Without the need to achieve incremental budget savings, the 
Government should focus all its efforts in fiscal year 2021 on real 
changes across the Government that assure better delivery of essential 
services. In that light, the 2020 Fiscal Plan outlines key reforms for 
the Department of Education, Department of Health, Department of Public 
Safety, Department of Corrections and Rehabilitation, and Department of 
Economic Development. These reforms focus on improving implementation, 
increasing efficiency, and consolidating regional and similar offices.
    To drive implementation of key reforms and outcomes, the 2020 
Fiscal Plan introduces milestone budgeting, which will allow for 
investments in certain areas once key milestones are met. Milestone 
budgeting is introduced because urgent action is necessary to support 
the broader reform journey for particular agencies. Crucial milestones 
and incentives include for the: (1) Employee Retirement System to 
finalize establishment of defined contribution accounts for public 
retirees and employees; (2) Department of Treasury to issue the 2017 
Comprehensive Audited Financial Report, draft the 2018 Comprehensive 
Audited Financial report, and develop an ERP system; (3) Department of 
Education to implement attendance reporting, school scorecards, and 
digitalization of Special Education Individualized Education Programs; 
and (4) Department of Economic Development and Commerce to publish 
regularly in a transparent manner economic incentives provided to 
businesses and associated returns.
E. Implementation is Key to Puerto Rico's Success

    Unfortunately, Governments have failed to achieve meaningful 
economic growth through structural reforms or drive operational change 
that would deliver greater responsiveness and efficiency of government 
services. Efforts at private sector labor market reforms have stalled 
and the impact of human capital and welfare reform is not expected for 
several years. The Government's efforts to improve the ease of doing 
business have not changed the burden on businesses in any meaningful 
way.
    To date, Government agencies have reduced expenditures but 
generally not in an effective fashion, as included in the certified 
fiscal plans. Rather than achieving budget savings by improving the way 
services are delivered or discontinuing duplicative or unimportant 
services, the Government has enacted broad-based early retirement 
programs to reduce headcount, creating major gaps in capabilities and 
functionality and potentially putting services at risk. Agencies should 
rethink their business processes and priorities, instead of relying on 
attrition and voluntary transition programs.
    Across many areas, the Government has struggled to implement 
changes, with even new investments often not driving the intended use. 
For example, salary raises provided for teachers were improperly 
implemented, bringing new litigation costs, while police officers' 
enrollment in Social Security was delayed by 6 months. Despite efforts 
by members of the Government, the Board, and the Federal Government--
which has increased oversight over Federal funds, installed Federal 
monitors in certain agencies, and managed expectations via consent 
decrees--the Government has been unable to meet the increasingly urgent 
need for real change.
    The 2020 Fiscal Plan includes dozens of practical actions that the 
Government must take to create a more accountable, affordable, and 
transparent government, with resources focused on improving the front-
line services that matter. Given the global COVID-19 pandemic, the 2020 
Fiscal Plan pauses most government right-sizing measures for a year, so 
that the full focus of Government may focus on recovery and 
implementation.
    Implementing the structural reforms and fiscal measures included in 
the 2020 Fiscal Plan fully on a timely basis will enable the Island to 
achieve low-cost and reliable energy, robust infrastructure, greater 
labor participation, an improved regulatory and permitting environment, 
and a more effective and efficient public sector. That said, these 
reforms are insufficient to return the Island to prosperity, nor do 
they allow Puerto Rico to avoid future deficits, which begin again in 
fiscal year 2032. Thus, in the near future, the Government will be 
required to take incremental measures, such as improving labor market 
flexibility through repealing restrictive laws and pursuing meaningful 
tax reform to broaden the base of collection and lower rates. These 
incremental structural reforms go beyond the 5-year framework of this 
2020 Fiscal Plan and are required to return the Island to prosperity. 
Many of these reforms--which would reduce deficits and therefore make 
funds available for a variety of potential uses, most importantly to 
invest in the people of Puerto Rico--have been proposed by the Board, 
but the Board cannot implement them without the support of Puerto 
Rico's elected Government.
IV. Debt Restructuring

    To date, the Board has: (1) developed and the District Court has 
confirmed a Title III Plan of Adjustment for COFINA; (2) authorized and 
the District Court has confirmed a Title VI Plan of Adjustment for GDB; 
and (3) supported a nearly $1 billion loan restructuring agreement for 
PRASA with EPA and USDA.
    The Board proposed an amended Plan of Adjustment (the ``Plan'') in 
February 2020 to restructure $35 billion of debt and other claims 
against the Commonwealth of Puerto Rico, the Public Building Authority, 
and the Employee Retirement System, and more than $50 billion of 
pension liabilities. The Plan significantly reduces $35 billion in debt 
liabilities to $11 billion, or about 70 percent, and ensures that 
almost 75 percent of current and future pensioners are not cut. The 
Plan also provides predictability to public employees via updated 
collective bargaining agreements and restores over $1.3 billion of 
withheld employee contributions to Sistema 2000.
    The Plan has been supported by the Official Committee of Retirees 
representing retired government employees, current government employees 
represented by the Public Service Union as the Puerto Rico chapter of 
AFSCME, and the Lawful Constitutional Debt Coalition, a group of 
investors and funds holding Puerto Rico's general obligation bonds and 
PBA bonds. The Board also has been seeking broader active public 
employee support and feedback, including from teachers represented by 
the Puerto Rico chapter of AFT.
    The Board's Special Investigations Committee hired the law firm 
Kobre & Kim to provide a complete, independent review of the 
Government's debt, ultimately receiving a comprehensive investigative 
report. Following on Kobre & Kim's findings, the Board undertook review 
of potential infirmities of debt issued by Puerto Rico and its various 
agencies and instrumentalities. Through its Special Claims Committee, 
the Board objected to the validity of over $11 billion of general 
obligations bonds and filed several hundred complaints against entities 
to recover their payment related to issuance of that debt. That 
committee also filed complaints against over 20 banks, law firms and 
other parties to recover fees earned in issuance of nearly $9 billion 
in bonds.
    Given the considerable uncertainty about the effect of COVID-19 on 
Puerto Rico, however, the Board continues to believe that the primary 
focus of the Government and the Board should be to minimize and contain 
the pandemic. Furthermore, even with implementation of far reaching 
growth-inducing structural reforms, the 2020 Fiscal Plan projects that 
the Government cannot afford to pay the public debt as originally 
contracted.
    Recognizing the importance of the ongoing Title III cases, but 
taking into account these realities, on March 23 the Board presented a 
motion requesting the Title III court to adjourn consideration of the 
proposed Plan of Adjustment's disclosure statement hearing until 
further notice. The amended proposed Plan of Adjustment, presented to 
the Court on February 28, 2020, is now on hold and the next status 
report is due on July 15. As to PREPA, the Board and the Government 
filed a motion seeking to adjourn the hearing and all deadlines related 
to the PREPA restructuring support agreement Rule 9019 motion. On May 
15, the Board and the Government provided a required update, stating 
that all briefing and hearing deadlines relating to the 9019 motion 
should continue to be adjourned.
V. Municipalities

    On April 15, 2020, the District Court held invalid and 
unenforceable Puerto Rico Act 29-2019, which had eliminated the 
municipalities' obligation to reimburse the Commonwealth for hundreds 
of millions of dollars in pension and health care cost for their own 
retirees. Contrary to what some mayors have said, the reversal of Act 
29-2019 is not expected to have a significant impact on municipalities' 
finances in the near term. The repeal of Act 29-2019 represents a 
deficit of 3 percent of the total municipalities' budgets for fiscal 
year 2020, and the Board outlined a process for municipalities to repay 
these fiscal year 2020 obligations from incremental unbudgeted 
revenues, thus not affecting municipalities' operating budgets.
    Better budgetary practices, reduction of expenses through 
consolidation or shared-services arrangements and increased own-revenue 
streams should help municipalities remain sustainable for the benefit 
of the people of Puerto Rico. Moreover, a new partnership model between 
the Government and municipalities needs to be developed in order to 
deliver important services. That is why the Board is working with 
Mayors to develop potential solutions, as well as with the Municipal 
Revenue Collection Center (``CRIM'' by its acronym in Spanish) on 
initiatives aimed at modernizing and improving the management of the 
property tax system and increasing the collection rate of such taxes. 
In addition, the Board is directly working with 10 municipalities to 
assist them with cost reduction and economic development measures. 
Further, and as explained earlier, the Commonwealth's 2020 Fiscal Plan 
maintains the level of support to the municipalities for the next 
fiscal year at the same amount as in fiscal year 2020. Moreover, the 
2020 Fiscal Plan provides an annual fund of $22 million during the next 
5 fiscal years (for a total of $110 million) to incentivize 
municipalities that achieve cost savings through cost sharing or 
consolidation of services.
    As a result of the extension of time granted to taxpayers for 
filing their personal property tax returns from May to August 2020, 
CRIM is facing a cash shortfall that has affected its ability to make 
the monthly remittances of May through August to the municipalities. To 
assist with this situation, the Board approved a Commonwealth liquidity 
facility for CRIM of up to $185 million to help with monthly 
remittances through July 2020. To date, CRIM has not accepted the terms 
of the liquidity facility.
VI. Transformation of PREPA

    The Board continues to work with Government on the transformation 
of PREPA to ensure reliable energy for the residents, more effective 
and efficient management, and lower fuel costs.
    This transformation is important to every individual, every 
business, and every potential investor. The people of Puerto Rico 
deserve a power system that can withstand hurricanes to ensure they are 
safe in their homes, and Puerto Rico's businesses deserve to open every 
day without relying on back-up generators to ensure they can serve 
their customers. Puerto Rico deserves manufacturing and service 
industry jobs created by investors who don't turn away because its 
electric power system is unreliable and antiquated.
    The Board and the Government are in full agreement that private 
generation and private management of the transmission and distribution 
system are key to these improvements. The Board is working with the 
Government on the pending public private partnership process for 
selection of a private transmission and distribution operator and 
strongly supports the Government's efforts to secure FEMA funding to 
help with the cost of restoration and reconstruction of an affordable, 
resilient, and reliable power system that is environmentally compliant 
and that serves as a driver of economic growth. Selection of this 
operator and securing this Federal funding are critical next steps in 
the modernization of PREPA and increased economic development on the 
Island.
VII. U.S. Government Matters
A. Supreme Court Decision

    On June 1, 2020, the U.S. Supreme Court issued a unanimous decision 
that will allow the Members of the Board and the Board to continue 
their work under PROMESA. The Supreme Court confirmed that PROMESA 
established the Board as an entity within the Government of Puerto Rico 
and that the process for selecting and approving members of the 
Oversight Board without Senate confirmation does not violate the 
Constitution's Appointments Clause.
B. Amendments to PROMESA Act

    I appreciate the opportunity to now comment on the Amendments to 
PROMESA Act recently introduced by Chair Grijalva and members of the 
Committee.
    As mentioned in my October 22, 2019 testimony on an earlier version 
of this proposed legislation, the Board has serious concerns that 
several of these provisions, while well-intended, will substantially 
hamper its ability to effectively negotiate settlement of claims at 
this very critical juncture in implementation of PROMESA. Moreover,

     The Board supports the legislative proposal of Rep. 
            Velazquez in the bill to extend the disclosure requirements 
            of the Federal Rules of Bankruptcy Procedure to 
            professionals employed by the Board, court, or debtor to 
            avoid conflicts of interest and its goal of greater 
            transparency and disclosure. The proposal, however, needs 
            to be interpreted or altered in a manner allowing its 
            practical implementation. It currently requires disclosures 
            of each professional's connections with all creditors, and 
            in the Puerto Rico Title III cases over 165,000 creditors 
            filed proofs of claim.

     The provision for a GAO report on expenditures and 
            operation of the Board is understandable, and the Board 
            looks forward to working with Congress on the details.

     The provision allowing the Legislature of Puerto Rico to 
            cancel some of its unsecured financial debt will lead 
            existing Puerto Rico bondholders to demand secured debt 
            during ongoing negotiations, which is more expensive and 
            restrictive than the unsecured debt. Moreover, this 
            provision could render the issuance of future municipal 
            debt in Puerto Rico and throughout the United States more 
            expensive, and will cause purchasers of new debt to require 
            that it be secured debt in all instances. The new discharge 
            provision is also likely not to inspire creditor trust and 
            confidence because no court is involved in the discharge 
            accomplished by the Legislature and Governor. The Board's 
            legal advisors also believe the criteria for the 
            application of this new discharge may only allow Puerto 
            Rico to qualify, in which case the statute will be subject 
            to constitutional challenge as not being a uniform 
            bankruptcy law. Additionally, the constitutionality of 
            discharging the unsecured financial debt for nothing, while 
            other debt is paid, will be challenged. It may well be that 
            these new provisions will be upheld because they are being 
            enacted under the Territories Clause, and not expressly the 
            Bankruptcy Clause, but that too will be litigated.

     The proposed definition of essential public services 
            specifies that public education, public safety, healthcare, 
            and pensions are ``essential public services'', with the 
            ostensible purpose to ensure their funding in the certified 
            Fiscal Plan to the maximum extent possible. The Board 
            believes that this provision could have the exact opposite 
            effect, as it provides ammunition to those who have been 
            arguing that the Board cannot fund services above and 
            beyond their own highly restrictive interpretation as to 
            what services are truly essential. The Board is facing this 
            claim in Title III cases filed by creditors, who would 
            welcome congressional support for an essential service 
            definition that could be used to advance their argument. 
            The result could be substantially reduced funding for 
            services that the Board and the Government consider 
            essential but that other parties strongly believe 
            otherwise.

     The prescribed funding for operation of UPR significantly 
            expanding and locking in an $800 million annual allocation 
            to UPR makes efficient and effective operation of the 
            Commonwealth substantially more difficult and delays any 
            strengthening or diversification of UPR's revenue base. To 
            put it in context, an $800 allocation represents 70-80 
            percent of UPR's total budget, versus a 20-30 percent 
            average for U.S. public universities. It is also diverts 
            resources away from the critical services funded by the 
            Commonwealth budget.

     The provision expanding the definition of investments for 
            economic growth is consistent with the Certified Fiscal 
            Plan and Budget. The plan and budget already include 
            specific investments both in structural reform 
            implementation and in the economic development tools 
            necessary to reduce poverty, increase labor participation, 
            attract quality jobs to the Island, expand workforce 
            development programs--all leading to increased economic 
            growth.

     The Board agrees with the importance of avoiding conflicts 
            of interest. The proposed language on prevention of 
            conflicts of interest as to the Board, however, 
            significantly reduces the number and quality of people who 
            can be Board members or Executive Director, which makes the 
            Board far less effective at performing its critically 
            important role and congressional mandate to help improve 
            Puerto Rico. The section further severely reduces the 
            amount on which the Board can rely for legal, financial, 
            economic, and operations external advisors, which strongly 
            impairs the Board's ability to effectively defend Puerto 
            Rico in court against creditors.

     The initiation of Federal funding for operation of the 
            Board and Title III could well lead to a new constitutional 
            challenge to the Board's appointment without Senate 
            consent. Moreover, it significantly limits the ability of 
            the Board to determine how much money it needs to invest, 
            research, and implement the critically important Title III 
            work. It also makes the process harder, riskier for the 
            Board, Puerto Rico, and the U.S. Government. Currently, the 
            Title III fees are reviewed by the Title III Court and a 
            fee examiner it appointed. That part of the system has 
            worked well. If the Federal funding is insufficient, then 
            the Board would not have the financial resources to defend 
            against the attempts of secured and unsecured creditors to 
            obtain judgments awarding them Puerto Rico's various 
            revenue streams. To date, the Board has been sued over 100 
            times by creditors, and cannot afford to run short of funds 
            to defend.

     The bill provides that any document, record, or 
            information relating to the public debt of the Commonwealth 
            of Puerto Rico is a public document and accessible to any 
            interested party. Making public any document relating to 
            the negotiations or restructuring of the public debt would 
            be prejudicial and detrimental to the Board's effort to 
            effectively and expeditiously secure the best debt deal 
            possible for Puerto Rico and its people.

     In connection with the new disclosure obligations, the new 
            provision for assessing attorneys' fees is problematic 
            because it may deter highly qualified individuals from 
            serving as Board members. Furthermore, it contradicts 
            PROMESA's insulation of the Board and its staff from 
            liabilities and obligations for acts undertaken in carrying 
            out PROMESA.

     The section creating a Puerto Rico Public Credit 
            Comprehensive Audit Commission disregards and duplicates 
            the work of the Board almost 2 years ago based on the over 
            600-page Investigative Report prepared by Kobre & Kim. That 
            independent report effectively served the purpose of a debt 
            audit. The Board's Special Claims Committee is pursuing 
            valid claims arising out of that report (subject to a stay 
            on some of the proceedings), and the Debt Management Policy 
            in the 2019 Fiscal Plan is designed to make sure these 
            issues do not arise again.

    The Board remains committed to working with the Chairman, the 
Ranking Member, and other members of the Committee and the Congress as 
you continue oversight over implementation of PROMESA and consider any 
changes to the law.
C. Legislation Expanding Manufacturing

    The Board was established by law to create the conditions for 
fiscal responsibility in Puerto Rico and restore access to capital 
markets. One element of this mandate has been to take opportunities to 
support the Government of Puerto Rico in its efforts to pursue prudent 
actions to promote economic stability and create the conditions for 
growth.
    In this context, the Board wrote to the U.S. President and 
Congressional leadership on March 18 stating that if Federal 
policymakers consider actions to require increased manufacturing within 
the U.S., the Board strongly believes that Puerto Rico is a center of 
excellence within the Nation and can play a leading role in the 
national portfolio of locations where this manufacturing re-locates. 
The physical infrastructure, human capital, and regulatory processes 
are already established and well positioned. Moreover, this is a 
valuable opportunity to expand investment, jobs, and ultimately 
prosperity on the Island.
    We acknowledge there are a number of policy considerations that 
would need to be discussed. Should policymakers pursue actions to 
require additional manufacturing in the United States, we respectfully 
encourage proactive dialogue between the Government of Puerto Rico and 
Federal policymakers to find mutually acceptable solutions to these 
issues. It is in this spirit that the Board will conduct a 
comprehensive study to update the facts and acquire the knowledge 
necessary for the private sector and the Government to define a 
comprehensive and actionable plan to reactivate the manufacturing 
sector in Puerto Rico. The Board would be proud for Puerto Rico to play 
a leading role in bolstering our national security and stand ready to 
assist however we can.
D. Legislation Supporting Puerto Rico

    Finally, the Board continues to support legislative efforts of 
Chairman Grijalva, Ranking Member Bishop, Puerto Rico Resident 
Commissioner Gonzalez-Colon, Representative Velazquez, Representative 
Soto, and many members of this Committee and Congress to provide 
equitable distribution of Federal funding and other Federal programs 
for Puerto Rico.
    For example, the Board continues to support the Government's 
request to receive equitable treatment in Medicaid and Medicare. 
Residents of Puerto Rico pay the same level of Medicare taxes as 
mainland residents, but the Island receives substantially lower 
payments. Moreover, the Board is supportive of congressional action to 
provide enable Puerto Rico to participate in the Federal Earned Income 
Tax Credit program, which would bolster Puerto Rico's own local Earned 
Income Tax Credit and create an even more powerful incentive to bring 
more workers into the Commonwealth's formal labor market. Likewise, the 
Board supports legislation that provides funding to extend the Federal 
Child Tax Credit to more families with children in the Commonwealth. 
The Board also supports Governor Vazquez Garced's request to authorize 
Puerto Rico to participate in the Pandemic Electronic Benefits Transfer 
program created by the Families First Coronavirus Response Act, to 
ensure children on the Island have access to critically needed 
nutritional assistance benefits.
VIII. Conclusion

    PROMESA is not perfect, but it has provided Puerto Rico with the 
protection of a stay on its debt payments while continuing to fund 
essential services. The compromise between both sides of the aisle to 
provide the Island with a novel mechanism to restructure its debt under 
a bipartisan Board allowed the Government to prevent complete chaos in 
2016 when the debts became unpayable.
    The fiscal planning and budgeting discipline spearheaded by the 
Board since its first certified fiscal plan has in fact allowed Puerto 
Rico to be resilient and strong, with the ability to respond with 
concrete actions to extraordinary natural disasters and the COVID-19 
pandemic. The savings measures have been successful in driving some 
meaningful progress in rightsizing the Government and enabled it to 
immediately provide fiscal stimulus and economic support to those 
affected by the COVID-19 measures. Unlike other local governments in 
the United States, Puerto Rico was not forced to respond to lost 
revenues with urgent and drastic cuts to its expenditures and essential 
services. In fact, next year's budget will be higher than the current 
budget, unlike most U.S. states, in part to respond to the need for 
fiscal stimulus and economic growth drivers.
    Since we began working with Governor Vazquez Garced, we have 
engaged in a collaborative working relationship. We must clarify, 
however, change can be hard. In accordance Section 405(m)(4) Congress' 
own finding states: ``a comprehensive approach to fiscal, management 
and structural problems and adjustments that exempts no part of the 
Government of Puerto Rico is necessary, involving independent 
oversight.'' While we will always collaborate in the best interest of 
the people of Puerto Rico, it is in this same interest that sometimes 
the Board must disagree with the Government and utilize the tools in 
PROMESA to further its mandate. Simply stated, all efforts should be on 
implementing the reforms that the people of Puerto Rico need and 
deserve.
    Since 2016, the Board has been carefully executing its mandate in 
law. The fact that both sides--creditors and politicians--have material 
disagreements with the Board means something. The Board is doing its 
job and PROMESA is working. As stated earlier, the Board has serious 
concerns that several of the proposed amendments to PROMESA, while 
well-intended, will substantially hamper its ability to effectively 
negotiate settlement of claims at this very critical juncture in 
implementation of the law. These amendments should not become a 
distraction from the real work we all have to do.
    The Board appreciates this Committee's invitation to provide an 
update on the status of the implementation of PROMESA and will continue 
to follow the path outlined in law to ensure Puerto Rico returns to 
fiscal responsibility and the capital markets.

                                 ______
                                 

                         Supplemental Testimony
                            Natalie Jaresko
                           Executive Director
        Financial Oversight and Management Board for Puerto Rico
                       Submitted on July 2, 2020

    Chairman Grijalva, Ranking Member Bishop, and all members of the 
House Committee on Natural Resources, I humbly submit this supplemental 
testimony in addition to my written and oral testimony from June 11, 
2020. I reviewed the transcript from the hearing and have compiled the 
information below to clarify some of the issues that were discussed.
       new fortress energy agreement for the conversion of prepa
    FOMB approved the agreement, even though the pricing structure was 
higher than the industry benchmark; the price was cheaper than the oil 
in use at that time. FOMB uses industry benchmarks and other pertinent 
data to evaluate proposed contracts, but the industry benchmark is not 
always available in Puerto Rico. In addition, since PREPA remains in 
bankruptcy, bidders tend to factor that financial risk in the cost of 
their bids. FOMB also approved the agreement because it would result in 
moving to LNG as a cleaner fuel than the bunker fuel it replaced. FOMB 
has seen recent media reports that San Juan 5 and 6 are still using 
diesel because New Fortress Energy has failed in its LNG safety tests, 
and FOMB is looking into that issue.
the ability of the department of health to deal with the pandemic after 
                              rightsizing
    The Department of Health's capacity to provide timely and reliable 
data and administer diagnostic tests was not affected by previous 
actions of FOMB as to the funding or administration of the Department. 
The Fiscal Plans certified by FOMB have required a transformation of 
the Island's health system into a more efficient one that provides 
better services to the people of Puerto Rico. The Government had 
several health-related agencies that were highly fragmented, driving up 
costs and inefficiency as well as impairing the level of care. The 
Fiscal Plan required that the Department of Health consolidate six of 
the healthcare agencies with centralized support functions, and so far, 
the Government has made limited progress. For example, the Department 
of Health has struggled to establish an effective, centralized process 
for managing COVID-19 testing results and municipalities outside San 
Juan have found it hard to get access to tests.
       the working capital of upr for fiscal year 2021 and beyond
    FOMB's goal is to put the university--Puerto Rico's most important 
engine for economic mobility--on a path to sustainability while also 
ensuring the tools it needs to manage the current COVID-19 pandemic. 
The FY2021 Budget for UPR tracks the 2020 UPR Fiscal Plan with modest 
adjustments based on updated projections related to COVID-19 
interruptions. The details are below:

     Total revenues in this year's budget come to $1.2 billion:

            --  Includes the delay in reduction of the Commonwealth 
        subsidy to UPR by 1 year, along with a corresponding delay in 
        scheduled tuition and fee increases to relieve burden on 
        students and families.

            --  Revenues also decline this year due to decrease in 
        enrollment (4.6 percent for undergraduates); COVID-19 related 
        interruptions to self-generated revenues, such as hospital 
        income; and, macroeconomic declines that affect UPR-directed 
        funding streams (e.g., slot machine revenue).

            --  Another major cause of the significant decline in 
        revenues versus FY2021 Budget is the fact that FY2020 included 
        significant federal and private insurance disaster relief.

     This year's budget provides for $1.2 billion in 
            expenditures:

            --  FOMB is expecting UPR to make marked progress in 
        implementing the administrative transformation this year.

            --  Nonetheless, the Budget continues to invest in academic 
        excellence, including a 3 percent increase in faculty payroll, 
        continued growth in the university's pool of need-based 
        scholarships (beyond those provided through the Commonwealth 
        scholarship fund), and over $10 million to support 
        implementation of the system's much needed transformation.

            --  The Budget also enables UPR to spend $30 million in 
        Capital Expenditures ($42 million including equipment 
        expenditures); this is significant as UPR has routinely 
        underinvested capex to cover its operating overruns.

            --  FY2021 also assumes that roughly 50 percent of the 
        CARES Act funds not directly distributed to students will be 
        expended during the academic year to help the system adjust to 
        a ``new normal'', including expanded distanced learning, 
        physical reconfigurations of campus spaces, and student 
        counseling.

     On pensions, specifically, this year's budget contemplates 
            freezing the defined benefit plan, moving to a defined 
            contribution plan, and reducing accrued benefits to bring 
            annual pension contributions to a sustainable level:

            --  As a result of the pension measures, the total 
        contribution required falls this year by $40 million to $121 
        million in annual expenditures.

            --  The FY2021 Budget also creates a $41 million emergency 
        reserve. This reserve is funded through the projected reduction 
        in procured and non-personnel services expected from the COVID 
        shutdown, and can be used, for example, to maintain pension 
        funding levels should UPR fail to implement the required 
        pension reforms.
     The net deficit in this year's budget (post-debt service) 
            is about $33 million:

            --  The Budget does imply an operating surplus (pre-debt 
        service) is $15 million.

            --  FOMB has consistently said that even after measures are 
        implemented, UPR will not have enough operating surplus to 
        cover its $48 million in annual debt service (legacy debt of 
        $542 million outstanding).

    FOMB believes this level of operating surplus provides the right 
balance of allowing UPR to maintain its important function as an engine 
of economic development while also requiring adequate transformation 
efforts to right-size its administration and reinvest in academic 
excellence.
                            fomb's authority
    The recommendation that Mr. Marrero makes on FOMB's authority is 
based on a false construct. There have been four issues, four 
situations where there have been disputes between the Government and 
FOMB regarding FOMB's authority. In all four of those cases since 2018, 
the Court has agreed on the clarity and the authority that has been 
provided by PROMESA to FOMB. If amendments were made as Mr. Marrero 
suggested, then the definition of fiscal sustainability and balancing 
budget might need to be changed. If FOMB is no longer responsible for 
fiscal sustainability, then it will be difficult, if not impossible, to 
ever restructure the debt without clarity and confidence that the debt 
is sustainable.
                                title v
    The demand for expedited permitting pursuant to Title V of PROMESA 
has not been overwhelming. The demand that came into the pipeline 
established was primarily PREPA related; however, all the PREPA 
contracts needed to first either be approved or rejected in the Title 
III court. It was only in early June of this year that PREPA announced 
next steps for the PPOA contracts. Now, we expect that the demand for 
Title V will grow as those contracts are in place. Moreover, we've also 
started to see some other private sector investment. We are hopeful 
that as the business environment improves, there will be more private 
sector investment seeking to take advantage of Title V. To ensure FOMB 
is prepared to manage the renewed demand, we are currently in the 
process of hiring a full time Revitalization Coordinator.
                        fiscal plans and budgets
    The reforms included in the fiscal plans and budgets have not 
caused delays in the receipt of federal funds. It is true that the 
fiscal plans and the budgets have reduced payroll spending over the 
past 3 years. However, none of those payroll reductions should have 
been implemented through frontline employees. The intention and the 
agreement reached with the previous governor was that the bulk of the 
right-sizing would happen through back office consolidation, 
consolidation of bureaus into single departments, and those actions 
actually haven't happened for the most part. What has happened instead 
is the Government has used a very blunt tool for early retirement or 
voluntary transition, which has been offered across practically all 
front and back offices. Since that happened, it is has been difficult 
to direct who stays and who leaves because people have a voluntary 
choice to early retire. By implementing the reductions and in that 
fashion, FOMB believes that these programs have caused a problem in 
terms of capacity.
                        delay of federal funding
    It is important to note that FEMA funding involves a very long and 
complex process. The COR3 department is funded by the Federal 
Government, not by the Commonwealth. So, it is a matter for COR3 and 
FEMA to clarify. Similarly, for CDBG-DR, there is an entirely new group 
of individuals hired with federal funds to implement the CDBG-DR 
program. That CDBG-DR program is very complex, so having to learn 
federal procurement rules and do what is required by the CDBG-DR 
program is complex.
                      the effectiveness of promesa
    PROMESA is not perfect, but it has provided Puerto Rico with the 
protection of a stay on its debt payments while continuing to fund 
essential services. The compromise between both sides of the aisle to 
provide the Island with a novel mechanism to restructure its debt under 
a bipartisan Board, allowed the Government to prevent complete chaos in 
2016 when the debts became unpayable. The fiscal planning and budgeting 
discipline spearheaded by FOMB since its first certified fiscal plan 
has in fact allowed Puerto Rico to be resilient and strong, with the 
ability to respond with concrete actions to extraordinary natural 
disasters and the COVID-19 pandemic. The savings measures have been 
successful in driving some meaningful progress in rightsizing the 
Government and enabled it to immediately provide fiscal stimulus and 
economic support to those affected by the COVID-19 measures. Unlike 
other local governments in the United States, Puerto Rico was not 
forced to respond to lost revenues with urgent and drastic cuts to its 
expenditures and essential services. In fact, next year's budget will 
be higher than the current budget, unlike most U.S. states, in part to 
respond to the need for fiscal stimulus and economic growth drivers.

    Since 2016, FOMB has been carefully executing its mandate in law. 
The fact that both sides--creditors and politicians--have material 
disagreements with FOMB means something. FOMB is doing its job, and 
PROMESA is working. In furtherance of PROMESA's mandates, FOMB had 
taken the following steps:

     Section 201(b)(1) Budgetary controls and fiscal 
            discipline: Implemented best practices budgetary controls 
            and constraints on Government spending to avoid previous 
            overspending practices. Given the absence of audited 
            financial statements and previous spending practices, prior 
            multi-year appropriations are suspended with few 
            exceptions. Total Government spending must now be reviewed 
            and certified. All tax initiatives must have a neutral or 
            positive budgetary impact, and all expenses and revenue 
            must be conservatively estimated.

     Section 201(b)(1) PayGo Pension System: Moved to a PayGo 
            pension system allowing retirees to receive their pensions 
            without interruption, despite the insolvency of Puerto 
            Rico's pension funds, and enrolled police officers in 
            Social Security to increase their security and retirement 
            benefits.

     Section 202(e) Ensuring critical services: FOMB-certified 
            budgets carefully balance the need to maintain funding for 
            critical services commensurate with the size of the 
            population and prioritize critical services such as 
            education, public safety, and healthcare. These include (1) 
            funding of $200 million a year to support increased labor 
            participation; (2) funding for safe kits to insure proper 
            forensic analysis and long-await justice for victims and 
            the accused; (3) pay increases for teachers and police to 
            ensure more competitive compensation; (4) funding new 
            positions for Forensics to rebuild capacity; (5) funding to 
            repay 10 years of back pay to police officers; (6) creating 
            a reserve account to ensure the ability to act to protect 
            the population immediately in case of future emergencies; 
            (7) budgeted funds to cover any cost-share required for 
            federal disaster funding; (8) funding to enable compliance 
            with certain consent decrees; (9) budgeting $400 million 
            annually in Commonwealth capital expenditures to improve 
            significantly underfunded infrastructure; and (10) over 
            $300 million in needs-based scholarships for UPR students.

      Without FOMB and associated fiscal plans, projections show that 
            Government spending would have ballooned from $19 billion 
            in fiscal year 2018 to $22 billion in fiscal year 2025 (an 
            increase of 16 percent). FOMB, meanwhile, has contained 
            expenditures to a 2 percent increase between fiscal year 
            2018 to fiscal year 2025, or up 12 percent on a per-capita 
            basis (given the decline in population), while providing 
            valuable investments in frontline services.

     Section 204(b) Transparency and accountability in 
            government spending: Fostered more transparency and 
            visibility into Puerto Rico's government finances, 
            including Puerto Rico's liquidity, budgets, and other 
            intergovernmental spending--notwithstanding the 
            Government's continued delays in completing its overdue 
            audited financial statements. Moreover, the people of 
            Puerto Rico now have access to public reports, including 
            bank balances, quarterly budget to actuals, payroll and 
            attendance, and tax expenditures.

     Section 204(b) Contract Review: FOMB reviews major 
            contracts before they can be ratified to ensure both 
            consistency with the certified fiscal plans and budgets, as 
            well as to ensure they promote market competition. This 
            process has brought much-needed transparency, with all 
            responses and analyses posted in FOMB's website.

    Since the inception of PROMESA, FOMB has played a critical role in 
helping Puerto Rico respond to crises. Moreover, it has worked with the 
Government to institute much more effective fiscal management after 
decades of mismanagement. The fiscal plans that FOMB has certified have 
walked a very prudent balance between driving more effective and 
sustainable Government, while investing in critical needs on the 
Island. Last, FOMB has articulated a detailed and comprehensive roadmap 
of the actions that must be taken to restore growth through economic 
development, with structural reforms being particularly critical. 
However, given the constraints of PROMESA, FOMB must rely upon the 
political will of the Island's elected leadership in order to truly 
transform the Government of Puerto Rico and the economic landscape into 
what the people and businesses of Puerto Rico deserve.
                      audited financial statements
    Completion of the Commonwealth of Puerto Rico's audited financial 
statements is a top priority to FOMB and at the core of PROMESA's 
objectives for the benefit of the people of Puerto Rico. FOMB is 
committed to assist the Government in completing such an important 
milestone, which will ultimately enable the Government to achieve 
financial sustainability and access to the capital market at reasonable 
rates.
    For years, the issuance of the Commonwealth of Puerto Rico's 
audited financial statements, better known as the Comprehensive Annual 
Financial Reports or ``CAFRs'', has been delayed. Most notably the 
FY2015 and FY2016 CAFRs were both issued and published over 1,000 days 
after each fiscal year ended. The FY2017, FY2018, and FY2019 CAFRs have 
yet to be issued as of this date. Despite best practices calling for 
audited financial statements to be published no later than 180 days 
after the end of each fiscal year, today is day 1097 for the FY17, day 
732 for the FY18 and day 367 for the FY19.

    To that effect, FOMB in its oversight role, has been actively 
collaborating in an attempt (1) to identify the challenges to issuance 
(ii) to ensure that audits are completed as quickly as possible; (ii) 
for the Government to institutionalize best practices; and (iii) for 
the Government to have the appropriate resources for the preparation of 
the CAFRs. During this fiscal year, FOMB has been conducting recurring 
meetings, in some cases on a weekly basis, with the Department of the 
Treasury, the Government's external auditors, and key component 
entities within the Government to help expedite the overdue delivery of 
the FY2017 CAFRs and assess the timing of the FY2018 audit. In this 
spirit, FOMB has provided recommendations on relevant administrative 
orders submitted for FOMB's consideration pursuant to the Rules, 
Regulations and Orders Review Policy; and requested the Government 
provide:

     weekly updates from the Department of Treasury on progress 
            and risks to the completion of the FY2017 CAFRs;

     progress reports on the FY2018 audit preparation;

     submission of the FY2018 proposed external auditor 
            contract pursuant to FOMB's Contract Review Policy; and

     any and all other information requested in an effort to 
            lend a hand, evaluate key constraints, and facilitate the 
            prompt delivery of current and future audits.

    Furthermore, the latest 2020 Certified Fiscal Plan and Fiscal Year 
2021 Certified Budget include incentive milestones and additional 
resources to promote and assist with timely completion of the pending 
audits. Some of these incentives and investments include:

     a $1.6 million appropriation to hire staff accountants in 
            the Department of Treasury's Central Accounting Division so 
            that critical skills and capabilities can be retained in-
            house while reducing the reliance on costly professional 
            services;

     a one-time $1,500 bonus to Central Accounting employees, 
            estimated at total cost of $100,000, if both the official 
            2017 CAFR is published and a draft of the 2018 CAFR is 
            provided to the FOMB by November 2020; and

     $36 million in capital expenditure appropriations for the 
            implementation of a new Government ERP system--broken down 
            into $14 million for Wave 1 once a dedicated project team 
            is in place by August 2020, and $22 million for Wave 2 
            after Wave 1 is completed between September 2020 and 
            February 2021.

    Despite the Government's efforts to comply with issuance deadlines 
and FOMB's willingness to assist the Government in any way possible, 
there are still high risks in producing timely audits. Disaggregated 
accounting systems, manual procedures, numerous circular letters, and a 
decentralized OCFO function have contributed to consistent delays in 
the production of audited reports. And that's the real question: what 
will the Department do differently to change processes and procedures 
to ensure we can fix this moving forward on a permanent basis and on 
the basis of best practices?
    FOMB is committed to transparency, accountability, and to the sound 
administration that ultimately results in better services for the 
people on the Island. In light of these goals, it is in the people's 
best interest to conduct this public hearing on the status of the 
overdue audited financial statements of the Commonwealth of Puerto 
Rico. As always, FOMB is in the best position to collaborate with the 
Government, accomplish the objectives of PROMESA, and ensure 
responsible fiscal practices are institutionalized to achieve financial 
sustainability and a return to capital market access at reasonable 
rates.

                                 ______
                                 

   Questions Submitted for the Record to Natalie Jaresko, Executive 
   Director, Financial Oversight and Management Board for Puerto Rico
                  Questions Submitted by Rep. Grijalva

    Question 1. Please provide a status of the debt restructuring 
negotiations and proceedings of the central government and its 
instrumentalities in light of the economic impact of the COVID-19 
pandemic.

    Answer. Given the considerable uncertainty about the effect of 
COVID-19 on Puerto Rico, FOMB believes that the primary focus of the 
Government and FOMB should be to minimize and contain the pandemic.
    As to debt restructuring, even with implementation of far reaching 
growth-inducing structural reforms, the 2020 Fiscal Plan projects that 
the Government cannot afford to pay the public debt as originally 
contracted. Recognizing the importance of the ongoing Title III cases, 
but taking into account these realities, on March 23 FOMB presented a 
motion requesting to adjourn consideration of the proposed Plan of 
Adjustment's disclosure statement hearing until further notice. The 
amended proposed Plan of Adjustment is now on hold and the next status 
report is due on July 15. Similarly, the Government and FOMB filed a 
motion seeking to adjourn the hearing and all deadlines related to the 
PREPA restructuring support agreement proceedings. On May 15, the 
Government and FOMB provided an update stating that all briefing and 
hearing deadlines relating to the restructuring support agreement 
should continue to be adjourned.

    Question 2. In April, the G20 announced a year-long moratorium for 
low income countries on debt-payments and interest accumulation in 
response to the global COVID-19 pandemic and economic crisis that is 
going to hit vulnerable economies hardest. Will the Oversight Board 
adopt a similar position given the already high levels of debt, 
unemployment, and poverty in Puerto Rico, which will only be 
exacerbated by the pandemic? What is your target for a principal 
haircut on the debt that remains to be restructured?

    Answer. A court approved stay is in effect for most of Puerto 
Rico's debt payments, which has aided Puerto Rico in stabilizing its 
finances and developing restructurings for its debt in a sustainable 
manner. In effect, as a result of PROMESA, Puerto Rico has had some 3 
years of relief already.

    As for a target on restructuring of debt, we need to take one step 
at a time. The first step was certifying the 2020 Fiscal Plan, which 
reflects the new reality. The second step is to produce a certified 
Budget consistent with this certified Fiscal Plan ensuring the funding 
of essential services. Thereafter, we will determine how to most 
effectively implement our mandate and restructure Puerto Rico's debts. 
FOMB continues to believe that exiting from Title III is critically 
important for Puerto Rico and we are dedicated to reevaluating our 
existing developments.

    Question 3. After the COVID-19 pandemic started, you made 
statements saying that you would postpone austerity measures for a year 
and acknowledged that the plan of adjustment and fiscal plan need to be 
redrawn. Even the International Monetary Fund has stated that austerity 
is not the answer in these times. Why not shelve austerity altogether 
and focus on growth? How does it benefit the economy of the island to 
continue gutting higher education, municipal budgets, retirees' 
pensions, and other drastic cuts to government spending at a time of 
world economic slowdown and recession?
    Answer. The 2020 Fiscal Plan reflects a 1-year delay in most 
categories of budgetary reductions to allow the Government to focus on 
implementation. This pause in rightsizing includes maintaining the 
subsidies to the University of Puerto Rico (``UPR'') and the 
municipalities at current fiscal year levels. Most agencies will 
maintain their fiscal year 2020 budgets in fiscal year 2021.
    That said, the Fiscal Plans never ``gutted higher education, 
municipal budgets, retirees' pensions or other.'' The Fiscal Plans 
aimed only at achieving fiscal sustainability, 4 years of balanced 
budgets per PROMESA, in light of the economic and population decline. 
Two elements were required to achieve that balance: (1) structural 
reforms that enabled a growing economy and increased budgetary revenues 
as a result; and (2) efficiency measures to decrease expenditures while 
improving government services.
    During the 1-year delay in rightsizing, the fiscal plans will press 
for major structural reforms to restore competitiveness and spur a 
return to prosperity.
    To further promote growth, the fiscal plans will accompany these 
reforms with targeted investments in and support for those on the front 
lines of service delivery.
    Given FOMB's financial projections outlined in my written 
testimony, we consider imperative the Government's implementation of 
the critical, overdue structural reforms in the fiscal plans over the 
next year.

    Question 4. Please provide the projections for tax revenue 
shortfalls this fiscal year FY2020, as well as FY2021.

    Answer. We estimate a revenue reduction of $1.3 billion in the 
current fiscal year 2020, $1.2 billion in fiscal year 2021, and $774 
million in fiscal year 2022, relative to the revenue projections in the 
2019 Fiscal Plan.

    Question 5. The certified 2020 Fiscal Plan estimates that the 
economy of Puerto Rico will receive an infusion of approximately $83 
billion of disaster relief funding, from federal and private sources. 
The expected funding from the Federal Government has been slow in 
reaching the Island. The greatest share of that projected federal 
funding is from FEMA ($48 billion) and HUD ($20 billion).

    5a. How much of the federal funding has been received to date?

    Answer. The $83 billion of disaster relief funding from federal and 
private sources will be disbursed in the hurricane reconstruction 
effort over a period of 15 years. It will be used for a mix of funding 
for individuals, funding for the public, and to cover part of the 
Commonwealth's share of the cost of disaster relief funding. In 
addition, FOMB estimates earthquake-related funds amounting to $595 
million from FEMA to cover the damage caused by the earthquakes at the 
beginning of 2020. To date, the Commonwealth has received $16.2 billion 
from FEMA and other federal agencies, $3.2 billion in CDBG-DR funds 
from HUD, and over $6 billion from private insurance payments.

    5b. Does the projected amount in FEMA funds for things like 
Individual Assistance (IA) take into account FEMA's history of denying 
over 60 percent of IA claims after Maria and the recent earthquakes?

    Answer. The data we use is provided directly by FEMA regarding 
approved IA only.

    Question 6. The CARES Act made Puerto Rico eligible for low-
interest loans from the Federal Reserve needed due to the COVID-19 
pandemic's impacts on the economy and local budget. A former PROMESA 
Oversight Board contractor is handling this program at the Fed. Did he 
consult with the Oversight Board before the Fed decided to exclude 
Puerto Rico (and the other territories) from eligibility? Did the 
Oversight Board or any of its contractors discuss Puerto Rico's 
eligibility with anyone at the Fed or the U.S. Treasury Department?

    Answer. FOMB has not engaged in any conversations with the Fed or 
the U.S. Treasury Department as to the low-interest loans from the 
Federal Reserve. We understand these are meant to help states and 
municipalities with liquidity shortfalls, which is not the case of 
Puerto Rico.

    Question 7. $4.9 billion was appropriated after Hurricane Maria for 
low-cost forgivable Community Disaster Loans for Puerto Rico and the 
U.S. Virgin Islands based on projections of revenue losses that, in 
Puerto Rico's case, were vastly overestimated. The White House 
suggested Puerto Rico could expect about $4.65 billion of the total, 
but only a few hundred million were disbursed to Puerto Rico's 
municipalities because the territorial government did not have a 
liquidity problem as projected. Since Puerto Rico was excluded from the 
Federal Reserve program--contrary to Congress' intent--should a 
reprogramming of the $4 billion in Community Disaster Loans that were 
appropriated but have not been used be disbursed to Puerto Rico?

    Answer. The intent of both the Community Disaster Loans and the 
recent Federal Reserve program appear to be providing liquidity support 
to local governments as needed when revenue losses are substantial. At 
this time, the territorial government has not experienced liquidity and 
revenue losses that would cause budgetary reductions. As a result of 
the budgeting practices in place since PROMESA was adopted, the 
territorial government was able to increase spending by some $500 
million during the pandemic to support front line public health and 
public safety workers, as well as those most affected by the economic 
consequences of social distancing measures. Moreover, the FY2021 
General Fund budget also is higher than the previous year budget, 
notwithstanding revenue declines.

    Question 8. Ms. Jaresko, in one of your previous congressional 
testimonies before the House Natural Resources Committee, you said that 
the Oversight Board concluded that at least $6 billion of Puerto Rico's 
debt was illegal. Yet, instead of pursuing that claim you settled with 
bondholders out of court. What message does it send during debt 
restructuring negotiations that the Oversight Board is willing to allow 
Wall Street and other investors to keep charging the people of Puerto 
Rico for debts accrued in an illegal fashion?

    Answer. A Special Investigation Committee of FOMB hired Kobre & Kim 
to conduct a comprehensive study of Puerto Rico's debt and its 
relationship to the financial crisis and to determine whether any of 
Puerto Rico's debt should be challenged. As a result of this review, 
FOMB with the Official Committee of Unsecured Creditors (``UCC'') 
objected to the validity of over $6 billion of general obligation 
(``GO'') bonds issued in 2012 and 2014. In early 2020, during the 
negotiation over the Commonwealth Plan of Adjustment, FOMB through the 
court-ordered mediation process reached a settlement on both the 
validity of the 2012 and 2014 GO bonds. A settlement avoids the costly 
and risky litigation that would be necessary to conclude the validity 
claims. As noted, the Court proceedings as to the Plan of Adjustment 
remain adjourned at this time.

    Question 9. Serious concerns have been raised after it became 
public that the Oversight Board has contracts with McKinsey, which has 
a subsidiary that owns Puerto Rico bonds. What measures are you taking 
to prevent this conflict of interest from happening again?

    Answer. Transparency is critically important, and we are committed 
to making sure our disclosure rules are fair and comprehensive. We 
carefully looked into the disclosures of our consultants and hired an 
independent law firm to do an independent investigation. The report \1\ 
did not find any violation of the disclosure rules governing our 
vendors or those required by law. Nonetheless, we did implement 
additional disclosure rules, as suggested in the report, to make more 
explicit the intolerability of conflicts of interest.
---------------------------------------------------------------------------
    \1\ Final Investigative Report--McKinsey & Company, Inc. prepared 
by Luskin, Stern & Eisler LLP, special counsel to FOMB, available at 
https://drive.google.com/file/d/1avv872k0XNon EiN9x0UzNUCUYDtYkqOd/
view.

    Question 10. In October 2019, you testified before this Committee 
that you supported Rep. Velazquez's H.R. 683--Puerto Rico Recovery 
Accuracy in Disclosures Act of 2019 (PRRADA) bill to require all 
PROMESA consultants, advisors, and law firms to disclose their 
conflicts of interest. Do you still support Congress passing the PRRADA 
bill and have PROMESA advisors like McKinsey increased their 
transparency or at least ceased trading in Puerto Rico debt while they 
---------------------------------------------------------------------------
also serve as a bankruptcy advisor?

    Answer. FOMB continues to support the legislative proposal of Rep. 
Velazquez in the bill to extend the disclosure requirements of the 
Federal Rules of Bankruptcy Procedure to professionals employed by 
FOMB, Court, or debtor to avoid conflicts of interest and advance 
greater transparency and disclosure. The proposal, however, needs to be 
modified to assure its practical implementation. It currently requires 
disclosures of each professional's connections with all creditors, and 
in the Puerto Rico Title III cases over 165,000 creditors filed proofs 
of claim. We look forward to working with Congress on technical 
amendments to further the bill's objectives.

    Question 11. The Oversight Board wrote a letter supporting the 
establishment of new incentives to reshore U.S. manufacturing 
(specifically pharmaceutical and medical devices plants currently 
located in China) to return to Puerto Rico. There are two bills that 
have similar objectives, one by Rep. Plaskett, H.R. 6648--Territorial 
Economic Recovery Act, to cut the GILTI tax for companies that create 
jobs in the territories. The other is from Resident Commissioner 
Gonzalez-Colon, H.R. 6443--Securing the National Supply Chain Act, that 
would apply to the states and territories establishing depressed zones 
for manufacturing investment. Which of these does the Oversight Board 
support?

    Answer. FOMB has not taken a position with regard to either bill. 
We support the reshoring of U.S. manufacturing to Puerto Rico and 
recognize the certain economic growth, jobs, and development that would 
result.
    One element of our mandate under PROMESA is to take opportunities 
to support the Government in its efforts to pursue prudent actions to 
promote economic stability and create the conditions for growth. Puerto 
Rico is a center of excellence within the Nation and should play a 
leading role in supporting pharmaceutical or medical device 
manufacturing. It is in this spirit that FOMB is conducting a 
comprehensive study for the private sector and the Government to define 
a comprehensive, actionable plan to reactivate manufacturing.

    Question 12. During recent natural disasters and the COVID-19 
pandemic, the University of Puerto Rico (UPR) has been essential for 
recovery efforts. As an example, we can see the work done by the Puerto 
Rico Seismic Network, which is part of the UPR, and has been essential 
during the earthquake emergency to evaluate, inform and educate in 
protection of civil society. Also, health professionals of the Medical 
Sciences Campus have been key to the COVID-19 medical task force 
created by the Government of Puerto Rico to guide them in the decision-
making process to control the spread of the pandemic. In that sense, 
the UPR can be distinguished from other Universities in the country, 
because it provides essential public services and plays an important 
socioeconomic role that otherwise would not exist for the residents of 
Puerto Rico. As the fiscal plans for the next years keep reducing the 
budget of the UPR, and thus the possibilities for it to operate and 
develop such essential programs, has the Oversight Board identified 
other ways that such essential public services would be provided to the 
residents of Puerto Rico?

    Answer. UPR has played and undoubtedly will continue to play an 
essential role in Puerto Rico's recovery and its future. In light of 
COVID-19, the 2020 UPR Fiscal Plan provides a 1-year delay in the 
reduction of the annual appropriation from the Government and the 
previously scheduled tuition, fees, and dues increases. In the longer 
term and more fundamentally, FOMB believes that the greatest challenges 
to UPR are falling enrollment, an aging infrastructure, and a pension 
system that is at serious risk of insolvency soon.
    In the coming fiscal year, UPR needs to focus on increasing 
revenues, attracting more students, implementing scholarship funds to 
help those students who need financial assistance, preserving its 
faculty, securing the pensions of its staff, and cutting administrative 
costs. The UPR Fiscal Plan does not foresee any campus closures, any 
decreases in teaching staff, any decreases in student services, yet 
does require efficiency in administration of the 11 campuses. 
Furthermore, to address future tuition increases and students in need 
of assistance, the Commonwealth Fiscal Plan establishes an over $200 
million scholarship fund that will be administered by the non-profit 
Fundacion Comunitaria. In addition, a special $30 million tuition-
remission fund is established for UPR medical students.

    Question 13. The Oversight Board insists that budget cuts to the 
University of Puerto Rico do not risk the accreditation of the 
educational institution and will not result in it losing its U.S. 
Department of Education certification. In several instances, the 
Oversight Board cites an opinion provided by the U.S. Department of 
Education to that effect. Can you confirm that this is the position of 
the Oversight Board and that it is sustained in a written opinion of 
the U.S. Department of Education? If so, can the Oversight Board 
provide this Committee with a copy of the written opinion it refers to?

    Answer. FOMB is not authorized to speak on behalf of the U.S. 
Department of Education. A clean reading of Title IV of the Higher 
Education Act makes it clear that a restructuring under Title III or 
Title VI of PROMESA does not trigger the Title IV ``bankruptcy'' rules.

    Question 14. In the 2020 Fiscal Plan, the Oversight Board 
completely defunded the public broadcasting system and, according to 
Director Marrero, attempted to micromanage the Government of Puerto 
Rico through such measures as specifying what agencies should perform 
promotional activities for the new earned income tax credit and 
imposing requirements on street parking. Can you explain why the 
Oversight Board needs to tell elected government officials what 
agencies should be involved in promoting its earned income tax credit 
and impose requirements on street parking? Or do you dispute his 
testimony?

    Answer. FOMB disputes Director Marrero's testimony 
mischaracterizing FOMB's actions as micromanaging. In each of these 
alleged instances, FOMB acted in accordance with its mandates under 
PROMESA. For almost 4 years, the Government has been slow in 
implementing the reforms needed to grow the economy.

    On the two examples of ``micromanaging,'' we would like to correct 
the record.

     On ``promotional activities for the earned income tax 
            credit:''

      The earned income tax credit (EITC) is key to promoting labor 
            force participation and reducing poverty. Implementation of 
            across mainland states and have resulted in meaningful 
            gains in formal labor force participation, especially among 
            low- to moderate-income workers. The of the EITC is 
            impactful when the targeted population's appreciation of 
            its value affects their decision whether to stay in the 
            formal economy or seek employment in Puerto Rico or 
            elsewhere.

      Although the Government implemented an EITC for tax year 2019, it 
            did not include a robust promotional campaign as required 
            by the Certified Fiscal Plan. Hacienda's EITC outreach 
            centered on sending circular letters to tax preparers and 
            establishing a few outreach centers to discuss EITC with 
            potential filers. The centers opened in late February and 
            closed on March 15th due to the pandemic. By relying on an 
            in-person outreach campaign after the tax year was over and 
            failing to establish a more robust promotional strategy 
            (e.g. via digital channels, targeted marketing) throughout 
            2019, the benefit of the EITC has been muted. To maximize 
            the EITC's impact, the Government must urgently assure that 
            individuals are aware of its benefits.

     On ``imposing requirements on street parking:''

      As part of the Fiscal Plan development process, FOMB has required 
            from the Government ``initiatives to create an integrated 
            multimodal transport system across the Island, including a 
            plan to execute on the initiatives and reflect any 
            Government expenditures to implement these initiatives.'' 
            When the Government failed to provide such detail, FOMB 
            included the following in the Fiscal Plan:

                 ``Public transit agencies should work with the 
        Government and local municipal authorities to promote the 
        adoption of innovative curb management practices (e.g., dynamic 
        pricing for on-street parking, replacing on-street parking with 
        drop-off zones). These practices would raise the cost of car 
        usage and would incentivize commuters to use public transit. 
        They would also generate funds that could improve service 
        quality in the communities they service (e.g., construct more 
        and better bus shelters).''

      Dynamic pricing for on-street parking and replacing on-street 
            parking with drop-off zones are examples of initiatives the 
            Government should undertake to improve the Island's transit 
            system, especially in the San Juan metropolitan area, which 
            is the 25th most congested city in the United States.

    In both cases, if the Government had implemented best practices on 
its own, there would be no need to describe the actions in the 
Certified Fiscal Plan. However, to maximize the benefit of the EITC and 
to increase the availability and convenience of public transport to 
residents, which reduces congestion, pollution, and increases mobility, 
we identified the best practices.
    As to WIPR, in January 2019 FOMB recommended that the Government 
transfer ownership of WIPR's assets to a private nonprofit entity. In 
April 2019, the Government accepted the recommendation and began 
implementing the change. However, to date, there has been no progress.

    Question 15. The Oversight Board decided that a major way to 
attract job-creating investments in Puerto Rico would be to repeal the 
law that requires employers to provide severance pay if they fire 
employees without being able to show cause, ``Law 80.'' The Oversight 
Board convinced then Governor Ricardo Rossello and represented this as 
an agreement with the entire Government. However, the Puerto Rico 
Senate passed a bill that would have repealed Law 80 for new hires. The 
Oversight Board rejected this proposal. Since the purpose of the repeal 
was to create new jobs and the branch of government that writes the 
laws in Puerto Rico was willing to repeal the law for new hires, why 
didn't the Oversight Board accept the legislation?

    Answer. FOMB believes that unless Puerto Rico substantially 
increases its labor force participation and employment, incomes will 
fall even farther below U.S. states and outmigration will continue to 
grow. Pre-COVID labor participation in Puerto Rico was around 40 
percent, while it was 60 percent on the mainland, and 60 percent in 
nearby island economies such as Dominican Republic. Increasing labor 
force participation may be the single most important objective for 
long-term economic well-being in Puerto Rico.
    FOMB believes that labor reform, especially including transforming 
Puerto Rico into an ``employment-at-will'' jurisdiction, will improve 
the vibrancy of the local labor market, make Puerto Rico more 
competitive and attractive for job-creating investments, promote more 
hiring within the formal economy, and produce more revenue to the 
government.
    The bill that you describe would have repealed Law 80 only for new 
hires and provided that individuals formerly covered by Law 80 would 
remain protected. Because that law failed to repeal Law 80, did not 
change Puerto Rico to an at-will employment jurisdiction, and 
potentially would have created greater administrative/regulatory burden 
in recordkeeping for business, FOMB did not accept the legislation.

    Question 16. Ms. Jaresko, you have sued the Government of Puerto 
Rico for not turning over documents related to the controversial 
purchase of rapid COVID-19 test kits for $38 million, that never 
arrived. What are the systemic contracting issues you have identified 
that should be addressed in order to prevent this kind of situation 
from happening again?

    Answer. FOMB asked the Government on April 6 and several times 
thereafter for the documents that should precede any contract or 
purchase order, such as emails, text messages and memos showing the 
procurement and decision-making process. Given the numerous examples of 
failure in emergency procurement in the past 3 years, we requested this 
information to determine what procurement processes were indeed 
executed, what lessons could be learned, so that a more transparent and 
accountable emergency procurement process could be put in place to 
avoid similar crises in the future. Unfortunately, the Government did 
not send these documents despite multiple requests from FOMB. 
Therefore, FOMB was forced to file a complaint in federal court to 
compel the Government to provide the requested required documents. This 
litigation is still pending.

    Question 17. Senate Finance Committee Chairman Charles Grassley 
wrote a letter to Governor Wanda Vazquez outlining a series of well-
documented incidents of corruption and mismanagement that have been 
widely reported by the media in Puerto Rico. What specific measures is 
the Oversight Board implementing to address each of his concerns and 
what steps are you taking to ensure these incidents never happen again?

    Answer. FOMB has taken the following actions:

    Budgeting practices: FOMB-certified budgets include four sets of 
major improvements in budgeting practices. First, FOMB worked with the 
Government to provide a deeper level of detail in the budget, detail 
that had not previously been available to the Legislature or public, 
enabling a better understanding of how funds are being spent. Second, 
the consolidated budget is more comprehensive and captures items not 
budgeted previously, including all cash subsidies. Moreover, the Fiscal 
Plan calls for the Government to consider limiting tax credits issued 
each year by capping the notional amount authorized, and including 
sunset provisions that eliminate the ability to claim unused credits 
previously issued. The Government also now has the capacity to make 
decisions around limiting and more selectively targeting tax 
expenditures based on the recent publication of the first-ever tax 
expenditures report. Third, the published budget resolution includes 
more detailed specific concepts of spending within the personnel and 
non-personnel categories for each agency to provide a more detailed 
look at how the Government uses its funds. Finally, a series of budget 
controls are established within the budget to improve fiscal 
responsibility and discipline.

    Transparency: Fostered more transparency and visibility into Puerto 
Rico's government finances, including Puerto Rico's liquidity, budgets, 
and other intergovernmental spending--notwithstanding the Government's 
continued delays in completing its overdue audited financial 
statements. Moreover, the people of Puerto Rico now have access to 
public reports, including: bank balances, quarterly budget to actuals, 
payroll and attendance, and tax expenditures.
    Contract review: FOMB is reviewing contracts for approval pursuant 
to Section 204(b)(2) of PROMESA to assure that they ``promote market 
competition'' and ``are not inconsistent with the approved fiscal 
plan''. Further, in an effort to comply with Section 204(b)(3) of 
PROMESA, FOMB is currently enhancing its Contract Review & Procurement 
Office with seasoned procurement, contract management and quality 
resources with the sole purpose of bridging collaboration with the 
government toward providing an end-to-end support in their procurement 
process, from the identification of the need(s) to the award of the 
service/product, the contract development itself and the subsequent 
follow up on critical essential services deliverables/milestones. The 
new office, which is expected to start in July 2020, is also working on 
reviewing and approving Government procurement regulations on purchases 
and contract registration to make the procurement and contracting 
process more transparent. By promoting market competition, the Contract 
Review & Procurement Office seeks to aid the Government in becoming 
more transparent and accountable to the people of Puerto Rico.

    Document requests for COVID-19 related issues: FOMB seeks to 
understand the processes under which these contracts were negotiated, 
procured, and approved to, among other things, increase the public's 
faith in the Government contracting process and improve the emergency 
procurement process. FOMB has requested all this information to the 
Government. Unfortunately, much of it has not been provided after 
months of requests in writing. For such reason, FOMB filed a complaint 
in the U.S. District Court for the District of Puerto Rico to compel 
the Government to provide the missing documents.

    Question 18. Due to a lack of government revenue, municipalities in 
Puerto Rico are highly concerned with liquidity. Although the Oversight 
Board approved a $185 million line of credit for the Municipal Revenue 
Collection Center, known as CRIM, the Government of Puerto Rico 
rejected the loan. Shortly after, the Puerto Rican legislature tried to 
push for a bill that would grant access to the Oversight Board's 
emergency funds to obtain this $185 million line of credit. The 
Oversight Board rejected this proposal. What steps will the Board be 
taking to address the liquidity of municipalities given these 
challenges?

    Answer. FOMB is working with CRIM and the Government on how to 
reimburse the Commonwealth for amounts paid to the municipalities under 
the now invalid Law 29. FOMB has developed a plan to reimburse the 
Commonwealth, with several options which only incrementally affects the 
budgets of the municipalities in Fiscal Year 2020.
    The Government and FOMB were aligned in offering CRIM a $185 
million line of credit, to help with its decision to defer property tax 
revenue in light of the pandemic, and CRIM rejected it. FOMB has asked 
CRIM, repeatedly, for an amount works to structure a line of credit 
facility. The Puerto Rico legislature was considering legislation in 
the Senate enabling the $185 million line of credit and legislation in 
the House providing unbudgeted funds to the municipalities.
    Moreover, FOMB has also adopted a number of measures to address 
these liquidity situation, such as authorizing use of funds from the 
Emergency Reserve Fund for municipalities, $15 million for 18 
municipalities impacted by the January 2020 earthquakes, $100 million 
as part of the COVID Emergency Measures Support Package, and over $30 
million to cover the demolition and debris removal in 11 
municipalities. In addition, the territorial government has allocated 
an additional $100 million to municipalities for eligible COVID-19 
related expenses from its CARES Act funding.

                   Questions Submitted by Rep. Sablan

    Question 1. The Oversight Board wrote in support of the 
establishment of new incentives to restore U.S. manufacturing--
specifically pharmaceutical factories and medical device plants 
currently located in China--to return to Puerto Rico. There are two 
bills that have similar objectives. One by Rep. Stacey Plaskett to cut 
the Global Intangible Low-taxed Income (GILTI) tax for companies that 
create jobs in the territories. The other bill by Resident Commissioner 
Jenniffer Gonzalez-Colon would provide federal tax incentives to 
economically depressed areas, also known as distressed zones, for the 
manufacturing of vital medical supplies. Which, if any, of these bills 
does the Oversight Board support?
    Answer. As stated in reply to the same question from Chair 
Grijalva, FOMB has not taken a position on either bill. However, as 
elaborated above, FOMB is conducting a comprehensive study for the 
private sector and the Government to define a comprehensive, actionable 
plan to reactivate manufacturing in Puerto Rico.

                   Questions Submitted by Rep. Costa

    Question 1. In order to help Puerto Rico achieve fiscal 
responsibility and sustainability, PROMESA required that Puerto Rico's 
audited financials be made current yet Puerto Rico remains behind in 
its audited financials even though PROMESA is now almost 5 years old. 
Are there factors attributing to the delay of the financial auditing 
process? If so, could you please elaborate on which factors?

    Answer. FOMB has received the FY 2016 audited financial statements 
from the Government, but the FY 2017 financial statements remain 
incomplete. The latest date targeted by the Secretary of Hacienda to 
provide those statements is July 30, 2020. For a significant period of 
time, FOMB has been urging the Government to update its audited 
financial statements and pressing the auditors to meet with those 
elements that are delayed. The factors that have led to historic delays 
in the issuance of audited financial statements include the numerous 
and disaggregated accounting systems, manual procedures, numerous 
circular letters, and a decentralized Chief Financial Officer function.

    Question 2. The Financial Oversight & Management Board in an early 
fiscal plan was projected to spend $1.5 billion on advisory fees. 
However, since then, this number has increased and there are growing 
concerns over where such fees are going. Could you please provide the 
amount the Commonwealth and the Board has spent on aggregate financial 
and legal advisory fees per year? Could please elaborate on why the 
fees have increased?

    Answer. FOMB's budget for this fiscal year is $58M, which we 
decreased by 11 percent from last year by hiring more staff and 
reducing our reliance on outside consultants. FOMB is working with the 
Government to fix a decades-long problem. To do so, FOMB has recruited 
the best firms that provide expertise in the many areas that FOMB needs 
to work to achieve lasting, sustainable solutions to fiscal management 
and practices.

    FOMB's operating budget per year is included below:


----------------------------------------------------------------------------------------------------------------
           FY 17                        FY 18                        FY 19                       FY 20
----------------------------------------------------------------------------------------------------------------
                     $31M                         $60M                        $64M                        $58M
----------------------------------------------------------------------------------------------------------------


    The Title III process includes many professional and advisor fees 
from FOMB as well as the Government, the Unsecured Creditor Committee, 
and the Committee of Retirees, among others. The growing cost for the 
Title III process is largely due to the large number of lawsuits 
pending and challenges in reaching consensual agreements for debt 
restructuring.
    In total, for the period from FY2018 to FY2024, the Title III 
restructuring-related expenditures projection in the 2020 Fiscal Plan 
continues to be $1.1 billion (same as the 2019 Fiscal Plan), however, 
uncertainty stemming from the series of recent natural disasters and 
ongoing COVID-19 pandemic have drawn out the restructuring process 
longer than anticipated. When adding FOMB's operating costs for this 
same period, the total cost adds up to around $1.5B. Thus, it is not 
correct that the number has increased.

                 Questions Submitted by Rep. Cartwright

    Question 1. The 2020 Fiscal Plan includes various projections of 
the GNP shortfalls due to the pandemic. However, I'd like more clarity 
on the impact on tax revenue for this year and upcoming years. How 
severely were tax revenue projections impacted this fiscal year? What 
do the projected tax revenue projections look like for the upcoming 
years?

    Answer. We estimate a revenue reduction of $1.3 billion in the 
current fiscal year 2020, $1.2 billion in fiscal year 2021, and $774 
million in fiscal year 2022, relative to the revenue projections in the 
2019 Fiscal Plan.

    Question 2. In the hearing before this Committee in May 2019, you 
called the University of Puerto Rico ``the island's crown jewel'' and 
stated that ``in many ways the future of Puerto Rico depends on a 
vibrant and sustainable UPR''. What steps has the Financial Oversight 
and Management Board taken to protect this crown jewel? How can the 
Board ensure that there is sufficient funding for the institution to 
fulfill its role?

    Answer. In response to the same question from Chair Grijalva, I 
have elaborated on FOMB's substantial commitment to the protection of 
UPR and financial support for UPR, as well as the fundamental financial 
challenges which UPR must address and the structural reforms it must 
implement in the coming years.
    To reiterate, in the coming fiscal year, UPR needs to focus on 
increasing revenues, attracting more students, implementing its 
scholarship funds, preserving its faculty, securing the pensions of its 
staff, and cutting administrative costs.

                   Questions Submitted by Rep. Garcia

    Question 1. During last week's hearing you stated that the 
allegations of insider trading during the mediation process are not the 
FOMB's responsibility and that the bankruptcy court, the mediation team 
and law enforcement were responsible for evaluating these claims and 
determining whether wrongdoing occurred. If participants in the 
mediation process are found to have engaged in insider trading during 
the private negotiations, could that revelation undermine the 
legitimacy of the bankruptcy process? What will FOMB do to ensure 
confidence in the process moving forward?

    Answer. This question raises issues extremely important to FOMB. 
The mediation process was introduced early in the Title III cases by 
the presiding judge, U.S. District Judge Laura Taylor Swain. Judge 
Swain appointed several sitting federal judges to serve as mediators. 
The mediation process is governed by a mediation agreement approved by 
Judge Swain. Among other things, it requires strict confidentiality. 
The mediation process has had several huge successes that led to the 
successful Title III restructuring of COFINA involving approximately 
$18 billion of debt, and Title VI restructuring of Government 
Development Bank involving more than $4 billion of debt. Just prior to 
COVID-19, the mediation process led to the proposal of a Title III plan 
of adjustment for the Commonwealth and PBA supported by the statutory 
retiree committee and holders of many billions of the General 
Obligation bonds.
    From the beginning, the mediation process embodied several 
practices designed to instill fairness and to deter or prevent wrongful 
insider trading. These practices included (a) enforcement of Bankruptcy 
Rule 2019 requiring groups of holders to disclose, among other things, 
their debt holdings and changes in their debt holdings, (b) limiting 
some mediation sessions to creditors' advisors so the creditors 
themselves would not receive inside information about the negotiations, 
and (c) `blowout dates,' under which the creditors themselves would 
engage in mediation sessions knowing that the offers and counteroffers 
would be publicly disclosed by a date certain (the blowout date) after 
which creditors could trade because the information would no longer be 
inside information.
    Significantly, insider trading provides unfair profits to the 
entity trading on material inside information and simultaneously causes 
prices to move in the direction of fair value. Therefore, while such 
insider trading is wrongful and its perpetrators should be punished, it 
does not affect the legitimacy of the Title III process which benefits 
from securities prices adjusting to fair value. FOMB is adamantly 
opposed to allowing anyone in the Title III process to abuse it for any 
purpose, especially for wrongful personal gain. Therefore, if changes 
in price levels are shown to precede the blowouts of material inside 
information, FOMB would support actions by the Title III court to 
require creditors and anyone else privy to the information to disclose 
their trading records. Any entities proven to have traded on material 
inside information should be compelled to disgorge all wrongful profits 
and to pay penalties.

                   Questions Submitted by Rep. Bishop

    Question 1. PROMESA required that Puerto Rico's audited financials 
be made current, yet Puerto Rico is further behind in its audited 
financials today than it was when PROMESA was passed. Is this a failure 
of the FOMB or the Commonwealth or both?

    Answer. FOMB has helped foster more transparency and visibility 
into Puerto Rico's government finances, including Puerto Rico's 
liquidity, budgets, and other intergovernmental spending. The issue of 
audited financials, however, is squarely within the authority and 
responsibility of the Government. Disaggregated accounting systems, 
manual procedures, numerous circular letters, and a decentralized Chief 
Financial Officer function have contributed to consistent delays in the 
production of audited reports.

    FOMB, in its oversight role, has been actively collaborating in an 
attempt (1) to identify the challenges to issuance (ii) to ensure that 
audits are completed as quickly as possible; (ii) to institutionalize 
best practices within the Government; and (iii) to enable the 
Government to have appropriate resources for the preparation of the 
CAFRs. During this fiscal year, FOMB has been conducting recurring 
meetings, in some cases on a weekly basis, with the Department of the 
Treasury, the Government's external auditors, and key component 
entities within the Government to help expedite the overdue delivery of 
the FY2017 CAFRs and assess the timing of the FY2018 audit. In this 
spirit, FOMB has provided recommendations on relevant administrative 
orders submitted FOMB's consideration pursuant to the Rules, 
Regulations and Orders Review Policy; and requested the Government 
provide:

     weekly updates from the Department of Treasury on progress 
            and risks to the completion of the FY2017 CAFRs;

     progress reports on the FY2018 audit preparation;

     submission of the FY2018 proposed external auditor 
            contract pursuant to FOMB's Contract Review Policy; and

     any and all other information requested in an effort to 
            lend a hand, evaluate key constraints, and facilitate the 
            prompt delivery of current and future audits.

    On July 1, 2020, FOMB held a follow up hearing on the status of the 
issuance of the audited financials, during which it required the 
Government to submit a 30-day plan to urgently speed up the issuance of 
the audited financials. This plan will be presented to FOMB at the end 
of this month.

    Question 2. With aggregate balances now totaling more than $19 
billion sitting in Commonwealth accounts (and virtually half of that 
being unrestricted in use), why have the Commonwealth and FOMB not been 
able to make more development progress, and also bring bankruptcy 
proceedings to a conclusion? Why haven't these funds been utilized to 
help Puerto Rico develop, and to honor what obligations could be 
honored in a timely fashion?

    Answer.

(a) Answer Regarding Development

    FOMB's fiscal plans have pressed for major structural reforms to 
restore competitiveness, enable growth, and spur a return to 
prosperity. These include human capital, welfare, and education reforms 
to advance successful participation in the formal labor market, reforms 
to streamline core business processes to improve the ease of doing 
business and enable job creation, and proposals to enable reliable 
power and stable infrastructure for businesses and households. In 
addition to these structural reforms, the fiscal plans have focused on 
improving the responsiveness and efficiency of the Government, while 
reducing unnecessary administrative expenses.
    Since 2017, and notwithstanding the environmental and public health 
emergencies, FOMB has been able to drive meaningful progress in 
creating a leaner, more affordable government. This has resulted in the 
ability of the Government to increase expenditures at a time of crisis, 
while ensuring total expenditure levels remain within total available 
revenues.
    Unfortunately, despite this real progress in the face of ongoing 
crises, the Government has still failed to achieve meaningful economic 
growth through structural reforms or drive operational change that 
would deliver greater responsiveness and efficiency. Efforts at private 
sector labor market reforms have stalled, the progress from human 
capital and welfare reform is not expected for several years, and the 
recent efforts to improve the ease of doing business have not changed 
the burden on businesses in any meaningful way.
    Rather than achieving budget savings by improving the way services 
are delivered or discontinuing duplicative or unimportant services, the 
Government has enacted broad-based early retirement programs to reduce 
headcount, creating major gaps in capabilities and functionality and 
potentially putting services at risk. Across many areas, the Government 
has struggled to implement changes, with even new investments often not 
driving the intended use. Absent real reform, Puerto Rico may not ever 
fully recover from all its recent crises. The 2020 fiscal plan lays out 
the meaningful changes needed to lead to an effective, responsive 
government and growing economy.

(b) Answer Regarding Bankruptcy Proceedings

    To date, FOMB has successfully: (1) developed and the District 
Court has confirmed a Title III Plan of Adjustment for COFINA; (2) 
authorized and the District Court has confirmed a Title VI Plan of 
Adjustment for GDB; and (3) supported a nearly $1 billion loan 
restructuring agreement for PRASA with EPA and USDA.
    FOMB proposed an amended Plan of Adjustment in February 2020 to 
restructure $35 billion of debt and other claims against the 
Commonwealth of Puerto Rico, the Public Building Authority, and the 
Employee Retirement System, and more than $50 billion of pension 
liabilities. The Plan of Adjustment significantly reduces $35 billion 
in debt liabilities to $11 billion, or about 70 percent, and ensures 
that almost 75 percent of current and future pensioners are not cut. 
The Plan of Adjustment also provides predictability to public employees 
via updated collective bargaining agreements and restores over $1.3 
billion of withheld employee contributions to Sistema 2000. The Plan of 
Adjustment has been supported by the Official Committee of Retirees 
representing retired government employees, current government employees 
represented by the Public Service Union as the Puerto Rico chapter of 
AFSCME, and the Lawful Constitutional Debt Coalition, a group of 
investors and funds holding Puerto Rico's general obligation bonds and 
PBA bonds.
    FOMB also has been seeking broader active public employee support 
and feedback, including from teachers represented by the Puerto Rico 
chapter of AFT. The Special Investigations Committee hired the law firm 
Kobre & Kim to provide a complete, independent review of the 
Government's debt, ultimately receiving a comprehensive investigative 
report. Following on Kobre & Kim's findings, FOMB undertook review of 
potential infirmities of debt issued by Puerto Rico and its various 
agencies and instrumentalities. Through its Special Claims Committee, 
FOMB objected to the validity of over $11 billion of general 
obligations bonds and filed several hundred complaints against entities 
to recover their payment related to issuance of that debt.
    That committee also filed complaints against over 20 banks, law 
firms, and other parties to recover fees earned in issuance of nearly 
$9 billion in bonds. Given the considerable uncertainty about the 
effect of COVID-19 on Puerto Rico, however, FOMB continues to believe 
that the primary focus of the Government and FOMB should be to minimize 
and contain the pandemic. Furthermore, even with implementation of far 
reaching growth-inducing structural reforms, the 2020 Fiscal Plan 
projects that the Government cannot afford to pay the public debt as 
originally contracted.
    Recognizing the importance of the ongoing Title III cases, but 
taking into account these realities, on March 23 FOMB presented a 
motion requesting the Title III court to adjourn consideration of the 
proposed Plan of Adjustment's disclosure statement hearing until 
further notice. The proposed Plan of Adjustment is now on hold and the 
next status report is due on July 15.
    As to PREPA, FOMB and the Government filed a motion seeking to 
adjourn the hearing and all deadlines related to the PREPA 
restructuring support agreement. On May 15, FOMB and the Government 
provided a required update, stating that all briefing and hearing 
deadlines relating to the restructuring support agreement should 
continue to be adjourned.

(c) Answer Regarding Use of Funds to Help Puerto Rico Develop and Honor 
Obligations

    FOMB is dedicated to the development of the Island and honoring its 
commitments to all stakeholders, including residents, retirees, and 
creditors.
    It is important to clarify that Puerto Rico's cash balances are not 
all unrestricted. The major categories of restrictions that reduce the 
cash available include monies with federal and state legal 
restrictions, including federal funds, working capital requirements, 
and cash set aside to replenish emergency reserves. Moreover, part of 
the cash was contemplated to be used as part of the proposed 
Commonwealth Plan of Adjustment, including union and retiree 
settlements, a pension trust, and reinstatement of pensions 
contributions.
    Fiscal Plans certified by FOMB have pressed for major structural 
reforms to restore competitiveness, enable growth, and spur a return to 
prosperity. These include human capital, welfare, and education reforms 
to advance successful participation in the formal labor market, reforms 
to streamline core business processes (e.g., paying taxes, registering 
property and obtaining permits) to improve the ease of doing business 
and enable job creation, and proposals to enable reliable power and 
stable infrastructure for businesses and households. In addition to 
these structural reforms, the Fiscal Plans have focused on improving 
the responsiveness and efficiency of the Government, while reducing 
unnecessary administrative expenses and mitigating the escalating 
growth of healthcare and pension costs, which could otherwise cripple 
future governments.

    The Fiscal Plans have accompanied these reforms with targeted 
investments in and support for those on the front lines of service 
delivery. Over the years, the Fiscal Plans have provided for salary 
raises for teachers, school principals, firefighters, and police 
officers to ensure salaries for these critical frontline roles are more 
competitive. Strategic capital investments have been made in hospitals, 
correctional institutions, public safety equipment, and other 
infrastructure. Moreover, the Fiscal Plans have included increased 
spending in areas that are important for the people of Puerto Rico: 
funds for an Earned Income Tax Credit to encourage more formal labor 
market participation, needs-based scholarships for UPR to ensure every 
student on the Island can access higher education, funds for the Puerto 
Rico Clean Water and Drinking Water State Revolving Fund, and an 
emergency reserve to enable immediate Government action in times of 
crisis, among others. A specific list categories of investments in 
included herein:

     Immediate support for COVID-19 response: Recognizing the 
            imperative for the public health system to focus its 
            efforts on slowing the spread of COVID-19 and healing those 
            affected, as part of the Emergency Measures Support Package 
            certified on March 28, 2020, the FOMB approved $787 million 
            in additional expenditures solely focused on COVID-19 
            response. These funds are intended to provide ``hazard 
            pay'' for frontline workers (including public and private 
            nurses and technicians, police, certain correctional staff, 
            and professionals managing taxes and financial operations), 
            medical and public safety supplies and capital 
            expenditures, distance learning in the public education 
            system, and $100 million in support for municipalities 
            facing reductions in revenue due to the pandemic.

     Investing in critical healthcare infrastructure: FOMB 
            proposed the Government to use remaining FY2020 funds to 
            invest in near-term improvements to the Island's healthcare 
            infrastructure. These opportunities represent $313 million 
            of investment in areas that include addressing critical 
            infrastructure gaps in public hospitals (e.g., the 
            renovation of functionally obsolete facilities, purchase of 
            power generators), instituting and expanding the use of 
            Electronic Health Record programs, expanding access to care 
            through development of telehealth infrastructure, enhancing 
            access to opioid medication and treatment programs, and 
            providing scholarships to healthcare students who are 
            committed to working in underserved areas of Puerto Rico.

     Enhancing healthcare services: The 2020 Fiscal Plan builds 
            on the strategic healthcare investments from prior Fiscal 
            Plans to stabilize and improve the healthcare system. It 
            directs $586 million to improve the availability and 
            quality of care under the Medicaid system, maintain nurse 
            and health professional staffing levels, increase hospital 
            capacity through major capital projects, operationalize the 
            Comprehensive Cancer Center, and enable operational 
            efficiencies.

     Safeguarding public safety: The 2020 Fiscal Plan adds to 
            prior investments, enabling almost $1.3 billion in public 
            safety funding. This includes continuing significant 
            investments made in the May 2019 Fiscal Plan to provide 
            sworn police officers with more competitive salaries and 
            benefits (including, life and disability insurance, Social 
            Security coverage), as well as the final of three 
            installments to cover back pay for police, which represents 
            $122 million in FY2021. These investments are meant to 
            ensure that more sworn officers can remain on Island and 
            serve in the field. Given the emergencies that Puerto Rico 
            has recently experienced, FOMB also believes it is ever 
            more important to ensure that there are enough emergency 
            response personnel available to help residents. The 2020 
            Fiscal Plan provides funds to recruit paramedics and 
            dispatchers, hire additional specialists at the Forensic 
            Sciences Institute, support salary increases for 
            firefighters, and provide public safety equipment, 
            materials, and vehicles.

     Driving education outcomes: FOMB has long recognized that 
            significant and thoughtful investment in the educational 
            system is key to a stronger economic future for Puerto 
            Rico. The 2020 Fiscal Plan includes over $760 million for 
            strengthening English Language Learning training for 
            teachers, bringing psychologists on staff to provide 
            evidence-based therapies for Special Education students, 
            hiring additional public-school nurses, driving 
            digitization to improve management and reporting, and 
            compensating transitory teachers and directors, who PRDE 
            mistakenly excluded from the FY2019 and FY2020 salary 
            raises previously funded by FOMB.

     Strengthening the technology sector: Addressing the 
            digital divide is critical to ensuring that all residents 
            of Puerto Rico can take advantage of the well-documented 
            socioeconomic benefits afforded by Internet connections 
            (e.g., telehealth, distance learning, remote work). 
            Important infrastructure gaps remain, particularly across 
            rural areas of the Island. The 2020 Fiscal Plan includes 
            $400 million to expand access to broadband for the 
            residents of Puerto Rico, thereby improving economic 
            opportunities for those in rural areas. The 2020 Fiscal 
            Plan also recognizes that technology skills are critical 
            for the future of the workforce; it thus includes $50 
            million in funding to invest in workforce development, 
            specifically focused on business- and technology-related 
            disciplines.

     Reactivating the manufacturing sector: The COVID-19 
            pandemic has made it apparent that most raw materials and 
            medical products necessary to ensure national security are 
            manufactured in China, India, and other countries outside 
            the United States. This represents a unique opportunity for 
            Puerto Rico as a capable and reliable venue for 
            manufacturing under the U.S. flag. As part of 
            implementation of the 2020 Fiscal Plan, FOMB will conduct a 
            comprehensive study to update the facts and acquire the 
            knowledge necessary for the private sector and the 
            Government to define a comprehensive and actionable plan to 
            reactivate the manufacturing sector in Puerto Rico.

     University of Puerto Rico: The 2020 Fiscal Plan provides 
            $43 million in FY2021 for the UPR scholarship fund and a 
            total of $179 million over FY2020-FY2025 to meet the needs 
            of the most financially vulnerable students. The 2020 
            Fiscal Plan also provides $30 million for an independently 
            managed scholarship fund for healthcare (e.g., medical, 
            dental, nursing) students and residents who commit to 
            serving in rural and underserved areas.

     Supporting the needs of municipalities: In addition to the 
            $100 million in support post-COVID-19, the Fiscal Plan 
            includes several investments to support municipalities. 
            These include: $185 million available through July 31, 
            2020, for a short-term liquidity facility to ensure that 
            monthly property tax remittances can continue to be 
            advanced to municipalities (given major delays in tax 
            payments), thereby supporting the viability of municipal 
            operations, $110 million ($22 million per year through 
            FY2025) as an incentive for voluntary service 
            consolidation, and up to $92 million to fund demolition and 
            debris removal projects for municipalities in the southwest 
            region of the Island.

     Transforming government services: The 2020 Fiscal Plan 
            includes $94 million to support hiring of additional staff 
            in core programs (e.g., NAP, GSA procurement initiative) as 
            well as incentives to drive change in government, including 
            to publish the 2017 CAFR, conduct an analysis of the 
            correctional system footprint to enable consolidation, 
            implement a common ERP system, and publish private sector 
            incentives.

     Expediting reconstruction efforts: The 2020 Fiscal Plan 
            provides for $750 million in working capital to be made 
            available to facilitate FEMA-approved reconstruction 
            efforts. These funds will accelerate rebuilding efforts by 
            providing the necessary capital upfront, with repayment via 
            reimbursement from the Federal Government.\2\
---------------------------------------------------------------------------
    \2\ The working capital facility is considered a use of the 
Commonwealth balance sheet, not a Fiscal Plan expense.

    Question 3. The FOMB in an early fiscal plan projected an 
astonishing $1.5 billion to be spent on advisory fees. Several years 
hence, how much money have the Commonwealth and FOMB in fact spent on 
aggregate financial and legal advisory fees so far since Puerto Rico 
began defaulting on its debt? Has this process created a class of 
people that benefit financially from the prolonged continuation of 
---------------------------------------------------------------------------
bankruptcy?

    Answer. In total, for the period from FY2018 to FY2024, the 
restructuring-related expenditures projection in the 2020 Fiscal Plan 
continues to be $1.1 billion (without change from the 2019 Fiscal 
Plan), however, uncertainty stemming from the series of recent natural 
disasters and ongoing COVID-19 pandemic have drawn out the 
restructuring process longer than anticipated. When adding FOMB's 
operating costs for this same period, the total cost adds up to around 
$1.5B. Thus, there it is not correct that the number has increased.

    Professionals for FOMB, the Government, the Unsecured Creditors' 
Committee, the Retiree Committee, and the mediation team have requested 
about $704 million in fees and expenses through the Title III 
compensation process through June 8, 2020. The breakdown is as follows:

        The $704 million figure includes:

     FOMB: $326,706,771.01 (This includes the Special Claims 
            Committee firms)

     Government: $234,687,347.34

     COR/UCC: $118,997,235.43

     The total of those three categories is $680,391,353.78.

     COFINA Agent and professionals: $20,700,188.03

     Mediation Team: $2,621,178.21

    Fees were developed in conjunction with the Government and were 
benchmarked versus comparable restructuring situations that yield an 
average professional-fee-to-funded-debt ratio of 2.08 percent relative 
to 1.68 percent projected for the Commonwealth. See Exhibit 20 from the 
Fiscal Plan below:

    Professional fees for restructuring
        (Excludes pensions and other retirement liabilities)
        
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    

    .epsMoreover, expenses specifically related to the Title III 
process under PROMESA are reviewed by a Court-appointed fee examiner. 
For FOMB's operating expenses, FOMB has retained its own fee examiner.

    Question 4. Even before the COVID-19 pandemic began, the FOMB and 
Commonwealth had not abided by their own agreement under the 2019 PREPA 
Restructuring Support agreement to raise a 1 cent interim rate increase 
case to the PREB, why?

    Answer. Under the PREPA restructuring support agreement, PREPA was 
only obligated to implement the 1 cent ``settlement charge'' and 
commence settlement payments to participating bondholders upon entry of 
the order approving the RSA settlement. The hearing on the settlement 
motion has been continued for various reasons and, as indicated in our 
May 15, 2020 status report, we do not yet have sufficient visibility to 
determine whether the RSA settlements are feasible in light of the 
impact of the pandemic on the island economy. PREPA has therefore held 
off on adding this charge and increasing rates near term until this 
determination is made.

    Question 5. We have entered into the 4th year of bankruptcy 
proceedings, what has the FOMB accomplished to restore access to the 
capital markets for Puerto Rico, one of the only two explicit 
objectives of PROMESA?

    Answer. Please see answer 2(b) above.

    Question 6. The latest fiscal plan certified by the FOMB shows 
Puerto Rico returning to long-term deficits after 2032 and beyond, even 
before paying contractual debt service. How is it possible that there 
are no reforms or potential recovery that can put Puerto Rico on the 
right track in the long term?

    Answer. There are indeed reforms that could put Puerto Rico on the 
right track in the long term. However, only a portion of them are 
agreed to in substance with the Government of Puerto Rico, and thus, 
reflected in the 2020 Fiscal Plan. The 2020 Fiscal Plan financial 
forecasts include:

     Energy and ease of doing business reforms are projected to 
            increase GNP by 0.60% by FY2025;

     Human Capital and welfare reform is expected to add 
            another 0.15% in FY2026; and

     K-12 education reforms add an additional 0.01% annual 
            impact beginning in FY2037,

    These sets of reforms result in total GNP increase from structural 
reforms of 0.75 percent by FY2026 and 0.88 percent by FY2049. The 
anticipated timing of the incremental positive impact of these reforms 
has been delayed in this Fiscal Plan given the delay in the 
Government's implementation efforts.
    Yet even with full implementation of these, the 2020 Fiscal Plan 
suggests that the current financial trajectory is not sustainable in 
the long term. Perhaps more importantly, the 2020 Fiscal Plan, even if 
implemented in full, will not raise Puerto Rico and its residents to a 
level of prosperity comparable to even the poorest states on the U.S. 
mainland. There continues to be insufficient political appetite to 
drive the types of structural reforms that are needed to create 
sustainable economic growth, and an inability to implement even reforms 
that have been nominally agreed-upon.

    While the 2020 Fiscal Plan projects deficits from FY2032 onward, 
the Government will be required to take additional measures that go 
beyond this 2020 Fiscal Plan. Accordingly, what follows are a set of 
options that future governments can consider in order to obtain fiscal 
balance in the out-years. Some of these reforms, which would reduce 
deficits and therefore make funds available for a variety of potential 
uses, have been proposed by FOMB but have not been adopted.

     Private sector labor reform, generating an additional 0.50 
            percent GNP growth over 2 years, by repealing Law 80, 
            reducing paid leave, and eliminating the Christmas Bonus. 
            Key reforms could require incentives, such as wage 
            subsidies for low-income workers and training programs to 
            address identifiable skills gaps. The reform is projected 
            to increase the 30-year surplus by $10 billion if 
            implemented after 10 years (FY2030) and by $3 billion if 
            implemented within 20 years (FY2040).

     Ease of Doing Business reform, generating an additional 
            0.15 percent GNP growth, based on instituting Trading 
            Across Borders reform to improve customs processes and 
            congestion and repealing restrictive laws (e.g., Laws 21 
            and 75 dictating terms for terminating commercial supplier 
            relationships). The 30-year surplus is projected to 
            increase by $3 billion if implemented after 10 years 
            (FY2030) and by $850 million if implementation lags by 20 
            years (FY2040).

     Overhaul of the tax system of Puerto Rico to stimulate 
            growth, requiring short-term investment (lower revenues in 
            short-term) for long-term growth benefits up to 0.5 percent 
            spread over 5 years. The reform is projected to increase 
            the 30-year surplus by $9 billion if implemented after 10 
            years (FY2030) and by $2 billion if implementation lags by 
            20 years (FY2040).

     Imposing a cap on total healthcare expenditure growth at 2 
            percent above standard inflation is projected to result in 
            savings of $14 billion by FY2049 if implemented in FY2030 
            and $3 billion if implemented in FY2040.

     Securing additional permanent Federal funding for Medicaid 
            of $1 billion per year (and growing with inflation) is 
            projected to increase the 30-year surplus by $27 billion 
            if begun in FY2030 and $11 billion if begun in FY2040.

     Risks to the long-term projections in the 2020 Fiscal 
            Plan. While the 2020 Fiscal Plan projects that $8 billion 
            surplus will be generated through FY2020-2031, there are 
            several variables that have a material impact on the long-
            term financial projections in the 2020 Fiscal Plan. The 
            impacts of COVID-19 remain highly uncertain at this stage 
            and could prove to be longer-lasting and greater than 
            anticipated. Moreover, revenues could be compromised 
            through lower growth generated by delayed or not 
            implemented structural reforms, lower than expected federal 
            funding, and/or less efficient spending on capital than 
            projected. Both revenues and expenditures could be impacted 
            by demographic shifts not yet seen on the Island, and in 
            the areas of government expenditures.

     Lack of implementation of healthcare reform measures could 
            affect the long-term projections of the 2020 Fiscal Plan. 
            If healthcare reform measures are not implemented starting 
            in FY2021, the surplus would decrease by $14 billion.

     Implementation risk of agency efficiency measures also 
            exists. For example, if only 50 percent of the projected 
            run rate agency efficiency measures are achieved, the 30-
            year surplus would decrease by $21 billion. Similarly, if 
            only 75 percent of the projected run rate agency efficiency 
            measures are achieved, the 30-year surplus would decrease 
            by $11 billion.

    Question 7. PROMESA requires that any Certified Fiscal Plan respect 
the Constitutional Priorities and lawful liens. How does this new 
certified plan meet that requirement?

    Answer. PROMESA section 201(b)(1)(N) provides the fiscal plan shall 
``respect the relative lawful priorities or lawful liens, as may be 
applicable, in the constitution, other laws, or agreements of . . .'' 
Puerto Rico. As you know, the fiscal plan is composed of FOMB's methods 
for carrying out the congressional policies and requirements in section 
201(b)(1). Notably, the fiscal plan is not a plan of adjustment. Plans 
of adjustment discharge claims, extinguish liens, and determine how 
each claim and lien is treated, and are governed by Title III of 
PROMESA. PROMESA section 106(e) provides the court lacks subject matter 
jurisdiction over challenges to FOMB's certifications of fiscal plans, 
while the court can and must review plans of adjustment before they can 
become effective. Therefore, the fiscal plans do not discharge any 
debt, extinguish any lien, or determine the treatment of any claim, all 
of which are done in Title III plans of adjustment.

    Question 8. Why were all fiscal quarters before the COVID-19 
lockdown producing revenues well in excess of FOMB near term 
projections? What does this say about new projections that are even 
more draconianly conservative than ever before? What about longer term 
projections that are more difficult to make accurate predictions over 
than short term ones?

    Answer. The Fiscal Plan projects revenues based on underlying 
economic and/or demographic indicators such as GNP growth and 
population. Those projections are tracked against actual receipts, as 
reported by Hacienda. In the first 6 months of the fiscal year (pre-
COVID), revenue receipts were largely in line with projections with the 
exception of corporate income tax, which was significantly higher than 
projected in large part due to a one-time payment of approximately $0.5 
billion related to a large multinational M&A transaction. Some revenue 
lines were ahead of forecast (individual income tax, motor vehicle 
excise tax, rum tax, Act 154, and other general fund revenue), while 
others were below forecast (non-resident withholdings, alcoholic 
beverages, cigarette taxes, and sales and use tax). As explained in the 
Fiscal Plan, long-term revenue projections depend directly on 
projections of future economic growth and other demographic factors.

    Question 9. Given that the FOMB is the debtor representative before 
the bankruptcy courts, is it necessary to gain Commonwealth support for 
every deal?

    Answer. Support from the Commonwealth strongly helps the process to 
move along more efficiently and effectively. Government support is 
required to the extent that legislation is required to affect the 
proposed transaction. Moreover, especially in the current complex 
political environment, building support across the Government and 
maintaining public goodwill is an important part of working within the 
cultural and financial context of Puerto Rico.

    Question 10. How and why does the FOMB project decreasing 
population on the island ad infinitum, yet at the same time show 
rapidly rising gross healthcare costs despite the declining population?

    Answer. Even before Hurricanes Maria and Irma hit the Island in 
2017, Puerto Rico's population had been trending downward by 1-2 
percent every year as residents have left to seek opportunities 
elsewhere and birth rates declined. In 2016, the U.S. Census Bureau's 
official forecast, projected a worsening population outlook due in 
large part to Puerto Rico's rapidly aging population. This high average 
age range results from extremely low age-adjusted birth rates and 
outmigration of younger people. Indeed, in 2016, Puerto Rico began to 
experience negative natural population change (a higher number of 
deaths than births). This negative natural change has continued 
unabated into 2020.
    Hurricanes Irma and Maria served to compound the problem, spurring 
an additional outflow of people just as natural population decline has 
set in, as many residents lost houses, jobs, and loved ones. While some 
of these people have returned, the population is still projected to 
decline over the course of the 2020 Fiscal Plan period and beyond. 
Further disasters, such as the series of earthquakes experienced in 
2020, have not made a swift return to balanced migration any more 
likely. But while net migration is a larger driver of population change 
in the short term, this factor is volatile; in the long run, net 
migration is projected to return to more balanced trends. Meanwhile, 
natural population change is not guaranteed to rebalance at any point, 
and births are likely to continue declining, while deaths are projected 
to rise or stay stable.
    The COVID-19 pandemic has been less severe in Puerto Rico than in 
many other areas thus far, and therefore no large epidemic-driven 
mortality rate increase is anticipated. COVID-19 is expected to 
suppress air traffic between Puerto Rico and the mainland, and thus 
impact migration, but this effect will be transitory.
    The 2020 Fiscal Plan projects that by FY2025, there will be 9 
percent fewer people living on the Island than in FY2019, and that by 
FY2049, the drop will grow to 30 percent.
    Notwithstanding the population decline, the Commonwealth's 
healthcare costs grow faster than inflation. Medicaid premiums grow at 
a faster pace than standard inflation and are instead grown by a per 
member per month (PMPM) growth rate and population change. On average, 
costs per demographic group will increase consistent with historical 
Puerto Rico healthcare costs, and in line with external data. However, 
the latest projections suggest the magnitude of this trend will not be 
as significant as reflected previous Fiscal Plans. From FY2026-FY2049, 
the age-mix-adjusted PMPM growth rate is expected to decline from 5.30 
percent in FY2026 to 4.75 percent in FY2049. This projection is driven 
by two factors. First, current demographic projections suggest that the 
population is not aging as fast as previously projected, which causes 
declines in overall healthcare utilization. Second, general cost 
efficiency spillovers from the U.S. mainland are expected to exert 
downward pressure on PMPMs. In the near-term, PMPM growth is expected 
to be muted in FY2020 due to lower utilization driven by the COVID-19 
pandemic. Social distancing and stay-at-home guidance have lowered 
utilization of the healthcare system. Between FY2020 and FY2022, the 
PMPM growth rate is expected to increase from 4.5 percent to 5.5 
percent as utilization recovers from both the COVID-19 pandemic and 
persistent impact from Hurricane Maria.
    Important to note is that in 2019, 37 percent of Puerto Ricans 
received their health coverage through the Commonwealth's state-run 
Medicaid program. This was a higher share of Medicaid/CHIP-funded 
health insurance coverage than any U.S. state. In addition to its large 
covered population, Puerto Rico has lagged U.S. states in both health 
outcomes and access. Puerto Ricans face higher rates of chronic 
conditions like hypertension, diabetes, and asthma than national 
averages. Puerto Rico also has higher premature birth and infant 
mortality rates, and higher rates of adults reporting fair or poor 
health. At the same time, 72 of Puerto Rico's 78 municipalities are 
deemed ``medically underserved areas,'' with 500 doctors leaving per 
year. As a result, Puerto Rico has half the rate of specialists as 
compared to U.S. states in critical fields.
    Puerto Rico's Government-funded health plan, Vital, covers 
individuals through three primary funding sources: federally matched 
Medicaid funds, the Children's Health Insurance Program, and the 
Commonwealth's self-funded insurance program for low-income adults. An 
additional 8 percent of the Puerto Rican population receives some 
benefits from the Government as part of the Platino program, which 
supports Medicare Advantage recipients who also qualify for Medicaid.

    Question 11. Puerto Rico has received near 80 percent Medicaid FMAP 
since well before the fiscal crisis began. The funding has been 
extended regularly. The Commonwealth draft fiscal plan projected 55 
percent long-term funding. PROMESA explicitly allows for projections 
based not just on approved legislation, but also on draft or introduced 
legislation that has not yet been passed. Why does the FOMB choose to 
assume that there will be virtually no Medicaid funding?

    Answer. FOMB has chosen to reflect current legislation, rather than 
draft or introduced legislation given the uncertainty of adoption. 
Moreover, because Medicaid is such an important element of essential 
services, it is important for the Government to budget and be able to 
fund costs that are not known to be reimbursed with Federal funds.
    Because Federal Medicaid funding for U.S. territories is subject to 
an annual cap, Medicaid expenditures eligible for federal matching 
often exceed available funding without supplemental legislated sources. 
This makes Puerto Rico's Medicaid program very sensitive to rising 
healthcare costs. Since 2011, Puerto Rico has received temporary relief 
from rising healthcare costs through increased levels of federal 
reimbursement made available through the passage of the Affordable Care 
Act and the Bipartisan Budget Act of 2018. In December 2019, the 
Further Consolidated Appropriations Act was passed, which provided 
supplemental federal funding (up to $5.7B total) to Puerto Rico's 
Medicaid program through September 30, 2021.
    In addition, the law raised the FMAP--the portion of Medicaid 
expenditures that federal funds can cover--from the standard level of 
55 percent to 76 percent for most populations. In response to the 
COVID-19 pandemic, the Families First Coronavirus Response Act was 
passed in March 2020, further increasing both the available federal 
funds and the FMAP.
    The available supplemental federal funds and higher FMAP will both 
return to standard levels in October 2021 without new federal 
legislation. Accordingly, the Commonwealth will hit a ``Medicaid fiscal 
cliff,'' whereby it will be responsible for multi-billion-dollar annual 
healthcare expenditures that had been covered by federal funding since 
2011.
    It is crucial, therefore, that ASES take advantage of the 
additional runway provided by recent federal legislation to put in 
place reforms that reduce the long-term growth rate of healthcare 
expenditures. Given the uncertainty as to future federal reimbursement 
levels, the 2020 Fiscal Plan assumes that no further supplemental 
funding will be provided beyond current programs, and thus, the 
Commonwealth must be prepared to cover growing Medicaid costs as if 
federal reimbursement rates reverts to steady-state levels.

    Question 12. Why has the FOMB not made more utility out of PROMESA 
Title VI mechanisms for consensual deals?

    Answer. Actually, Title VI was the first provision used by the 
Government and FOMB in a consensual debt restructuring, which was late 
2018 Title VI consensual restructuring of the Government Development 
Bank's debts. In addition, where possible FOMB and the Government have 
successfully used PROMESA Section 207, rather than either Title III or 
Title VI, in cases where unanimous consent could be obtained from 
affected creditors to the consensual restructuring of their bonds. This 
Section 207 approach was used to consensually restructure over $1 
Billion of Federal EPA and USDA loans to PRASA, saving PRASA nearly 
$400 million in the first 10 years and re-starting New Money Federal 
lending from those agencies, while also avoiding putting PRASA through 
either Title III or Title VI.
    That said, both Section 207 and Title VI are narrower than Title 
III in terms of the categories of claims and liabilities that can be 
resolved through those procedures and the scope of relief available 
from those approaches. Accordingly, Title VI and Section 207 are not 
necessarily viable or effective approaches for Puerto Rico's other 
government operating entities and public corporations.

    Question 13. If the FOMB and creditors disagree over Commonwealth 
revenue projections, could contingent notes be a partial answer to debt 
restructurings so that creditors take the risk if revenues fail to 
exceed projections?

    Answer. At this point in time, as noted in the May 2020 Certified 
Fiscal Plan for the Commonwealth, FOMB has put a pause on the existing 
February 28, 2020 Plan of Adjustment and will be exploring a variety of 
debt restructuring topics as it considers how to move forward in an 
affordable, sustainable way.

                  Questions Submitted by Rep. Gohmert

    Question 1. Ms. Jaresko, during your time as Ukrainian finance 
minister, did you have a relationship with Alexandra Chalupa? If yes, 
were you aware of any efforts to extract information from NABU (the 
National Anti-Corruption Bureau of Ukraine)?

    Answer. No, Ms. Jaresko had no relationship with Ms. Chalupa during 
her time as Ukraine's finance minister. Ms. Jaresko knew her only as a 
member of the Ukrainian-American community.
    Question 2. You were the chief executive officer of the Western NIS 
Enterprise Fund (WNISEF), correct?

    Answer. Yes, Ms. Jaresko served as CEO of WNISEF from 2001-2014, 
previously having served as Executive Vice President and Chief 
Investment Officer from 1998-2001, and Country Manager from 1995-1998.

    2a. Is it true that you shifted management of WNISEF to Horizon 
Capital, a private company? What is your relationship with Horizon 
Capital?

    Answer. Yes, the goal of the Enterprise Funds, established 
initially by President George H. Bush in eastern and central Europe, 
was to act as a catalyst to private sector investment in the region of 
their mandate. The goal was to move from USAID funding to attracting 
private sector capital investment in the region, based on the track 
record and team experience of the Enterprise Fund. The Polish American 
Enterprise Fund was the first to succeed, having spun out their team 
into Enterprise Investors, one of the most successful East European 
private equity firms. The Hungarian fund, and others were also 
successful in achieving the mandate. Western NIS Enterprise Fund was 
successful in attracting over $100 million in private capital and 
spinning off its investment team into Horizon Capital, a private 
company, in 2006.
    Ms. Jaresko was one of the Founders and the CEO of Horizon Capital 
from 2006 through November 2014, when she left to take the position of 
Minister of Finance in the Ukrainian Government. Since then, she has 
had no role or relationship with Horizon Capital.

    2b. Did you receive bonuses during your time as head of WNISEF? And 
you received these bonuses while the fund was losing money, correct?

    Answer. Yes, USAID approved a bonus program in the Enterprise 
Funds, including, but not only WNISEF, that provided the investment 
teams financial incentives (bonuses) to liquidate the investments made 
with USAID funding at a profit. Incentives were only paid based on 
profitable transactions. Given the Enterprise Funds initially were all 
expected to return some portion of their capital to the U.S. Government 
(which is a unique feature given almost all USAID programs are grants 
and do not return funds to the USG), liquidation of the portfolio at a 
profit was an important element of the Enterprise Funds.

    2c. Was WNISEF audited for accounting irregularities that arose 
during your time as head of the fund?

    Answer. No, Ms. Jaresko does not recall any audit for accounting 
irregularities during her leadership of WNISEF. All the audited 
financial statements from inception are publicly available for the 
record.

                   Questions Submitted by Rep. Gosar

    Question 1. Can you please elaborate on current weaknesses of the 
Government's contract procurement process and how this affected the 
government's response to the needs presented by the pandemic crisis?

    Answer. Despite some improvement, the Government still fails to 
provide an adequate level of transparency when it comes to contract 
procurement. In fact, when FOMB attempts to obtain information about 
pending and executed contracts, it is often a very long and tedious 
process. Currently, the Government is required to get approval from 
FOMB for contracts that cost $10 million and over. Specifically, when 
it comes to the pandemic, the Government failed to secure approval from 
FOMB for a $38 million contract to purchase COVID-19 testing kits. FOMB 
immediately requested the required information but unfortunately the 
Government failed to provide the relevant procurement information. 
Ultimately, FOMB had to file litigation in order to obtain the needed 
information.

    Question 2. Is the Board doing anything to provide accountability 
in the government's contract procurement process?

    Answer. In addition to instituting budgets and evaluating requests 
by the Government for reapportionments, FOMB is reviewing contracts for 
approval pursuant to Section 204(b)(2) of PROMESA to assure that they 
``promote market competition'' and ``are not inconsistent with the 
approved fiscal plan''.
    Question 3. Based on your testimony, it sounds like it is difficult 
to do business in Puerto Rico. How does Puerto Rico's business 
environment compare to the mainland business environment? And how does 
Puerto Rico get to the point where it is operating more like mainland 
businesses?

    Answer. In Puerto Rico, there are several barriers to entry for 
businesses. Perhaps the largest barrier is the fact that there is no 
at-will employment in the territory. Christmas bonuses of $600 are 
mandated for employers regardless of employee performance. Moreover, 
the licensing, permitting, and registration process is expensive and 
difficult. The Island's energy supply is expensive and not reliable. 
Construction permits are difficult and expensive, and the payment of 
taxes is extremely complicated. Finally, transportation costs are 
higher due, in part, to strict local regulations and federal laws, such 
as the Jones Act.

    Question 4. Can you elaborate on the spending trends for the 
Government of Puerto Rico since the inception of the Board? Has the 
Government of Puerto Rico spent most of its appropriated funds for key 
agencies in this fiscal year?

    Answer. FOMB used its mandate under PROMESA to break the Government 
of Puerto Rico's cycle of deficit spending. The rightsizing measures in 
the Certified Fiscal Plan have already reduced the Government's payroll 
and overall operating expenses while securing essential government 
services, as mandated under PROMESA. The General Fund budget, looking 
only at operational costs, declined from $8.9 billion in fiscal year 
2016 to $6.2 billion in fiscal year 2020, a more than 30 percent 
reduction. The General Fund budget operational costs for the coming 
fiscal year 2021 are projected to increase to $7 billion because of 
COVID-19 and the reclassification of certain expenses (about $600,000) 
from the Special Revenue budget.
    Separately and in addition, since fiscal year 2018, the 
Government's budget also includes Paygo pension costs, which did not 
exist in General Fund budgets before. That cost fluctuates between $2.5 
billion and $2.6 billion per year, prior to any pension reform proposed 
in the Plan of Adjustment. Ensuring pensions is mandated under PROMESA. 
Further, the Government must budget for Puerto Rico's expenditures on 
Medicaid, which fluctuate dramatically based on Federal funding. 
Medicaid costs not included in the above General Fund budget numbers 
have fluctuated from about $400 million to over $1.5 billion. FOMB has 
always ensured that the Certified Fiscal Plan projects costs of 
Medicaid based on current Federal legislation.

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    .epsQuestion 5. PROMESA outlines a process for the development of 
the annual budgets. Describe collaboration between the Board and the 
Government in developing these budgets.

    Answer. Since November 2019, FOMB has been working hand-in-hand 
with the Government to develop the budgets for the Commonwealth and 
instrumentalities. This includes the Commonwealth (across General Fund 
and Special Revenue Funds), COFINA, CRIM, PREPA, PRASA, HTA, UPR, 
COSSEC, PRIDCO, and 10 municipalities in our pilot program.
    Per PROMESA, the certified budgets need to be consistent with the 
certified fiscal plans. The fiscal plans, which are updated annually to 
incorporate the latest revenue and expenditure information and to 
reflect macroeconomic conditions (namely, the impact of COVID-19), are 
the 5-year blueprint to return prosperity to Puerto Rico and fiscal 
sustainability to the government and its different instrumentalities. 
In the last month, FOMB certified updated (or in some cases new) fiscal 
plans for the 19 aforementioned entities. Since then, FOMB has worked 
with the Government to develop budgets that are consistent with those 
fiscal plans.
    The budget process is not a simple one. FOMB requests a lot of 
information to validate agency requests, understand how agencies spend 
their taxpayer dollars, and make better management decisions that allow 
prioritization of much-needed funds. FOMB also ensures that, in 
addition to ensuring transparency and efficient use of public funds, 
the budget also serves as a tool to ensure efficient implementation of 
key priorities as outlined in the fiscal plans.
    Unfortunately, for the fourth year in a row, the Government and the 
Legislature were unable to submit a budget compliant with the 
Commonwealth Fiscal Plan. In fact, the Legislature never submitted an 
official budget to FOMB for its review. Notwithstanding several 
meetings to try to find a consensus among FOMB, the Governor, the 
Senate, and the House, FOMB was unable to do so.

    Question 6. Many keep insisting that Puerto Rico is in trouble 
because it does not have enough money and that the Federal Government 
needs to throw more funds and resources at the territory. Is this an 
accurate portrayal of why Puerto Rico is suffering?

    Answer. It cannot be denied that Puerto Rico has been through 
horrible disasters, including hurricanes, earthquakes, and a health 
pandemic, all within the last 3 years. However, Puerto Rico has 
received substantial funding for these disasters when it comes to 
Medicaid, NAP, FEMA reimbursements, CDBG-DR, unemployment, and other 
areas as well. These federal funds have been extremely helpful during 
these difficult times. However, more federal funds alone will not solve 
the problems in Puerto Rico. In order to be economically healthy, the 
highest priority is for the Government to implement structural reform 
related to labor, welfare reform, ease of doing business, rightsizing 
of the government, pensions, healthcare, the power sector, 
infrastructure, and education. In doing so, Puerto Rico needs to give 
its residents confidence in future economic growth and opportunity to 
stem, and even to reverse, the outmigration to the mainland United 
States.

    Question 7. Do you agree that the Board is forcing the 
privatization of the Public Broadcasting Corporation without taking 
into consideration the value of the FCC licenses?

    Answer. No. In January 2019, FOMB recommended that the Government 
transfer ownership of the Public Broadcasting Corporation's assets to a 
private nonprofit entity. In April 2019, the Government accepted the 
recommendation and said it would begin implementing the change. To 
date, the Government has not acted on this reform and is extremely 
delayed in doing so. The FCC licenses should be protected and a 
transfer to a private nonprofit entity should not jeopardize the value 
of the FCC licenses. There would need to be an appropriate transition 
period in the process.

    Question 8. The Board made the decision in the latest Certified 
Fiscal Plan to freeze all budget cuts for the next year in order to 
encourage the implementation of it is recommended reforms. Can you 
please explain how you expect this to work? What is different this 
time?

    Answer. The 1-year delay of many budget reductions will give the 
Government more bandwidth to handle effectively difficult policy and 
implementation issues related to structural reform. In light of the 
health pandemic and so many unknown factors, FOMB reinforces in its 
fiscal plans that structural reforms are even more important.
    Most of the initiatives in the Fiscal Plan do not require 
legislation, just leadership from the executive branch and agency 
heads. Government institutions and processes must continue operating 
regardless of whether there is an election. These initiatives that are 
necessary for our economy and people to recover from the pandemic.
    The Government should focus all of its efforts in fiscal year 2021 
on making real changes across the Government to ensure better delivery 
of essential services. These reforms are designed to promote the focus 
of finite Government resources on frontline service delivery that 
matters to residents. Real changes include, but are not limited to:

     For the Department of Education to implement a back to 
            school plan, a time and attendance reporting policy for all 
            employees, record daily student attendance, efficiently 
            manage its student-teacher ratio by observing its own 
            staffing policies, and generate savings through improved 
            procurement and more transparent accounting.

     For the Department of Health to focus on core health care 
            services by saving money through centralized procurement of 
            supplies across agencies and public hospitals, develop an 
            action plan for telehealth, consolidate regional Medicaid 
            offices, improve hospital management, and merge the 
            Administracion de Seguros de Salud (ASES) into the 
            department.

     For the Department of Public Safety to move more officers 
            from administrative positions to the field so they can 
            better serve residents, and reduce overtime with better 
            time management, fully consolidate the back office.

     For the Department of Corrections and Rehabilitation to, 
            analyze the utilization of facilities given the decline in 
            the prison population, and generate savings through 
            improved procurement.

     For the Department of Economic Development to finalize the 
            consolidation of the Puerto Rico Tourism Company into the 
            department, complete the ascription of the Planning Board, 
            renegotiate procurement contracts, and publish quarterly 
            reports of economic incentives.

    Question 9. There are no work requirement for NAP in Puerto Rico. 
In fact, the way that NAP is currently structured, it discourages 
recipients from finding employment. What should Puerto Rico do to 
change that? And if Puerto Rico does not do anything to change it, is 
there anything the Federal Government could do to help in that arena?

    Answer. The 2020 Fiscal Plan required the Government to adhere to a 
set of parameters when implementing a NAP work/volunteer requirement. 
Specifically, the Government should: (1) apply the requirement year-
round to all able-bodied NAP beneficiaries aged 18-59; (2) grant all 
eligible recipients up to a 3-month transition period to secure 
employment, begin volunteering, or enroll in qualified education or 
training programs; (3) mandate that all eligible recipients complete 80 
hours of qualifying activities per month; (4) redesign NAP eligibility 
guidelines and benefit calculations to ensure that eligible recipients 
are not penalized for seeking formal sector work; (5) redistribute 
savings realized through the work/volunteer requirement to boost 
working eligible recipients' take-home pay through an expansion of the 
Earned Income Disregard; and (6) continue to extend NAP benefits to 
children even if their parents are eligible recipients who do not 
comply with the work/volunteer requirement.
    NAP is a capped block grant, through which the food and nutrition 
assistance program for Puerto Rico is funded at a fixed level. Since it 
is a block grant, Puerto Rico must make its own decisions regarding 
eligibility and work requirements and must also enforce those policy 
decisions. The only way this could be changed is through federal 
legislation.

    Question 10. What growth has Puerto Rico foregone because of little 
to no implementation of structural reform since the creation of the 
Board?

    Answer. Structural reforms were expected to cumulatively increase 
nominal GNP by approximately $2.65 billion between FY20-25 if they were 
to have been implemented as stated in the 2018 Certified Fiscal Plan. 
This represented an incremental cumulative uptick of 1.8 percent in 
Real GNP growth rates during this period. Due to the delay in 
implementation, structural reforms, if fully implemented going forward 
per the Certified Fiscal Plan, are now expected to increase nominal GNP 
by only $242 million (an incremental cumulative uptick of 0.6 percent 
in Real GNP growth rates). In other words, the economy has lost in 
potential nominal growth approximately $2.4 billion dollars between 
FY20-25 due to this delay.
    In the long run the loss is even greater. Structural reforms were 
expected to cumulatively increase nominal GNP by approximately $90.28 
billion between FY20-49 if they were to have been implemented as stated 
in the 2018 Certified Fiscal Plan. This represented an incremental 
cumulative uptick of 1.97 percent in Real GNP growth rates. Due to the 
delay in implementation, structural reforms are now expected to 
increase nominal GNP by only $24.67 billion (an incremental cumulative 
uptick of 0.88 percent in Real GNP growth rates).

    Question 11. What is the status of the HUD GDBR funds for Puerto 
Rico? Puerto Rico has received them, correct? Have the funds been 
utilized yet?

    Answer. To date, about $86 million have been disbursed of the $3.2 
billion obligated by U.S. HUD. Most disbursements to date are related 
to the flagship R3 Housing Program (repair, reconstruction, and 
relocation), which is expected to impact a significant number of 
families/homes in the following 6 months.

                                 ______
                                 

    The Chairman. Thank you very much. Let me now recognize our 
next witness, Mr. Omar Marrero, who is the Executive Director 
of the Puerto Rican Fiscal Agency and Financial Advisory 
Authority. In this role, he is responsible for leading the 
preparation of fiscal plans for the government of Puerto Rico, 
which are considered by the Oversight Board. Governor Wanda 
Vazquez appointed Mr. Marrero to be the Puerto Rican 
government's representative before the Oversight Board, and we 
welcome you here, sir, and look forward to your testimony.

  STATEMENT OF OMAR MARRERO, EXECUTIVE DIRECTOR, PUERTO RICO 
         FISCAL AGENCY AND FINANCIAL ADVISORY AUTHORITY

    Mr. Marrero. Thank you, sir. Good afternoon, Chairman 
Grijalva, Ranking Member Gonzalez-Colon and members of the 
Committee. I am Omar Marrero, Executive Director of the Puerto 
Rico Fiscal Agency and Financial Advisory Authority. I am 
honored to appear here before you again on behalf of Governor 
Wanda Vazquez and thank you for the opportunity.
    During the last 2\1/2\ months, our Governor's top priority 
has been COVID-19. Today, I will share some of the measures we 
have implemented in order to manage the crisis. I will also 
discuss the implementation of PROMESA during this period and 
some areas of the law that need to be modified in order to make 
them more effective. Based on our experience with the Board, we 
believe that the best way PROMESA will be able to clarify the 
unique power-sharing relationships between the government and 
the Board is by limiting each to their respective public policy 
and fiscal accountability roles, especially now as we continue 
to respond to COVID-19 and as the Chairman said, rebuilding 
from past and ongoing natural disaster.
    Let's discuss the measure our administration has 
implemented against COVID-19. First, on March 15, Governor 
Vazquez imposed the first mandatory lockdown in the Nation, the 
executive order that included the closure of non-essential 
businesses, an island-wide curfew, and social distancing 
measures.
    On March 18, the Governor, who was the first in the Nation 
as well, requested the FAA to limit the air traffic into Puerto 
Rico, including suspending all domestic and international 
flights. And the FAA agreed that all commercial flights must 
land at the San Juan International Airport. Then we started 
conducting COVID-19 testing for all passengers arriving at the 
airport. That strategy has been praised by both our businesses 
and residents.
    On March 23, Governor Vazquez announced a local relief 
package of approximately $787 million to provide immediate 
emergency assistance. Some of the initiatives were aimed at the 
self-employed, small and medium businesses, municipalities, 
public hospitals, and some dedicated emergency response 
personnel. We appreciate the help of the Oversight Board to 
make it happen.
    On March 27, the CARES Act was signed into law. And of the 
$150 billion Congress appropriated to state and local 
governments through the CRF, Puerto Rico was awarded roughly 
$2.2 billion.
    On May 15, Governor Vazquez announced our strategic 
disbursement plan for the CRF funds. Under the plan, the CRF 
funds are mainly prioritized for economic stimulus or health-
related expenses and for government-related expenses incurred 
due to COVID-19.
    The government's goal is to distribute funds as quickly as 
possible while ensuring transparency, compliance, and 
accountability. To ensure appropriate oversight, review panels 
comprised of representatives from each lead agency are 
providing input and recommendations on a newly created CRF 
Disbursement Oversight Committee that serves as the centralized 
oversight authority of all programs and disbursement. To date, 
we have distributed from the CRF approximately $150 million to 
self-employed individuals, approximately $100 million to small 
and medium businesses and transferred around $150 million to 
the State Unemployment Insurance Trust Fund.
    In addition, we have allocated $150 million to private 
hospitals and $100 million to the municipalities. All this 
information is publicly available through our transparency 
portal at the above COVID-19 website. Certainly, like any other 
government, our response to this unprecedented crisis has not 
been free of challenges and obstacles.
    Similar situations have occurred stateside. However, our 
governor remains committed to the principle of transparency and 
accountability and that is what we have implemented for the 
funds available for COVID-19. As to the implementation of 
PROMESA during COVID-19, as this Committee knows, the 
government and Board have had a long history marked with uneven 
periods of cooperation and disagreement, some of which has 
become the subject of litigation.
    But despite some important disagreements, the Board and the 
government have actually collaborated on successful 
infrastructure, about $25 billion over the last few years. 
Since taking office in August 2019, Governor Vazquez has 
consistently sought to improve the relationship between the 
government and the work by facilitating periodic meetings and 
supporting the infrastructure and proceedings.
    In addition, Governor Vazquez has worked with the Federal 
administration, which Coast Guard Rear Admiral Brown, the Trump 
administration's liaison to the government, acknowledged 
earlier this year when he said that Puerto Rico's reputation 
seems to lag the reality because the government has implemented 
very strong internal control mechanisms to counter any attempts 
at corruption or diversion of Federal funds. These measures 
establish a new atmosphere of cooperation and trust that did 
not exist with prior administrations and is a development that 
we hope will continue to improve and expand.
    Despite our best effort to minimize disagreements, PROMESA 
allows the Board to blur the line between the government and 
the Board. Over the last several years, the Board has taken the 
advantage of such unclear separation of powers to gain more 
control over the day-to-day operations, particularly by using 
PROMESA certification processes to micromanage the public 
governance in Puerto Rico.
    The government believes that any attempt to actively impede 
our public policy initiatives is counterproductive and 
undermines the recent progress to work together. Therefore, due 
to the lessons learned during the last 4 years, the government 
recommends that if this Committee were to consider amendments 
to PROMESA, this must be to clarify where the Board stands, as 
I fully explained in my written statement.
    Finally, as Justice Breyer advised in his book, Making Our 
Democracy Work, a workable government requires trust among 
government institutions and between those institutions and the 
people. In order to achieve a long-term workable government for 
the people of Puerto Rico, the government on the Board must 
trust each other in their respective roles, respecting, 
thereby, our democratic system which not only is fundamental to 
our Puerto Rican community but also is intrinsically aligned 
with the long-standing American principle that government of 
the people, by the people, and for the people shall not perish 
from the Earth. Thank you, Chairman.

    [The prepared statement of Mr. Marrero follows:]
Prepared Statement of Omar J. Marrero, Esq., Chief Financial Officer of 
the Government of Puerto Rico and Executive Director of the Puerto Rico 
 Fiscal Agency and Financial Advisory Authority (AAFAF) (on behalf of 
          Hon. Wanda Vazquez Garced, Governor of Puerto Rico)
    Chairman Grijalva, Ranking Member Bishop, and members of the 
Committee: Thank you once again for the opportunity to appear before 
you to discuss ways to evaluate and improve the implementation of the 
Puerto Rico Oversight, Management and Economic Stability Act (PROMESA). 
Over the last 4 years, PROMESA attempted to provide Puerto Rico with 
vital tools to restructure its debts, achieve fiscal stability, and 
spur economic growth. While some of these tools have produced 
meaningful results, there remain certain aspects of the law that need 
to be reformulated to make these tools more effective, which will allow 
Puerto Rico to finish the job of restructuring its debts, achieving 
fiscal responsibility and exiting from the bankruptcy process. However, 
in several respects, the amendments that have been proposed in the past 
do not adequately address critical implementation issues that will 
allow Puerto Rico to finish the job that PROMESA started. For instance, 
none of the amendments that have been considered address the flawed 
fiscal plan and budgeting process under PROMESA sections 201 and 202, 
which continues to be the subject of ongoing friction between the 
elected Government of Puerto Rico (the ``Government'') and the 
Financial Oversight and Management Board (the ``Oversight Board'' or 
the ``Board''). The best way for Congress to improve the efficiency and 
effectiveness of PROMESA would be to clarify the unique power-sharing 
relationship between the Government and Board by limiting each to their 
respective public policy and financial accountability roles. Especially 
now as Puerto Rico continues to respond to the COVID-19 pandemic and 
rebuild from past and ongoing natural disasters, clarifying the roles 
of the Board and the Government would substantially improve the 
collaboration and cooperation that we have cultivated to date.
    My testimony today will focus on five topics: (i) how Puerto Rico 
has responded to the COVID-19 crisis; (ii) how PROMESA has facilitated 
substantial progress in Puerto Rico; (iii) how PROMESA's unclear 
delineation of power has led to unnecessary and wasteful conflict 
between the Board and Government regarding the implementation of public 
policy; (iv) how PROMESA has been implemented during the current COVID-
19 crisis; and (v) recommended changes to PROMESA that Governor 
Vazquez's administration believes will facilitate a better long-term 
future for Puerto Rico. While the administration believes the framework 
and implementation of PROMESA can be improved, changing the law or the 
way the law is implemented will not be sufficient alone to unlock the 
full potential of Puerto Rico unless the federal government, including 
Congress, demonstrates its commitment to Puerto Rico and works with us 
to end the current unequal and undemocratic territory status and places 
Puerto Rico on the definitive path to full equality through statehood.
I. Puerto Rico's Response to the COVID-19 Crisis

    Since China first alerted the World Health Organization of flu-like 
cases in Wuhan on December 31, 2019, the COVID-19 virus has spread to 
188 countries in every continent except Antarctica with over 7,100,000 
reported cases. Addressing this humanitarian challenge continues to be 
the Government's top priority at this moment. As of June 9, 2020, 
Puerto Rico had 5,185 cases that tested positive for COVID-19 and 142 
deaths. The Government continues to take actions to combat the spread 
of the virus, and today I would like to share with the Committee part 
of the efforts we have implemented during this time.
    On March 15, Governor Wanda Vazquez signed Executive Order OE-2020-
023, which mandated a lockdown, the closure of business, an island-wide 
curfew and social distancing procedures. This was the first such 
measure taken by any jurisdiction in the United States of America. On 
March 18, the Governor requested the Federal Aviation Administration 
(the ``FAA'') to take a series of steps to limit air traffic into 
Puerto Rico, including suspending all domestic and international 
flights to and from Puerto Rico. In response, the FAA agreed that all 
commercial flights must land at Luis Munoz Marin International Airport, 
located in San Juan, thereby making Puerto Rico the first jurisdiction 
to receive tools from the FAA to control air traffic amid the COVID-19 
threat. In addition, testing for COVID-19 is being carried out for 
passengers arriving at the Luis Munoz Marin International Airport, a 
strategy that has been welcomed by both our visitors as well as our 
residents.
    Since the COVID-19 crisis started, the Governor has issued several 
executive orders to address, among other things, caring for the 
homeless, school and private sector closures, the creation of a Medical 
Task Force to provide counsel and recommendations to the Governor, 
acquisition of goods and services, use of the National Guard, prompt 
diagnosis of COVID-19, and the general state of emergency due to the 
pandemic. Taken together, these measures help protect the physical, 
mental, and economic health of the people of Puerto Rico, while 
preserving the social fabric of the Island's diverse communities.
    On March 23, Governor Vazquez, with the support of the Oversight 
Board, announced a local emergency relief package of approximately $787 
million, which was intended to provide short-term stimulus and 
emergency assistance. On March 25, the Oversight Board issued a letter 
to the Governor and Legislature outlining the stimulus measures and 
necessary steps to secure the budgetary allocation. On March 28, the 
Puerto Rico Legislature approved a Joint Resolution to provide the 
allocation of $500 million from the General Fund to cover the initial 
phase of the Government's stimulus package. On March 30, the Board 
approved a reprogramming request to transfer $157 million under the 
custody of the Puerto Rico Office of Management and Budget to various 
agencies according to the Government's stimulus package.

    I would like to provide some details on some of the specific 
measures approved as part of the local economic stimulus package:

    Under the Self-Employed incentive, approximately 200,000 self-
employed workers are eligible to receive a $500 one-time payment. The 
estimated total cost of this measure is $100 million.
    Under the Small Business Incentive, businesses with 50 employees or 
less and with business volume of $10 million or less are eligible to 
receive a $1,500 one-time cash payment. The estimated total cost of 
this measure if $60 million.
    Some workers are eligible to receive bonuses. These include 
dedicated emergency response personnel including state police and 
firefighters, medical emergency technicians, and staff of COVID-19 
emergency response management agencies. Amounts awarded per worker 
range between $2,000-$4,000.
    On March 27, the Coronavirus Aid, Relief, and Economic Stability 
Act (known as the ``CARES'' Act) was signed into law. Of the roughly 
$2.3 trillion of approved funding under the CARES Act, Congress 
appropriated about $150 billion to state and local governments through 
the Coronavirus Relief Fund (CRF) under section 5001. Puerto Rico's 
population of 3.2 million people accounts for 74.7 percent of the 
entire pool for territories, thus awarding us roughly $2.2 billion 
dollars.
    On May 15, Governor Vazquez signed Executive Order EO-2020-040, 
establishing a Strategic Disbursement Plan for CRF funds. Under the 
Strategic Plan approved by the Governor, these funds have been 
allocated in the following way: $965 million for economic stimulus, 
$500 million for health related expenses, $290 million for government 
related expenses and $485 million as a reserve for future programs. The 
Government's goal is to distribute funds as quickly as possible to put 
them into the hands of organizations and individuals that need them the 
most, while ensuring transparency, compliance, and proper use of those 
funds. To that end, the Government developed a Strategic Disbursement 
Plan that, at the time of its publication, was more comprehensive and 
detailed than any other state. To ensure appropriate allocation of 
funds and oversight, review panels comprised of representatives from 
each lead agency for individual Programs are providing input and 
recommendations regarding Program guidelines and disbursement 
allocations, and a newly constituted Coronavirus Relief Fund Committee 
for the Oversight of Disbursements will maintain overall oversight and 
governance of all Programs and authorize all disbursements.
    On May 15, the Government began distributing the CRF funds. To 
date, the Puerto Rico Treasury Department has distributed approximately 
$150 million of the allocated $200 million for the Assistance Program 
to Self-Employed Individuals Program, impacting over 149,000 
individuals. This information is publicly available through our 
Strategic Disbursement Plan Funding Report, hosted through the AAFAF 
COVID-19 webpage.
    On May 18, we opened the application period for the Assistance 
Program to Private Hospitals and Assistance Program to Municipalities. 
As of June 9, all applications for the Assistance Program to Private 
Hospitals have been reviewed by the Program Grant Office, Compliance 
Office and the Lead Agencies. In total, 47 applicants representing 51 
hospitals were awarded almost $140 million of the $150 million 
allocated to the program. These funds have begun to be disbursed, and 
we anticipate all awarded funds will be disbursed in the next week.
    On June 4, the assistance programs to Small and Medium Businesses 
were launched. In the first 48 hours, over 21,000 small and medium 
businesses applied for assistance through the program, and more than 
$101 million was identified for disbursement. In the coming week, we 
expect to continue to make progress on launching the remaining programs 
as well as solidifying the process for fund recipients to document and 
report their use of funds to ensure the strictest compliance with CARES 
Act guidelines and the mitigation of fraud, waste, and abuse.
    Like any other crisis, the Government's response has not been free 
of errors and controversies. Similar situations have occurred in other 
states and jurisdictions of the Nation. However, the Government remains 
committed to the principles of transparency and accountability, and 
will continue to work with our Federal counterparts in order to ensure 
that the recovery funds available to combat the COVID-19 crisis go 
directly to the people and entities that need it most.
II. PROMESA Has Facilitated Substantial Progress in Puerto Rico

    I would now like to discuss how PROMESA has been implemented during 
this current crisis. As this Committee knows, the Government and Board 
have had a long history--across three different administrations in 
nearly 4 years--marked with uneven periods of cooperation on the one 
hand and disagreement on the other, some of which has become the 
subject of litigation. Notwithstanding some important disagreements, 
the Government and Board have actually collaborated and achieved 
several restructurings over the last few years. For example, in 
November 2018, the Government Development Bank of Puerto Rico (GDB) 
completed a first-of-its-kind consensual restructuring of about $4 
billion of debt under Title VI of PROMESA. In February 2019, COFINA 
consummated its Title III plan of adjustment to restructure 
approximately $18 billion of bond debt. And in July 2019, PRASA entered 
into definitive agreements to restructure almost $1 billion in debt 
under Federal programs administered by the EPA and USDA under section 
207 of PROMESA, providing significant annual debt service relief, among 
other benefits for PRASA. All of these efforts garnered the full 
support of the Oversight Board and the Government, including both the 
legislative and executive branches.
    In the past, the Government and the Board have also had 
disagreements over fiscal plans and budgets. But we have generally 
agreed on many of the fiscal plan provisions. Any remaining 
disagreements have been primarily based on public policy decisions, 
such as civil service reform and the treatment of Government employee 
compensation and pension benefits, among other things.
    After Puerto Rico experienced an unexpected political upheaval in 
July and August 2019, the relationship between the Government and Board 
adjusted to a new administration under Governor Vazquez. Since taking 
office, Governor Vazquez has consistently sought to mend the 
historically fractious relationship between the Government and the 
Oversight Board by facilitating informal discussions to achieve 
meaningful solutions for the people of Puerto Rico including supporting 
the restructuring proceedings. From the outset, Governor Vazquez's 
administration has been, and will continue to be, fully committed to 
(1) transparency, (2) accountability, and (3) fiscal responsibility. To 
achieve these objectives, this administration has issued a series of 
executive orders in the last year designed to combat corruption in 
government contracting and restore Puerto Rico's credibility with the 
Board and the Federal Government. In fact, after reviewing the 
Government's recovery operations in February 2020, Coast Guard Admiral 
Peter J. Brown--the Trump administration's liaison to the Government 
for natural disaster recovery efforts--reported that Puerto Rico's 
``reputation seems to lag the reality'' because the Government has 
implemented ``very strong internal control mechanisms to counter any 
attempts at corruption or diversion of funds.'' These measures have 
helped to establish a new atmosphere of cooperation and trust between 
the Government of Puerto Rico, the Oversight Board, and the Federal 
Government that did not exist with prior administrations--a development 
that we hope will continue to improve and expand.
    In particular, this recent collaboration between the Government and 
the Board has been vital to achieving a swift response to the negative 
health and economic impacts of COVID-19 in Puerto Rico. On March 13, 
2020, the Government sent a request to the Oversight Board seeking 
authorization to use $160 million from an Emergency Reserve fund 
established under the Commonwealth's fiscal plan for preparedness and 
response to the COVID-19 emergency. That same day, the Oversight Board 
authorized the use of these funds on the condition that the Puerto Rico 
Office of Management and Budget (OMB) provide weekly reports to the 
Board on its uses and the disbursements of emergency expenses. The OMB 
has been providing these weekly reports to the Board. A few weeks 
later--on March 23, 2020--Governor Vazquez, with the support of the 
Oversight Board, announced a $787 million local emergency relief 
package package to address local issues. This relief package was among 
the most complete and ambitious packages awarded at the state/territory 
level to face this unprecedented crisis, and required substantial 
coordination between the Government and the Board to make available the 
necessary funds.
    This level of unprecedented collaboration between the Government 
and the Board demonstrates how meaningful achievements are possible 
under PROMESA when we work together. However, on June 8, 2020 the Board 
commenced a new adversary proceeding against the Government over a 
disagreement that, frankly, could have been resolved out of court. The 
Government believes that this and other disagreements we still have are 
reconcilable and we remain committed to working with the Board to 
achieve consensus wherever possible to build upon these prior 
successes.
III. Due to PROMESA's Unclear Delineation of Power, the Oversight Board 
        Has Engaged in Efforts to Impede the Government's Public Policy 
        Objectives

    Despite our best efforts to minimize disagreements, the language 
and structure of PROMESA as currently adopted by Congress, allows the 
Board to blur the delineation of power between the Government and the 
Oversight Board. Because the respective roles of the Government and 
Oversight Board often overlap, the lack of clarity in the statute 
creates too many opportunities to waste time jockeying for power rather 
than creating and implementing meaningful solutions for the people of 
Puerto Rico.
    Over the last several years, the Board has attempted to take 
advantage of this unclear separation of powers to gain control over 
day-to-day operations of the Government. For instance, on October 26, 
2017, the Oversight Board brought a motion in the Title III cases 
seeking the appointment of a chief transformation officer (CTO) for 
PREPA, the Island-wide public electric company. In its motion, the 
Board argued that the broad powers granted to it under PROMESA 
obligated the Board to act as a ``chief executive officer'' over both 
long-term strategic planning and day-to-day management of PREPA, such 
that it could unilaterally displace a statutorily created management 
structure and direct the executive functions of PREPA (or any other 
Puerto Rico public corporation). Fortunately, the Title III Court 
denied the Board's request, noting that, unlike the establishment of 
the D.C. control board, ``Congress did not grant the [Oversight Board] 
the power to supplant, bypass, or replace the Commonwealth's elected 
leaders and their appointees in the exercise of their managerial duties 
whenever the Oversight Board might deem such a change expedient.'' In 
re The Fin. Oversight & Mgmt. Bd. for Puerto Rico, 583 B.R. 626, 634 
(D.P.R. 2017).
    After failing to be acknowledged as the CEO of PREPA, the Oversight 
Board pivoted its strategy to subvert the duly elected Government's 
policy objectives through significant lobbying efforts, which have cost 
a disturbingly considerable amount of Puerto Rico taxpayer dollars to 
do it. The Board's use of such anti-democratic tactics to undermine the 
elected Government's policy preferences should be a primary concern of 
this Committee.
    The Oversight Board has also seized the fiscal plan and budget 
certification processes under PROMESA sections 201 and 202 to micro-
manage virtually all aspects of public governance in Puerto Rico, 
including attempts to exercise managerial duties that the Title III 
Court has already denied. For example, in 2018, the Oversight Board 
refused to provide appropriations for public-sector employee Christmas 
bonuses, and economic development initiatives for municipalities (among 
other things) and insisted on a draconian cut to public pensions unless 
the Government agreed to become an ``at will'' employment jurisdiction 
by repealing Act 80. Act 80 requires employers to have ``just cause'' 
before terminating the employment of an employee hired for an 
indefinite period of time. Although then-Governor Rossello agreed to 
the Board's request in exchange for vital funding necessary to support 
the Government's public policy objectives, the Puerto Rico Legislature 
did not repeal Act 80. In retaliation, the Oversight Board re-certified 
a new version of its fiscal plan and budget for fiscal year 2019 
imposing severe austerity measures designed to punish the Government 
for failing to adopt the Board's preferred public policy on employment.
    In its latest Commonwealth-wide fiscal plan certified on May 27, 
2020, the Board did it again when it completely defunded the State 
Public Broadcast Corporation (``WIPR'', by its Spanish acronym) to 
force the Government to comply with an unreasonable and unrealistic 
timeframe that could jeopardize the crown jewel of WIPR: its licenses 
issued by the Federal Communications Commission and their renewals. The 
Board also included in the new Fiscal Plan a detailed K-12 education 
reform plan that requires the Puerto Rico Department of Education to 
implement non-financial reforms such as: (i) segmenting schools based 
on performance outcomes; (ii) launching evidence-based curriculum 
reforms; (iii) creating post-COVID-19 back-to-school plans and 
improving distance learning capabilities; (iv) improving professional 
development opportunities for directors and teachers; and (v) 
implementing initiatives to boost family engagements. While the 
Government does not necessarily disagree with these measures, the 
Government believes that these types of detailed public policy 
initiatives--which have nothing to do with fiscal responsibility, 
ensuring sustainable debt levels, exiting the Title III bankruptcy, or 
maintaining balanced annual budgets--go far beyond the intent of 
PROMESA's fiscal plan and budget processes. These are matters for the 
people of Puerto Rico to decide.
    There is no doubt that an improved education system will help 
propel Puerto Rico's economy forward by developing a more competitive 
workforce and providing better opportunities for Island residents. In 
fact, improving education in Puerto Rico is one of Governor Vazquez's 
top priorities. But fiscal plans and budgets should not be a masquerade 
for the Board to implement its own vision for the future of education 
in Puerto Rico (or any other public policy for that matter). Puerto 
Ricans have elected their own government to do that. If the Board can 
use the fiscal plan and budget process to impose its own public 
policies on the Government of Puerto Rico, then the Board can tie the 
hands of elected officials (as it has done historically) and 
effectively strip the people of Puerto Rico of their voice in an 
elected government of their own choosing. Although we are cognizant of 
the fact that territories are subject to the plenary powers of Congress 
under Article IV of the U.S. Constitution, certainly, this is not what 
Congress adopted or intended under PROMESA when it installed an 
oversight board for Puerto Rico rather than a control board.

    The May 27 Fiscal Plan includes many other policy initiatives that 
have nothing to do with fiscal responsibility and financial management, 
but instead impose directives on day-to-day governmental operations, 
such as which agencies should perform promotional activities for the 
earned income tax credit. These measures include the micromanagement of 
government functions related to, among other things:

     Business permitting and occupational licensing;

     Workforce development programs;

     Public safety programs;

     Freight regulations;

     Tourism marketing;

     Broadband access programs; and

     Street parking.

    To be clear: the Government does not necessarily disagree with 
these policies. The problem is that the Board should not be able to use 
its fiscal plan and budgetary powers to dictate the specifics of every 
policy the Government pursues. A proper division of power would allow 
the Government to construct its own policies freely to meet the needs 
of the people, and the Board's oversight role would be to intervene 
only if the costs of Government policies significantly undermine the 
financial framework of the certified fiscal plan. If the Government 
acts within the broad revenue and expense targets in the fiscal plan, 
then the Board's powers should end and the democratic will of the 
people should prevail.
    In addition to imposing its own policy preferences, the Board has 
also used its fiscal plan and budgetary authority to impede the 
Government's own public policies by seeking to nullify new laws. Over 
the last several months, the Board has sent an excessive amount of 
correspondence to the Government asserting rights and powers that the 
Government believes exceeds the Oversight Board's capacities under 
PROMESA and which the Government has spent considerable time and energy 
responding to. A list of these efforts, including samples of the 
related correspondence, is attached hereto as Appendix A. Some of these 
letters touch upon aspects far removed from regular Oversight Board 
work, including suggesting when and how the Puerto Rico Electric Power 
Authority's (PREPA) vegetation management program should occur. But the 
most troubling of these communications from the Government's 
perspective include:

     Directives to provide substantial unwarranted information 
            in support of the Government's fiscal plan compliance 
            certifications related to new laws designed to (i) better 
            regulate the healthcare industry in Puerto Rico (Act 82-
            2019, Act 90-2019, and Act 138-2019); (ii) change employee 
            vacation and sick day accrual rates (Act 176-2019); (iii) 
            provide the Fire Department of Puerto Rico a pay increase 
            paid for with a new 3 percent tax on fire and allied lines 
            insurance policies (Act 181-2019); and (iv) provide tax 
            relief to health professionals in light of their personal 
            and professional sacrifices related to COVID-19 (Act 47-
            2020); and

     Assertions that the Board can unilaterally nullify these 
            new laws pursuant to PROMESA sections 204(a) and 108(a) if 
            the Government fails to comply with the foregoing 
            directives.

    Furthermore, on June 8, 2020 the Oversight Board commenced yet 
another adversary proceeding over certain information requests the 
Board has sent to various Government agencies. Even though the 
Government has cooperated with such requests by producing over 1,000 
pages of documents, the Board still alleges some information is 
missing. Rather than engaging with the Government and meeting with 
public officials to discuss the alleged missing information, as the 
Government has suggested, the Board decided to go through the courts, 
once again antagonizing the Government in expensive judicial 
proceedings that unnecessarily wastes public funds.
    In contrast to the Board's interference with Government public 
policies, the Board has not made efficient use of the economic 
development tools provided by PROMESA. As of today, the position of 
Revitalization Coordinator provided for in section 502, has been vacant 
for over a year. And as far as the Government is aware, only one 
critical project under section 503 of PROMESA has been approved by the 
Board. Almost 4 years since the enactment of PROMESA, the economic 
development tools provided to the Board by PROMESA are stalled. As with 
the Board's imposition of public policies in the fiscal plan, the 
Government believes that actively impeding the Government's own public 
policy initiatives is counterproductive and undermines our recent 
progress to work collaboratively with the Board to implement meaningful 
fiscal and economic solutions for the people of Puerto Rico. It is 
particularly disconcerting that the Board has used these letters to 
make unwarranted threats to nullify the duly elected Government's 
recently enacted laws. The Government believes that a more carefully 
delineated division of power would avoid these wasteful and time-
consuming endeavors, while preserving effective governance in Puerto 
Rico.
IV. Any PROMESA Amendments Should Clarify Where the Board's Powers End

    As with prior proposed PROMESA amendments that this Committee has 
considered, any further PROMESA amendments must address the most 
important obstacle to effectively implementing the statute: Clarifying 
where the Board's powers end. As such, the Government recommends that 
Congress consider the following amendments to PROMESA:

     Clarify the Roles of the Government and the Oversight 
            Board: It is critical to the legitimacy of this process 
            that the Government of Puerto Rico always retain its 
            democratically derived powers. Congress should make clear 
            that appropriate, important roles exist for each of the 
            Government of Puerto Rico and the Oversight Board. As 
            previously discussed, the Oversight Board has used its 
            fiscal plan and budgetary powers to impose detailed 
            spending restrictions that have the effect of dictating 
            public policy--an approach that undermines the Government's 
            powers and turns the Oversight Board into something more 
            akin to a control board. To address this issue, we submit 
            that sections 201 and 202 of PROMESA should be amended to 
            make clear that the Oversight Board's fiscal plan and 
            budgetary powers do not extend to determining day-to-day 
            operating level expenditures or the imposition of detailed 
            public policy (such as education reforms). The Government 
            of Puerto Rico should be responsible for setting public 
            policy, operating the government and implementing 
            solutions. The Oversight Board should provide financial 
            oversight and monitor the budget and fiscal health of the 
            Commonwealth to assure that appropriate controls are in 
            place and financial metrics are being met. While the 
            Government and the Oversight Board would still be required 
            to work diligently together to make their respective roles 
            work as a cohesive whole, a more careful delineation of 
            PROMESA's power-sharing arrangement would make for a much 
            more effective process.

     Eliminate the Role of the Oversight Board as Title III 
            Representative: The insertion of the Oversight Board as the 
            Title III representative creates confusion and results in 
            litigation within the Title III process. The Title III 
            debtor is already subject to the scrutiny of the court 
            process. While the Oversight Board has a critical role to 
            play, it is not necessary to create conflicting roles by 
            giving the Board both the debtor role and the oversight 
            function in the Title III process.

     Revise Fiscal Planning Process: The fiscal plan and 
            budgeting process should be revamped to provide a focus on 
            one-year budgets to make sure that Puerto Rico is not 
            spending more than it is taking in and that an objective 
            and reliable assessment is made each year to determine how 
            much the Government needs to pay for essential services. 
            The fiscal plan and budgeting process should not be used as 
            a public policy tool or turned into an endless modeling 
            exercise.

                               Conclusion

    As Justice Breyer advised in his book ``Making Our Democracy 
Work,'' a ``workable government'' requires trust among government 
institutions and between those institutions and the people. In order to 
achieve a long-term ``workable government'' for Puerto Rico, the 
Government and the Board must trust each other in their respective 
roles. But the people of Puerto Rico will not trust the dynamic between 
the Board and their Government if the Board is able to impose its 
public policy preferences at will over elected officials. Hence, 
failing to amend PROMESA to more clearly delineate the respective roles 
of the Board and the Government will result in only one thing: an 
``unworkable government.'' Moreover, the Board may be tempted to 
continue in their attempts to interfere with local governmental powers, 
acting like a judicial branch by unilaterally enjoining the 
implementation of local laws, like a legislative branch by illegally 
incorporating and mandating public policy issues in certified fiscal 
plans, and like an executive branch, by dictating when and how their 
own public policy determinations are executed. Surely this is not the 
type of entity Congress had in mind when PROMESA was approved. The 
Government believes that, notwithstanding the substantial restructuring 
progress we have made to date, further and faster progress could be 
made, and the job of exiting Title III bankruptcy can be achieved, if 
the Government and Board's powers were more clearly delineated in 
PROMESA. By doing so, we will fully respect thereby both the democratic 
system of the People of Puerto Rico, which the Preamble of our 
Constitution acknowledges as fundamental to the life of our community, 
as well as the long-standing tradition of our American democracy ``that 
government of the people, by the people, for the people, shall not 
perish from the earth.'' Thank you.

                                 *****

The following documents were submitted as attachments to Mr. Marrero's 
testimony. These documents are part of the hearing record and are being 
retained in the Committee's official files:

Appendix A: Board Actions Interfering With Government Operations

    -- Exhibit 1: U.S. District Court, District of Puerto Rico, Case 
            17-04780-LTS

    -- Exhibit 2: FOMB, Letter to Governor Wanda Vazquez Garced, dated 
            November 15, 2019.

    -- Exhibit 3: AAFAF's Response Letter to FOMB, dated November 22, 
            2019.

    -- Exhibit 4: FOMB, Letter to Omar Marrero, dated December 18, 
            2019.

    -- Exhibit 5: FOMB, Letter to Omar Marrero, dated April 27, 2020.

    -- Exhibit 6: AAFAF's Response Letter to FOMB dated May 8, 2020.

    -- Exhibit 7: FOMB, Letter to Ortiz Vazquez, PREPA, dated April 30, 
            2020.

    -- Exhibit 8: FOMB, Letter to Governor Vazquez, Senate President 
            Thomas Rivera Schatz, and House Speaker Carlos J. Mendez 
            Nunez, dated May 11, 2020.

    -- Exhibit 9:AAFAF's Response Letter to FOMB, dated May 19, 2020

    -- Exhibit 10: FOMB, Letter to Governor Vazquez, Senate President 
            Thomas Rivera Schatz, and House Speaker Carlos J. Mendez 
            Nunez, dated May 11, 2020.

    -- Exhibit 11: FOMB, Letter to Governor Vazquez, Senate President 
            Thomas Rivera Schatz, and House Speaker Carlos J. Mendez 
            Nunez, dated May 21, 2020.

    -- Exhibit 12: AAFAF's Response Letter dated May 28, 2020.

    -- Exhibit 13: FOMB, Letter to Omar Marrero, dated June 5, 2020.

                                 ______
                                 

Questions Submitted for the Record to Omar Marrero, Executive Director, 
        Puerto Rico Fiscal Agency & Financial Advisory Authority
                  Questions Submitted by Rep. Grijalva

    Question 1. How does the 2020 Fiscal Plan certified by the 
Oversight Board differ from the proposed Fiscal Plan presented by the 
Government of Puerto Rico?

    Answer. While there are many overlapping assumptions and measures 
in the Government's fiscal plan proposal dated May 3, 2020 (the 
``Government 2020 Fiscal Plan'') and the Oversight Board's fiscal plan 
as certified on May 27, 2020 (the ``Certified 2020 Fiscal Plan''), 
there are also areas where the Government and the Oversight Board 
differ. Below please find a summary of certain provisions that are 
fundamentally different.

     Term of the Financial Forecast: The Government 2020 Fiscal 
            Plan includes a 20-year forecast through fiscal year 2039, 
            consistent with the life of the bonds as proposed in the 
            Board's as-filed plan of adjustment proposal dated February 
            28, 2020. The Certified 2020 Fiscal Plan includes a 30-year 
            forecast through fiscal year 2049.

     Macro-Economic Forecast: The Government 2020 Fiscal Plan 
            reflects a slightly more pessimistic macroeconomic forecast 
            in fiscal year 2020 and fiscal year 2021 relative to the 
            Certified 2020 Fiscal Plan. This is a result of assumptions 
            related to United States economic growth, the COVID-19 
            shock, and the offsetting COVID-19 stimulus.

     Long Term Medicaid Federal Funding: The Government 2020 
            Fiscal Plan includes an assumption that the Commonwealth 
            will receive long-term Medicaid federal funding of 55 
            percent after the current Medicaid Bill expires. 
            Conversely, the Certified 2020 Fiscal Plan does not assume 
            that there will be long-term Medicaid funding.

     Pension Reform: The Government 2020 Fiscal Plan excludes 
            pension reform, such as pension cuts and a pension freeze. 
            Conversely, the Certified 2020 Fiscal Plan includes pension 
            reform measures such as the pension cuts and pension 
            freeze.

     General Fund Expenses: The general fund expenses in the 
            Government 2020 Fiscal Plan are based on the Puerto Rico 
            Office of Management and Budget (``OMB'') proposed budget 
            for fiscal year 2021. Additionally, the Government 2020 
            Fiscal Plan includes several reinvestment initiatives such 
            as Uniform Remuneration, Police Retirement, Parametric 
            Insurance, and the payment of the ``Christmas Bonus,'' an 
            integral part of government employees' compensation for 
            over 40 years. The Certified 2020 Fiscal Plan is based on 
            the Oversight Board's target budget for fiscal year 2021. 
            Moreover, the Certified 2020 Fiscal Plan includes 
            approximately $5.5 billion in re-investment in Puerto Rico 
            on account of the COVID-19 crisis.

     Measures and Appropriations: The Government 2020 Fiscal 
            Plan calls for a 2-year delay in rightsizing measures and 
            appropriations as a result of the COVID-19 pandemic. 
            Additionally, the Government 2020 Fiscal Plan excludes go-
            forward measures related to education, health, and public 
            safety given their critical nature. The Certified 2020 
            Fiscal Plan includes a 1-year delay in rightsizing measures 
            and appropriations on account of COVID-19.

    Question 2. Are austerity measures requested by the Oversight Board 
impacting the Government's ability to provide essential public services 
and/or respond to the current COVID-19 public health and economic 
crises? For example, are austerity measures causing delays in 
processing stimulus checks, unemployment applications, NAP expansion, 
and/or local programs to respond to the pandemic?

    Answer. The Oversight Board's austerity measures have affected the 
Government's ability to provide services to the people of Puerto Rico 
in some instances. Specifically, the Labor grouping in the Certified 
2020 Fiscal Plan has already had its budget reduced by $8.9 million 
from fiscal year 2018 through fiscal year 2020. Over the same time 
period, headcount declined from 2,318 to 2,084, a 10 percent reduction.

    Question 3. $4.9 billion was appropriated after Hurricane Maria for 
low-cost forgivable Community Disaster Loans for Puerto Rico and the 
U.S. Virgin Islands based on projections of revenue losses that, in 
Puerto Rico's case, were vastly overestimated. The White House 
suggested Puerto Rico could expect about $4.65 billion of the total, 
but only a few hundred million were disbursed to Puerto Rico's 
municipalities because the Government of Puerto Rico did not have a 
liquidity problem as projected. Since Puerto Rico was excluded from the 
Federal Reserve program--contrary to Congress' intent--should a 
reprogramming of the $4 billion in Community Disaster Loans that were 
appropriated but have not been used be disbursed to Puerto Rico?

    Answer. The Government supports any initiative that allows it to 
cope with the revenue losses caused by the substantial economic and 
health impacts of the COVID-19 pandemic, including Puerto Rico's 
participation in the Federal Reserve program or the revenues loss 
provisions being contemplated in the HEROES Act currently under 
evaluation in Congress.

    Question 4. Through the CARES Act, the Federal Government assigned 
$2.2 billion to Puerto Rico to address the COVID-19 pandemic. The 2020 
Fiscal Plan outlines how the funds will be allocated by the government. 
Mr. Marrero, how much of these funds has the Government already used? 
Are you confident the government will be able to make use of the 
available funds before the December 31, 2020 deadline established by 
the CARES Act?

    Answer. On May 15, 2020, Governor Wanda Vazquez Garced issued 
Executive Order OE-2020-040 establishing Puerto Rico's Strategic 
Disbursement Plan for the Coronavirus Relief Fund (the ``Strategic 
Disbursement Plan'') under the Coronavirus Aid, Relief, and Economic 
Security Act of 2020, Pub. L. 116-136 (the ``CARES Act''). A copy of 
the Strategic Disbursement Plan is available at http://
www.aafaf.pr.gov/assets/strategic-disbursement-plan-crf.pdf.

    The Strategic Disbursement Plan lays out 16 distinct programs that 
address both government needs (mainly associated with attending to the 
public health emergency and continuing government operations) and those 
of the private sector, which has been severely affected by interruption 
of operations. In addition, the Strategic Disbursement Plan established 
a reserve of $486 million to be allocated at a later date. The 
Government is currently considering options to deploy that reserve 
based on a necessity standard as well as data gathered from the 
applications received for the other Coronavirus Relief Fund (``CRF'') 
programs.
    As of June 17, 2020, 12 of the Strategic Disbursement Plan programs 
are live and accepting applications, with the remaining programs 
expected to go live in the next few weeks. $557 million in CRF funds 
have been disbursed or transferred to entities who were deemed eligible 
after completing the Strategic Disbursement Plan's CRF application 
process. Based on the pace of disbursements to date as well as 
additional eligible needs that have been identified, we expect the 
Government will be able to make use of the available funds before the 
deadline established by the CARES Act. Further information on CRF 
disbursements can be found at http://www.aafaf.pr.gov/covid-19-
resource-center.html.

    Question 5. Mr. Marrero, like most places around the world, Puerto 
Rico is facing higher unemployment rates due to the COVID-19 pandemic. 
However, Puerto Ricans trying to obtain unemployment benefits have 
faced hours-long lines, faulty technology, and miscommunication from 
the local Department of Labor. What steps will the Puerto Rico 
Department of Labor take to immediately correct the current missteps in 
disbursing local unemployment funds?

    Answer. The State Unemployment Insurance Program (``UI'') and the 
temporary unemployment benefits programs created under the CARES Act 
(e.g., Pandemic Unemployment Assistance (``PUA''), Federal Pandemic 
Unemployment Compensation (``FPUC'') and Pandemic Emergency 
Unemployment Compensation (``PEUC'')) require compliance with Federal 
law, which mandates that claimants should meet all eligibility 
requirements. At present, there are more than 320,000 workers receiving 
UI and PUA benefits. However, a portion of applicants have issues of 
eligibility on their claims that must be solved through investigation 
before a payment is issued. These issues arise from the information 
provided by claimants in their benefits application.
    Federal law requires the adjudication of eligibility issues to be 
solved on a case-by-case basis before the issuance of a payment. 
Sometimes, the adjudication of an issue may require interviewing not 
only a claimant, but also his or her employer. Therefore, the payment 
of unemployment funds cannot always be as fast as expected. See U.S. 
Department of Labor, Unemployment Insurance Program Letter No. 23-20, 
at p.4 (``Eligibility for [Unemployment Compensation (``UC'')] is based 
on claimants demonstrating that they meet certain eligibility 
requirements on a weekly basis . . . a state's failure to administer 
its UI program in conformity and substantial compliance with federal 
law can result in loss of the state's certification and loss of its 
administrative grant to operate the UC program and/or its employers' 
tax credits under [Federal Unemployment Tax Act] FUTA'') (emphasis 
added).
    Hence, issues on a claimant's eligibility can delay the receipt of 
unemployment benefits. In order to speed up the issues-solving process, 
the Puerto Rico Department of Labor (``PRDOL'') has contracted with a 
company that provides software and virtual platform for employees to 
solve claimant's issues by phone. Under this new software, claimants 
will receive texts and e-mails informing the date and hour in which 
PRDOL will call to solve their eligibility issues.
    Claimants with issues of eligibility with an older date will be 
called before claimants with recent eligibility issues. Therefore, the 
software provides an efficient way to solve claims chronologically, so 
that people that have been waiting longer for the resolution of their 
claim can obtain their unemployment benefits payment first. PRDOL will 
promote this phone-appointment system, so that claimants do not have to 
visit their local PRDOL office. PRDOL will also promote the use of its 
virtual document uploader so that claimants will be aware that they do 
not have to hand in person the documentation required to solve their 
eligibility issues. Moreover, new mailboxes were installed at the PRDOL 
regional offices.
    Regarding the acquisition of new technology to speed up the payment 
of claims, PRDOL issued a request for proposal to analyze PRDOL's 
processing of unemployment claims and issue an opinion with 
recommendations. Currently there is a bill before the Puerto Rico 
Legislature that will allow a collaboration between the PR Treasury 
Department and PRDOL. Once the aforementioned bill becomes a law, the 
PR Treasury Department will be allowed to provide data and its updated 
technology to the PRDOL with the purpose of speeding up the processing 
of unemployment claims. Furthermore, PRDOL is currently analyzing 
various software proposals for a fastest processing of PUA and 
``Disaster Unemployment Assistance'' (``DUA'') claims. Finally, it must 
be pointed out that PRDOL expects to add approximately 200 temporary 
employees (or more if needed) to its current workforce to help with the 
resolutions of claims.

    Question 6. Senate Finance Committee Chairman Charles Grassley 
wrote a letter to Governor Wanda Vazquez outlining a series of well-
documented incidents of corruption and mismanagement that have been 
widely reported by the media in Puerto Rico. What specific measures is 
the Government of Puerto Rico implementing to address each of his 
concerns and what steps are you taking to ensure these incidents never 
happen again?

    Answer. As the Government's response to Chairman Grassley made 
clear, the allegations in his letter appear to be unsupported and many 
originated from unreliable sources or parties with partisan agendas. 
Governor Vazquez's administration has fought to ensure that government 
agencies take responsible measures to fairly and transparently 
implement their procurement and contracting policies. This 
administration has addressed issues related to irregularities in the 
use of federal funds and ensured that relief is used to benefit the 
people of Puerto Rico. Since assuming office in August 2019, Governor 
Vazquez has issued a series of executive orders designed to combat 
corruption in government contracting and restore Puerto Rico's 
credibility with the Federal Government. In fact, after reviewing the 
Government's recovery operations in February 2020, Coast Guard Admiral 
Peter J. Brown--the Trump administration's liaison to the Government 
for natural disaster recovery efforts--reported that Puerto Rico's 
``reputation seems to lag the reality'' because the Government has 
implemented ``very strong internal control mechanisms to counter any 
attempts at corruption or diversion of funds.''

    Question 7. Since the COVID-19 pandemic reached Puerto Rico, and 
the shelter in place and lockdown restrictions were put in place, many 
non-profits entities, community leaders and community-based 
organizations have been working together in several groups to find 
solutions to the social problems created by this new emergency. Some of 
those groups include ``La Mesa Social'' and ``Task Force Social del 
Pueblo'', comprising more than 150 organizations. These groups have 
been working with vulnerable populations facing the new challenges 
imposed by COVID-19, and also asking the Government for information and 
specific actions that would help the residents of Puerto Rico. Why 
hasn't the Government of Puerto created a social task force, similar to 
the medical or economic task forces, to address the problems faced by 
the most vulnerable populations of the island?

    Answer. The Government continues to take all measures necessary to 
combat the effects of the COVID-19 pandemic. The Governor has created a 
medical task force and an economic task force to advise on matters on 
how to handle the pandemic. The vulnerable population of the Island is 
of the utmost importance to the Government. In fact, one of the first 
Executive Orders signed by the Governor during the COVID-19 crisis was 
geared toward protecting a sector of the most vulnerable population of 
Puerto Rico; the homeless. Executive Order 202-25 ordered the PR 
Department of the Family, the Department of Housing and the Health 
Department to establish assistance centers to provide medical 
attention, among others, to this vulnerable sector of the population. 
In addition, as further explained in our answer to Question 8, under 
the Strategic Plan for the Disbursement of CRF funds, nongovernmental 
organization that work closely with these vulnerable communities are 
eligible and encouraged to participate in many of the programs outlined 
in the Strategic Plan. The Government will continue analyzing further 
ways in which to address the problems of this important sector of our 
population.

    Question 8. After advocacy efforts from a group of Puerto Rican 
NGOs, the Oversight Board wrote a letter to Governor Wanda Vazquez 
supporting a petition that a portion of the discretionary funds under 
federal stimulus packages be assigned to the social services NGOs in 
Puerto Rico. However, the Government of Puerto Rico has not answered 
this petition. What are the reservations to the petition made by the 
NGO community and supported by the Oversight Board? Is the Government 
of Puerto Rico going to act on this request any time soon?

    Answer. On May 15, 2020, Governor Wanda Vazquez Garced issued 
Executive Order OE-2020-040 establishing Puerto Rico's Strategic 
Disbursement Plan for the use of CRF funds under the CARES Act. The 
plan lays out 16 distinct programs that address both government needs 
(mainly associated with attending to the public health emergency and 
continuing government operations) and those of the private sector, 
which has been severely affected by interruption of operations. Non-
governmental organizations (``NGOs'') are eligible for and have been 
encouraged to participate in many of these programs.
    Additionally, communication among representatives of the Puerto 
Rico Fiscal Agency and Financial Advisory Authority (``AAFAF'') and 
representatives of the NGO sector has been constant throughout the 
process of developing these CRF programs. Representatives of AAFAF have 
met with a group of representatives of the NGO sector three times and 
continue to discuss with them ways to achieve their goals that are in 
line with the CRF guidance provided by the U.S. Department of Treasury. 
AAFAF remains available to continue discussions with representatives 
from the NGO sector.
    Question 9. Puerto Rico's power grid is particularly fragile after 
Hurricane Maria and the earthquakes in southern Puerto Rico. After the 
earthquakes this January, the Costa Sur power plant has been out of 
service due to the significant damages made. The 2020 Hurricane season 
began 2 weeks ago. Mr. Marrero, have you or Governor Wanda Vazquez been 
in contact with FEMA to discuss the upcoming hurricane season? What 
steps are being taken to plan and prepare for these upcoming months? 
How are these being impacted by the upcoming privatization of the power 
utility?

    Answer. As a result of the multiple lessons learned following 
Hurricanes Irma and Maria, PREPA has undertaken and implemented various 
System Planning and Response Planning measures.

    (a) System Planning--

     Vegetation Management: PREPA commenced a pilot and a 
            comprehensive vegetation management program, consistent 
            with industry best practices, to protect the integrity of 
            PREPA's T&D infrastructure. The pilot program was supported 
            by a $7 million budget for two contractors (fiscal year 
            2019-2020), 1,098 areas assigned across six regions on 38 
            kV lines. The full T&D vegetation management program 
            (fiscal year 2020 and 2021) includes a $33 million budget 
            for three contractors, with 595 miles assigned across six 
            regions.

     Enhanced Communications: PREPA also now has 68 satellite 
            phones and agreements with KP4 for radio communication in a 
            natural disaster event. This includes an installed 
            teleconference system island-wide that improves 
            communication reliability and redundancy.

    (b) Response Planning--PREPA has aligned the following support in 
the event response is needed to another natural disaster.

     American Public Power Association (APPA) Agreement: The 
            Mutual Aid Program includes a variety of partners and 
            networks for the provision of external resources for power 
            restoration; This also contemplates coordination with APPA 
            within 72 hours.

     Master Service Agreement (MSA) for Emergency Restoration: 
            PREPA issued an RFP during early May. Selected proponents 
            are expected to be announced in early July 2020.

     Memorandum of Understanding (MOU) with Municipalities: 
            PREPA has made available an MOU agreement to those 
            municipalities that wish to provide restoration services at 
            a very local level.

     Inventory: PREPA's inventory positions is currently at 
            $138 million versus $37 million prior to Hurricane Maria. 
            The $138 million amount includes $82 million of PREPA 
            inventory and $56 million of USACE inventory.

     Additional Logistics in Place: Four functioning 
            helicopters; 160 call center resources at three different 
            locations throughout the island.

    The above are only some of the preparedness measures undertaken by 
PREPA. In addition thereto, PREPA has undertaken multiple and specific 
initiatives that have been included within the FEMA claims process that 
are designed to improve the island's ability to respond to hurricanes 
and other atmospheric events/natural disasters. Initiatives include 
recommendations made by the Department of Energy (``DOE''), FEMA, and 
other stakeholders. These include peaking units, substation hardening, 
upgraded codes and standards, underground critical feeders, substation 
relocations for flooding prevention, and new buildings for storm 
hardening, among others.
    The Operation and Maintenance services management contract for the 
Transmission and Distribution infrastructure will not negatively impact 
any of the preparatory actions and strategies. To the contrary, the 
selected operator and the underlying public-private partnership 
agreement are contemplated to expressly augment the island's capacity--
from a financial, human resource, and practical expertise standpoint--
to improve, professionalize and react to any future event.

                   Questions Submitted by Rep. Sablan

    Question 1. Like Puerto Rico, my district, the Northern Mariana 
Islands, was recently devastated by multiple natural disasters. And, 
like Puerto Rico, we are currently dealing with considerable fiscal, 
economic, and social challenges during this pandemic. I imagine all the 
territories are. What are some lessons learned during this crisis that 
you believe might be useful for the territories and the rest of the 
United States?

    Answer. If the last 3 years has taught us anything it is that we 
must be prepared for the unknown. Over this time period, Puerto Rico 
has been struck with two devastating hurricanes, Irma and Maria, 
countless earthquakes and is now facing the COVID-19 pandemic. 
Territories must be financially and operationally equipped to respond 
to events such as these. This includes budgeting for rainy-day funds, 
ensuring adequate funding for emergency response and healthcare related 
agencies and having action planes developed in advance of future 
catastrophic events to ensure Government continuity and continuation of 
essential services.

    Question 2. The 2020 Hurricane season began just a few weeks ago, 
while Puerto Rico is still recovering from several natural disasters. 
Have you or the Puerto Rico government been in contact with FEMA to 
discuss the upcoming hurricane season? What steps are being taken to 
plan and prepare for these upcoming months?

    Answer. The Government has regular communications with the Federal 
Emergency Management Agency regarding both the continued work to 
rebuild after Hurricanes Irma and Maria, the recent Earthquakes and 
COVID-19. The Government anticipates a significant amount of monies to 
be obligated this year for the rebuilding of the islands electric grid, 
water infrastructure and schools.
    The Government is also keenly aware of the hurricane season ahead 
and the fact that certain experts are anticipating an extremely active 
season. The Government continues to fund a rainy-day fund that will 
grow over time to $1.3 billion by funding $130 million annually. The 
monies in the rainy-day fund will be used, where needed, to respond to 
external shocks including hurricanes and other natural disasters, among 
other possibilities. In addition to the rainy-day fund, the Oversight 
Board has finally acknowledged the need for a Disaster Relief Funds 
(``DRF'') working capital facility. The Government has consistently 
articulated the need of a DRF working capital facility to the Oversight 
Board but the Oversight Board had objected to this concept until the 
Certified 2020 Fiscal Plan, which includes a DRF working capital 
facility in the amount of $750 million. The intent of the facility is 
to accelerate the rebuilding process funded with Federal monies on a 
spend and reimburse basis. The acceleration of permanent projects will 
put the Island in a better position to withstand future hurricanes.

                 Questions Submitted by Rep. Cartwright

    Question 1. Like most places around the world, Puerto Rico is 
facing higher unemployment rates due to the coronavirus pandemic. 
However, Puerto Ricans trying to obtain unemployment benefits have 
faced hours-long lines, faulty technology, and miscommunication from 
the local Department of Labor. Mr. Marrero, what steps is the Puerto 
Rico Department of Labor taking to remedy this situation?

    Answer. See response to Question 5 from Chair Grijalva above.

                   Questions Submitted by Rep. Bishop

    Question 1. PROMESA required that Puerto Rico's audited financials 
be made current, yet PR is further behind in its audited financials 
today than it was when PROMESA was passed. Is this a failure of the 
FOMB or the Commonwealth or both?

    Answer. The expected issuance of audited financial statement for 
fiscal year 2017 is no later than July 31. The Government is targeting 
to have a draft of fiscal year 2018 financial statements for review by 
external auditors by November 2018.

    Question 2. With aggregate balances now totaling more than $19 
billion sitting in Commonwealth accounts (and virtually half of that 
being unrestricted in use), why have the Commonwealth and FOMB not been 
able to make more development progress, and also bring bankruptcy 
proceedings to a conclusion? Why haven't these funds been utilized to 
help Puerto Rico develop, and to honor what obligations could be 
honored in a timely fashion?

    Answer. Respectfully, the premise of the question is misleading. 
For example, the headline number of $19 billion (which was as of April 
30, 2020 and does not reflect drops in revenue since then) includes 
nearly $2 billion in CARES Act funding, $650 million in employee 
retirement contributions, $660 million in unemployment trust funds, and 
nearly a billion in funds belonging to Puerto Rico's water and sewer 
authority (PRASA), which is current in its bond obligations. Funds 
available to address creditor claims in each individual Title III case 
are much lower.
    Moreover, over the last several years, the Government has worked 
with the Oversight Board to develop several strategies to emerge from 
the Commonwealth's Title III cases. Many of these strategies have been 
successful. For example, in November 2018, the Government Development 
Bank of Puerto Rico completed a first-of-its-kind consensual 
restructuring of about $4 billion of debt under Title VI of PROMESA. 
And in February 2019, the Puerto Rico Sales Tax Financing Corporation 
(known as COFINA) consummated its Title III plan of adjustment to 
restructure approximately $18 billion of bond debt. Both of these 
efforts garnered the full support of the Oversight Board and the 
Government, including both the legislative and executive branches.
    In addition, substantial progress has been made regarding the 
Government's other Title III debtors. However, any consensual 
resolution of the Title III cases must involve creditors recognizing 
weaknesses in their legal positions as well as a realistic evaluation 
of what the Title III debtors can provide for recoveries. The 
unwillingness to this point of major creditor constituencies to face 
these realities is a roadblock to progress.

    In addition, the COVID-19 pandemic has materially impacted the 
economic and cash-flow projections for the Island, consistent with what 
all U.S. states are experiencing. As a result, the Government and 
Oversight Board will need to re-assess all restructuring agreements to 
determine which approaches remain viable in the post-COVID-19 economic 
reality. Before the COVID-19 pandemic, the Government and Oversight 
Board made the following progress in the Title III process:

     Commonwealth: The Government worked closely with the 
            Oversight Board in the development of a Plan Support 
            Agreement (``PSA'') and Plan of Adjustment (``POA'') for 
            the Commonwealth. Although the Government and Oversight 
            Board did not agree on all aspects of the POA proposal, 
            they were working together to resolve them. The PSA and POA 
            contemplated the use of approximately $5.1 billion of cash 
            as part of settling various claims against the 
            Commonwealth. This disproves the assertion that the 
            Government is not willing to use cash to satisfy creditor 
            obligations.

     Puerto Rico Electric Power Authority (``PREPA''): In the 
            case of PREPA, the Government supported, and was party to, 
            the Restructuring Support Agreement entered between the 
            PREPA Revenue Bond holders, the Oversight Board and AAFAF.

     Employees Retirement System (``ERS''): The validity of the 
            Pension Obligation Bonds (``POBs'') and rights of the 
            Pension Obligation Bondholders are subject to various 
            complex litigation that has not yet been resolved. 
            Resolution of the legal issues surrounding the POBs will 
            facilitate and accelerate the Title III for ERS.

     Highway & Transportation Authority (``HTA''): The 
            Government and Oversight Board have participated in 
            mediation sessions with the creditors of HTA, but they have 
            not yet reached an agreement with them.

    Although the aggregate balances of the Commonwealth's funds is 
currently approximately $19 billion, some of these funds are restricted 
and cannot be used. Many of the accounts holding these funds are (i) 
restricted by court order, (ii) earmarked for emergency use only by the 
Oversight Board, (iii) federal funds limited to specific uses, (iv) 
restricted by various federal laws or regulations, (v) held in 
custodial or other segregated accounts for third parties, (vi) proceeds 
of tax-exempt bonds with restrictions under the Internal Revenue Code, 
or (vii) restricted due to third-party contracts (such as debt service 
reserve funds held by a trustee). And many of the funds that are not 
otherwise restricted are being fought over by hundreds of different 
creditor constituencies involving complex legal issues that remain 
subject to pending litigation. Although the Government is trying to 
minimize the duration of litigation and reach consensual resolution 
with creditors where possible, the vast number of competing parties and 
interests has made global resolution difficult to achieve.
    Before the COVID-19 pandemic, the Government also repeatedly 
advocated for reserving excess cash and additional resources so that 
Puerto Rico could adequately address future natural disasters or other 
uncontrollable events that might negatively affect the economy. Recent 
events have vindicated this position. In March 2020 alone, the 
Oversight Board authorized the use of nearly $1 billion of Puerto Rico 
funds, which included an increase and reallocation of $800 million for 
the Government's fiscal year 2020 budget and $160 million of the 
remaining balance available from the Government's Emergency Reserve 
Fund to combat COVID-19. Earlier this year, the Oversight Board 
authorized the use of $100 million from the Emergency Reserve Fund to 
respond to Puerto Rico's recent earthquake emergency in January 2020. 
Without the availability of these cash reserves, the Government would 
not have been able to quickly and effectively address these emergency 
situations. In order to successfully emerge from its Title III process 
and minimize the risk of having to seek Title III relief again, the 
Government continues to believe it should retain sufficient cash 
reserves not only for emergency purposes but also to utilize any excess 
available resources to reinvest in areas earmarked as the most critical 
to Puerto Rico's future economic growth.
    Thus, the Government is not simply sitting on a pile of cash and 
doing nothing with it. To the contrary: the Government is trying to 
preserve its available resources so that it can properly allocate and 
utilize them in a potential global resolution of the Title III cases 
that is both fair to creditors and protects the health, welfare, and 
safety of the people of Puerto Rico.

    Question 3. The FOMB in an early fiscal plan projected an 
astonishing $1.5 billion to be spent on advisory fees. Several years 
hence, how much money have the Commonwealth and FOMB in fact spent on 
aggregate financial and legal advisory fees so far since PR began 
defaulting on its debt? Has this process created a class of people that 
benefit financially from the prolonged continuation of bankruptcy?

    Answer. Perhaps the largest driver or professional fees has been 
that creditors have engaged in failed litigation strategies, including 
their challenge to PROMESA's appointment process, which was rejected by 
a 9-0 vote in the U.S. Supreme Court. The scorched earth tactics of 
creditors--who started the bankruptcy process filing fruitless lawsuits 
rejected by the District Court, the Court of Appeals and the Supreme 
Court and have continued a steady pace of motions and lawsuits since 
then--forces the Oversight Board, the Government and the statutory 
committees Congress required be appointed to spend resources. As 
described above, the fastest way to stop professional fee expenditures 
is for creditors to be willing to reach reasonable compromises instead 
of seeking overreaching recoveries.
    We also refer you to section 5.2.8 of the Certified 2020 Fiscal 
Plan for a description of the professional fee forecast and Oversight 
Board operating expense forecast. Additionally, Exhibit 20 of the 
Fiscal Plan provides an analysis of professional fees as a percentage 
of funded debt relative to other mega bankruptcy cases. As can be seen 
in that analysis, the projected professional fees are in line with 
other large, complex cases. The Title III cases in Puerto Rico are 
arguably the most complex bankruptcy cases ever and involve many legal 
and financial issues that have never been addressed before. 
Restructuring over $100 billion in liabilities (funded debt and 
unfunded pensions) with a wide array of creditors is a costly and 
timely endeavor but a necessary one to put Puerto Rico on a path of 
sustainability.

    Question 4. Even before the COVID-19 pandemic began, the FOMB and 
Commonwealth had not abided by their own agreement under the 2019 PREPA 
Restructuring Support agreement to raise a 1 cent interim rate increase 
case to the PREB, why?

    Answer. PREPA filed a request before Puerto Rico Energy Bureau 
(``PREB'') on July 3, 2019, to implement the settlement charge 
contemplated by the PREPA Restructuring Support Agreement (the ``PREPA 
RSA''). See In re: the Puerto Rico Electric Power Authority Initial 
Rate Review No. CEPR-AP-2015-0001. On November 22, 2019, PREB denied 
the motion on procedural grounds. The PREPA RSA provides that PREPA's 
obligation to implement the one-cent settlement charge is subject to 
entry of an order of the Title III Court approving the settlements 
embodied in the PREPA RSA (the ``9019 Order''). The hearing on the 9019 
Order has not yet occurred so no order has been entered.

    Question 5. Where is PREPA today in its transformation and 
privatization process? Have delays in this process directly and 
negatively impacted its ability to provide stable electricity to 
residents and hospitals on the island?

    Answer. On June 22, 2020 the Government announced an agreement 
between the Puerto Rico Public-Private Partnerships Authority (``P3A'') 
and LUMA Energy to manage and operate the transmission and distribution 
system of PREPA. PREB approved the contract last week. Under the 
agreement, LUMA Energy will operate, manage, maintain, repair, and 
restore PREPA's transmission and distribution system to help the 
transformation of PREPA into a modern power company able to deliver 
reliable, clean, and more affordable electricity to Puerto Rico's 
households and businesses.

    Question 6. What creditability will PREPA and the Commonwealth have 
with potential new transformation partners, or in future attempts to 
access the capital markets, if it is now on the verge of pulling out of 
yet a third consensually agreed PREPA Restructuring Support Agreement?

    Answer. The COVID-19 pandemic has materially impacted the economic 
and cash-flow projections for the Island, consistent with what all U.S. 
states are experiencing. As a result, the Government and Oversight 
Board will need to re-assess all restructuring agreements to determine 
which approaches remain viable in the post-COVID-19 economic reality.

    Question 7. What has the Commonwealth government done to take 
advantage of low oil prices to lock in future contracts for PREPA, and 
to offset the increase in charges that are mandated by law to cover all 
costs including those under the Commonwealth and FOMB agreements with 
creditors?

    Answer. During fiscal year 2020, PREPA has renegotiated its 
existing Fuel Purchase Contract for the supply of bunker fuel to the 
San Juan, Palo Seco, Aguirre, and Costa Sur steam plants. After 
conducting an RFI process directed to different potential bunker fuel 
suppliers, PREPA formally requested from the Oversight Board approval 
of an amendment to an existing fuel provider with more favorable terms. 
On June 2020, the Oversight Board approved the amended Fuel Purchase 
Contract.
    The contract amendment extended the term of the agreement until 
October 31, 2020, with an automatic extension until October 31, 2021. 
With this amendment, PREPA also secured a reduction in price adders of 
just over 20 percent. Given PREPA's bunker fuel purchases from August 
2019 through April 2020, the amended contract has resulted in 
cumulative savings of $9.2 million in adder fees. Based on projected 
bunker fuel purchases for May and June 2020, the amended contract is 
expected to save PREPA an additional $3 million.
    The Amendment generally seeks to stipulate that (i) the contract 
shall be in effect until October 31, 2021, extendable by an additional 
year and (ii) PREPA will pay a fixed price for bunker fuel oil, 
regardless of the market price, for purchases between a minimum volume 
of 250,000 barrels per month, up to a maximum of 400,000 barrels per 
month. As such, the fuel provider guarantees the price and is 
responsible for delivering the product at such price, regardless of the 
actual price at which it can secure inventory. The FOMB approval 
confirms that the renegotiated agreement is consistent with PREPA's 
fiscal plan and that funds for the relevant fuel payments are included 
in budget. Furthermore, the FOMB's analysis shows that these generally 
align with typical hedging facilities and, while some costs may be 
above typical benchmarks (i.e. hedging costs), the amended contract is 
expected to produce savings to PREPA, if current projections for the 
price of oil are realized.
    Any increases in rates are regulated and subject to the Puerto Rico 
Energy Bureau and the regulatory approval process thereunder. 
Furthermore, PREPA has achieved certain efficiencies and operational 
improvements that are contained in its current fiscal plan, which will 
be further detailed and reported on in the new fiscal year 2021 fiscal 
plan for PREPA that is expected to be certified by the Oversight Board 
on or before June 30, 2020. In addition, the announcement made on June 
22, 2020 by the Government regarding the selection of a Transmission 
and Distribution (``T&D'') private operator will also leverage 
additional and new operational and infrastructure efficiencies that 
will be incorporated into the T&D system over the next few years.

    Question 8. In the 2019 PREPA restructuring agreement the risk of a 
declining population was borne by creditors with no true up to rates, 
and if the B note in the transaction remained unpaid at maturity, it 
simply disappeared. Isn't that deal even better for the Commonwealth 
today than when it was struck given the greater uncertainty on economic 
projections and collections?

    Answer. Those are certainly good attributes of the PREPA 
restructuring agreement. Unfortunately, the COVID-19 pandemic has 
materially impacted the economic and cash-flow projections for the 
Island, consistent with what all U.S. states are experiencing. As a 
result, the Government and Oversight Board will need to re-assess all 
restructuring agreements to determine which approaches remain viable in 
the post-COVID-19 economic reality.

                   Questions Submitted by Rep. Gosar

    Question 1. What does the law require of the Puerto Rico government 
for procuring contracts? Did the law require the government to get 
approval from the Financial Oversight Management Board for Puerto Rico 
before the government entered a contract with Promedical for $38 
million worth of COVID-19 testing kits? If so, why did the government 
not follow the appropriate protocols?

    Answer. On March 16, 2020, Governor Vazquez Garced signed executive 
order EO-2020-024, which authorized the Government's agencies to 
acquire the medical supplies necessary to prevent the contagion of 
COVID-19 in Puerto Rico. As of the date of the executive order and 
given the COVID-19 emergency, the Government's agencies were given a 
60-day period to execute COVID-19 related contracts--effective for only 
60 days--without the need to comply with any requirements established 
by law, regulation, administrative order, or other applicable 
guidelines. Governor Vazquez Garced implemented this aggressive measure 
to acquire the medical equipment necessary to combat the virus as 
expeditiously as possible.
    The executive order also required that any contract executed within 
the 60-day emergency period be remitted to the Oversight Board. This 
provision was designed to minimize any disruptions to emergency 
contracting related to the Board's contract review policy under PROMESA 
section 204(b)(2), which authorizes the Oversight Board to require 
prior approval of ``certain contracts'' in order ``to ensure such 
proposed contracts promote market competition and are not inconsistent 
with the approved Fiscal Plan.'' Section 204(b)(3) explains that any 
Oversight Board contract review policy should be designed to: (1) make 
the government contracting process more effective; (2) increase the 
public's faith in the contracting process; (3) make appropriate use of 
the Oversight Board's time and resources; (4) make the Commonwealth 
government a facilitator and not a competitor to private enterprise; 
and (5) avoid creating any additional bureaucratic obstacles to 
efficient contracting. The Oversight Board's current contract review 
policy provides that ``any contract or series of related contracts with 
an aggregate expected value of $10 million or more'' must receive prior 
Oversight Board review and approval. The Oversight Board believes this 
policy applies to all contracts in which the Commonwealth or a covered 
instrumentality is a counterparty. However, because (i) section 
204(b)(2) on its face states that the purpose of any Oversight Board 
review is to promote market competition and is limited to contracts 
between the Commonwealth and another Puerto Rico Government entity, and 
(ii) section 204(b)(3) suggests that the purpose of the law is to 
promote private enterprise, the Government believes that the Oversight 
Board's policy requiring its approval of all contracts valued at more 
than $10 million is overbroad and at odds with section 204(b)(3).
    In a collaborative effort to expedite the execution of the 
emergency contracts, the Government and Oversight Board agreed to 
temporarily relax the Oversight Board's contract review policy, even 
though the Government still believes the contract review policy is 
beyond the Oversight Board's authority under PROMESA section 204(b)(2).
    As to the Promedical COVID-19 test kits, on April 6, 2020, the 
Oversight Board sent the Governor a letter asserting that such 
agreements should be canceled, and recommending the Government seek 
reimbursements for any amounts disbursed in connection to these 
agreements. AAFAF replied to the Oversight Board's letter confirming 
that: (i) the purchase order for Promedical COVID-19 test kits was 
canceled on April 2, 2020; and (ii) the Government was fully reimbursed 
on April 6, 2020. AAFAF provided evidence of both the cancellation and 
reimbursement of the $19 million deposit. As noted, the Promedical 
COVID-19 test kits were requested through a purchase order. In its 
April 9, 2020 letter to the Oversight Board, AAFAF explained that the 
Promedical purchase order was not previously provided to the Oversight 
Board because the Government's agencies understood that, as written, 
the Oversight Board's contract review policy covered only formal 
contracts, and not purchase orders.

    Question 2. Puerto Rico is authorized to receive substantial funds 
from the Federal Government for the distribution of needed school 
breakfasts and lunches during this epidemic. However, I heard that 
Puerto Rico had difficulties distributing the school meals. Can you 
please explain why that is so? Can you please also elaborate on the 
lawsuit that was brought against the government on this matter? And 
please update the Committee on the current process and procedure being 
utilized by the government to distribute the meals to qualifying 
students.

    Answer. The Government has made significant efforts to support its 
most vulnerable citizens and to mitigate their health risks during the 
COVID-19 outbreak. These efforts have been generally successful as 
Puerto Rico continues to be on the lower end of COVID-19 cases per 
capita in the United States. In mitigating these risks, the Government 
has made many difficult choices that factor in public health, 
government support, and economic impacts. In determining the best way 
to feed children and their families, the Government has determined that 
the best course of action is to rely on existing food banks located 
throughout Puerto Rico. At the time of this decision, Puerto Rico's 
food banks had measures in place to ensure the safe distribution of 
food to reduce the likelihood of COVID-19 exposure. Unlike the 
Government's School Food Authority, the Puerto Rico food banks were 
already able to provide pre-packaged meals, which reduces the risk of 
contamination. In addition, funding from other government programs 
would support the transportation of these meals to areas where they are 
most needed. While the Family First Coronavirus Response Act and CARES 
Act provided additional funding to support school food programs, at the 
time, much of the costs associated with meal delivery would not have 
been covered. The time and cost for retrofitting School Food Authority 
facilities to provide the same public health protections that already 
existed within the Puerto Rico food bank program seemed inefficient. 
Though these are difficult decisions, the Government's ability to slow 
the spread of COVID-19 while maintaining food support programs, 
indicates that the Government made the best choice under the 
circumstances. It is our understanding that all of the above is being 
explained to the Court as part of the pending lawsuit.

    Question 3. Why are there no work requirements in Puerto Rico for 
participants of NAP?

    Answer. NAP (or ``PAN'' for its Spanish acronym) is Puerto Rico's 
largest welfare program. It is similar to the mainland SNAP, but it is 
funded and administered separately and does not include a work 
requirement nor specific budget allocations to administer such 
requirements. As part of the human capital and welfare reform package, 
the Government will institute work requirements for able-bodied adults 
without dependents in order to qualify for PAN benefits. Puerto Rico 
has already submitted a work requirement language in its fiscal year 
2019 Annual State Plan to the Food and Nutrition Service Agency. During 
fiscal year 2019, the Government will develop, alongside the Food and 
Nutrition Service Agency, the work requirement program policies, 
parameters, operational guidelines and compliance oversight that will 
be included in its fiscal year 2020 Annual State Plan submission. The 
annual state plan may be amended at any point throughout the fiscal 
year with the proper request, review, and approval by the Food and 
Nutrition Service Agency.
    The Government has maintained its stand in a phase-in of the work 
requirement for NAP. Including a phase-in of the work requirement over 
a 4-year period (Government proposal) versus launching a full work 
requirement (with a 3-month transition time). The main reason for the 
phase-in instead of 1-year full deployments has been high unemployment 
(lack of supply of jobs) and high volume of training and re-training 
(lack of skilled professionals), which represent a stumbling blocks 
that could endanger the current benefits provided by NAP. Unlike U.S. 
states, Puerto Rico receives the NAP benefits as a block grant and 
cannot redistribute funds immediately in order to mitigate this 
potential economic impact to over 150,000 citizens that would 
potentially qualify for work requirements.

                                 ______
                                 

    The Chairman. Thank you very much, and I appreciate both 
witnesses and your indulgence as we go through this process. 
Let me now turn to Mr. Sablan for any questions or comments he 
might have for the witnesses. And then we will alternate, as we 
do with in-person meetings, to the Minority side. But first let 
me recognize Mr. Sablan. Sir.
    Mr. Sablan. Yes. Thank you very much, Mr. Chairman, for 
holding today's hearing. Thank you also to Ms. Jaresko and Mr. 
Marrero for their presentations. I have a question. I am going 
to make this short for Ms. Jaresko, if I may. Ms. Jaresko, if 
Congress were to amend PROMESA, as Mr. Marrero advised, to 
limit the Board's oversight over funding issues affecting 
policy, how would that change the role of the Board going 
forward and affect your ability to achieve the goals of 
PROMESA?
    Ms. Jaresko. Thank you, Representative Sablan. The 
recommendation that Mr. Marrero makes is based on a false 
construct. There have been four issues, four situations, where 
there have been disputes between the government and the Board 
with regard to our authority. Of those four cases, three were 
litigated, were brought to the court by the government or the 
legislature of Puerto Rico and won by the Board. In all four of 
those cases since 2018, the court has agreed on the clarity and 
the authority that has been provided by PROMESA to the Board. 
If the amendment were made as Mr. Marrero suggested, then I 
think you'd have to change the definition of ``fiscal 
sustainability'' and ``balancing budgets.'' If you change 
fiscal sustainability and the Board is no longer responsible 
for fiscal sustainability, then it will be difficult, if not 
impossible, to ever restructure the debts without clarity and 
confidence that the debt is sustainable.
    Mr. Sablan. All right. Thank you very much. I have other 
questions, but I will submit them for the record and could 
potentially probably get a response from you. Thank you very 
much, Mr. Chairman. I yield back.
    The Chairman. Thank you, Mr. Sablan. Let me recognize the 
Ranking Member, Ms. Gonzalez-Colon. Madam Commissioner, the 
floor is yours.
    Miss Gonzalez-Colon. Thank you, Chairman. My first question 
will be to Ms. Jaresko. As you are aware, there is a lot of 
frustration on the island in terms of how long it is going to 
take for the Federal and local government for a lot of the 
disbursement of many of those Federal funds. And I share that 
frustration. And that was the reason a few weeks ago we met 
with the Governor, directly with the Governor's cabinet as well 
to see why it is taking so long. And you have many, many 
reasons for that, some of them, Federal agencies with a lot of 
red tape. But other ones are at the state level.
    One of the concerns that hit me most--and this was from all 
cabinet members--was that they do not have the personnel with 
the experience and the expertise to manage and comply with the 
new requirements of Federal grants due to PROMESA board cuts. I 
mean, that those reforms that were imposed by PROMESA are 
limiting the budget to actually train and recruit employees in 
different Federal and local agencies to comply with Federal 
grants and actually make that happen. How do you respond to 
this, and how does the 2020 Fiscal Plan address this issue?
    Ms. Jaresko. Thank you for the question, Representative 
Gonzalez. It is true that the fiscal plans and the budgets have 
reduced payroll spending over the past 3 years. However, none 
of those payroll reductions should have been implemented 
through frontline employees. The intention and the agreement 
reached with the previous governor was that the bulk of the 
rightsizing would happen through back-office consolidation, 
consolidation of bureaus into single departments. And those 
actions actually haven't happened for the most part.
    So, what has happened instead is the government has used a 
very blunt tool, early retirement or voluntary transition, 
which has been offered across practically all front and back 
office. And when that has happened, it is very hard to direct 
who stays and who leaves because people have a voluntary choice 
to early retire. And indeed, by implementing the reductions in 
payroll in that fashion, I believe that they have caused a 
problem in terms of capacity. But that said, I don't think you 
can allay the disbursement all at the feet of the civil 
servants or payroll reductions. I think that in, for example, 
the case of implementation of FEMA funding, it is just a very 
long and complex process.
    The COR3 Department is funded by the Federal Government, 
not by the budget that is part of the fiscal plan. So, it is 
not a matter for COR3 and FEMA programming and FEMA 
disbursement that has anything to do with the budget because 
their budget is not part of the general fund that we are 
certifying. Similarly, for CDBG-DR, there is an entirely new 
group of individuals, about 100, the last I recall, hired with 
Federal funds to implement the CDBG-DR program.
    That CDBG-DR program is very complex, and having to learn 
Federal procurement rules and do what is required by the CDBG-
DR program is complex. But again, that capacity is not a 
capacity funded by the general fund or part of the certified 
fiscal plan or budgets. It is a separate Federal funding for 
that personnel.
    Miss Gonzalez-Colon. Ms. Jaresko, we also heard the 
complaint that the Oversight Board takes too long to review 
some documents and plans submitted by the government of Puerto 
Rico. And it goes for the delays. So, I have two questions on 
this. How do you see this, and how long does it typically take 
the Board to review that documentation provided by the 
government? And if you can actually submit to the Committee a 
log of such requests and responses as well as--you understand 
it is useful to require a fixed time frame to the Board to 
either reject or approve, especially in the case of 
expenditures that are already gone through the territory of 
Federal regulatory agencies.
    Ms. Jaresko. Thank you, Representative Gonzalez. I am more 
than happy to submit a log of our responses along with response 
times. It varies depending on what the issue is. For contract 
review, we typically take 7 working days. The issue with a 
review is whether or not the submission is complete. That is 
probably the most basic issue that we have. When a submission 
is complete, it can take 1 day to 7 days. With regard to budget 
reapportionments, similarly, documents, if they are complete, 
take up to a week, sometimes a bit more. And again, I will get 
you that log. However, the longer delays have to do with 
incomplete documentation, lack of bids that go with the cost or 
other.
    Miss Gonzalez-Colon. Thank you. I don't know how much time 
I have left--I don't see the timer here--but I will make a 
question of Mr. Marrero.
    The Chairman. Thank you. Let me now turn to Mr. Huffman.
    Miss Gonzalez-Colon. Mr. Chairman, is my time expired?
    The Chairman. Yes.
    Miss Gonzalez-Colon. I can't see the timer in my----
    The Chairman. There is a timer--if your staff will call our 
technical staff, it will appear on a screen that will ping you 
when you have 1 minute left.
    Miss Gonzalez-Colon. OK.
    The Chairman. Mr. Cox, if you have any questions or 
comments, sir.
    Mr. Cox. Thank you for the witnesses being here today. As 
chairman of the Oversight Subcommittee, I have observed that 
the post-hurricane response to claims by first responding 
agency seem unreasonably delayed by FEMA. And my question to 
both of you is I understand your agencies have regular 
interactions with PREPA. Can you tell me how much Puerto Rico 
requested for emergency power restoration work performed 
following Hurricanes Irma and Maria? What is the current status 
of FEMA reimbursement for this work, and how much of the 
request is still pending FEMA review? As you know, these storms 
occurred in September 2017, almost 3 years ago. And there just 
seems to be an undue delay with FEMA's processing these 
requests for a reimbursement to some of the utility companies, 
particularly the utility companies there in Florida that did a 
lot of this important work.
    Ms. Jaresko. I don't know if Mr. Marrero wants to go first. 
I can speak generally to FEMA as a whole. And then maybe, Omar, 
you can talk to PREPA.
    Mr. Cox. OK.
    Ms. Jaresko. We have estimated in the Fiscal Plan, total, 
in terms of FEMA funding we expect. And the government is 
generally in agreement--it is $48 billion over a period of 15 
years. Of that $48 billion, $17.4 billion has been obligated. 
And of the $17.4 billion obligated, $13 billion or so has been 
disbursed to date. It is a long process. I won't speak again to 
the specifics of the emergency generators.
    But in general for PREPA, I understand that great progress 
has been made and we are expecting an agreement to be reached 
hopefully by the end of the summer, all else being equal. But 
the damage assessment process has been very long, tedious, and 
requiring incredible civil engineering work and a lot of 
incomplete work. Omar?
    Mr. Marrero. Sure. Thank you, Natalie. Thank you, 
Congressman, for the question. I am trying to log into our 
transparency portal. I don't know if you are familiar, but 
Congressman, if you go to recovery.pr, that is our transparency 
portal. It is updated on a weekly basis. And it has all the 
information concerning FEMA funding, not only how much money 
has been obligated, disbursed, how much has been waiting and 
also by subrecipient and by project.
    I am having some technical glitches to getting information. 
But if you go to recovery.pr--it is in English and in Spanish, 
and it has all the information concerning FEMA funding for both 
Irma and Maria. And it has graphics. You can download the 
information. But if the Committee wants, I can submit it for 
the record as well. But it is all publicly available through 
our recovery portal.
    Mr. Cox. Thanks so much. And I understand that the 
Administration has assigned a reconstruction coordinator, Rear 
Admiral Peter Brown, to oversee the disbursement of recovery 
funds in Puerto Rico after Hurricane Maria. How is that 
relationship with the government of Puerto Rico, with the 
coordinator--what support has it received, and how can we be of 
assistance?
    Mr. Marrero. Well, Congressman, I am going to be honest. 
The relationship with the rear admiral, Peter Brown, has been 
phenomenal. I think that he has been instrumental to help to 
convey the message to the Administration on what we are doing 
and what we need in order to expedite the recovery process in 
Puerto Rico. So, everything that I have is just to congratulate 
him for not only his commitment to work but also his real 
involvement with the government of Puerto Rico, his meeting 
with us on a regular basis as well as the Governor.
    Mr. Cox. Right.
    Mr. Marrero. Next week, we are going to have a 1-week visit 
from him. So, we are going to be working with him. And, again, 
he has been great, has been phenomenal. And hopefully he is 
going to be the chief operating officer that we have been 
waiting on.
    Mr. Cox. Great. That is super to hear. And finally, Ms. 
Jaresko, given the obligations that have been incurred for this 
emergency restoration work following the hurricanes, how does--
really, I am worried about the delay in receiving FEMA funding. 
How does that impact Puerto Rico and other debtors in the 
payment of these obligations which have to be paid. My fear is 
that if contractors don't get paid when they do the work after 
the disaster, they are going to be less likely to step up the 
next time a disaster hits Puerto Rico. So, if you could comment 
on that very briefly----
    Ms. Jaresko. I agree with you that that type of practice, 
not being paid, creates consternation on the part of bidders 
and private sector players. At this point, though, again, I 
have to say that I don't see any reason why, if the monies have 
been obligated, why they haven't been disbursed. So, if there 
are those who have bills outstanding or invoices outstanding 
that have not been approved by FEMA, I think that is a separate 
category and COR3 and the government need to look into that. 
But I have to remind you that we are outside of the Federal 
funding. We don't have oversight over that level of detail in 
the Federal funding, so I'd have to turn to my colleague.
    Mr. Cox. OK. Well, we can follow up. We're out of time here 
so thank you so much.
    The Chairman. Thank you. The gentleman yields. Mr. Gohmert? 
Mr. McClintock? Mr. McClintock, you are recognized.
    Mr. McClintock. Thank you, Mr. Chair. Welcome. I am deeply 
disappointed that this Committee hearing is conducted in a 
manner that makes a mockery of the constitutional process of 
government that is set forth in our Constitution. You know, the 
founders might not have had Zoom and the internet, but they had 
a very effective mail system. And there was nothing to stop 
them from mailing their speeches and questions and votes to 
each other. But that is not the system they created. In those 
days, getting to Washington was dangerous, arduous, and time-
consuming, and yet through world wars, pandemics, epidemics, a 
civil war and sleet and snow, they all managed to get here to 
do their jobs until this Congress.
    Congress, the very word means the act of getting together 
and meeting. The Constitution calls for representatives to 
attend, assemble, and meet. Congress is a deliberative body and 
by its very nature, that requires the people's representatives 
to interact with each other both through formal proceedings as 
well as through the countless informal conversations that are 
the unique product of coming together and meeting. That can't 
be done on a Zoom call. We can't do our jobs in the manner our 
responsibility demands by phoning it in from our living rooms 
and our bathrobes.
    Nobody is lounging around the pool today with a mai tai. I 
say just give it time. There is nothing in these bizarre new 
rules to stop it. Mr. Chairman, I hope you will take a step 
back and consider the damage that you're doing to this 
institution by conducting our affairs this way. I know it is 
much easier to sit at home and phone it in. It is not what our 
constituents have a right to expect of us. There are a few of 
us here present in the Committee room today, and yet we're 
staring at laptops.
    If you persist in this farce, I am sure, one by one, we're 
all going to conclude it is a lot easier to sit in our homes 
too. I am certainly tempted. I could be home with my family 
today too. And at some point soon, I will probably take you up 
on this slovenly, sloppy, and extraconstitutional process. But 
at that point, we might as well rent out the capitol for 
weddings and banquets because there is no other use for it. So, 
shame on this Committee.
    Next, to the business at hand, I have been an opponent of 
PROMESA since it was first introduced. And after 4 years of 
watching this fiasco, I am more convinced than ever that it was 
a terrible idea. I hold to the old-fashioned belief that a 
government debt secured by a constitutional guarantee is 
sacrosanct and the governments that created their own problems 
must deal with their own problems without seeking a bailout 
from others who have responsibly managed their affairs.
    PROMESA's unelected management board is an affront to, 
little D, democratic values and, little R, republican 
institutions. And its repudiation of constitutionally protected 
debt threatens to undermine the full faith and credit of every 
state and territory in this Nation. It was enacted with the 
promise that it would set the fiscal affairs of Puerto Rico in 
order. And yet here we are 4 years later, as far as I can tell, 
no better off. Self-government means not only electing our 
representatives, but it also means dealing with the 
consequences of their decisions.
    In a democracy, we are always guaranteed to get the 
government we vote for or, as Lincoln put it, the voters get 
their backsides too close to the fire, they will just have to 
sit on the blisters a while. It is a painful experience, but it 
is a learning experience from which voters may go away sadder 
but wiser. So, I will ask both of our witnesses, wherever they 
are, what would be wrong with repealing PROMESA, disbanding its 
management board and then handing the whole mess back to the 
people who created it, Puerto Rico's elected government and the 
voters who elected it? And I will wait for an answer.
    Ms. Jaresko. Congressman McClintock, I will attempt to 
answer. I understand your frustration. And I believe that the 
people of Puerto Rico are equally frustrated that we are not 
through this bankruptcy yet and on the road to prosperity and 
sustainability. We need to work harder. We need to do more. The 
elected government needs to do more in terms of structural 
reforms to build a revenue base from which we couldn't possibly 
pay back any/all of that debt.
    Mr. McClintock. And our other witness wherever he is----
    Mr. Marrero. Thank you, Congressman McClintock. Thank you 
for your statement. I do, sir, think that we all have to share, 
we all have to assume the responsibility. And I believe also 
the Congress has to share the responsibility in making sure 
that the people of Puerto Rico have the tools not only to exit 
bankruptcy but also to pave the way for economic recovery. So, 
definitely, I agree with you. I think that we will have to 
assume our responsibility. That is the second----
    Mr. McClintock. Thank you. Mr. Chairman, since I don't have 
a timer, I don't know how much time I have left. But any that I 
do have left, I will yield to Ms. Gonzalez-Colon.
    The Chairman. You went over 11 seconds, Mr. McClintock. And 
I am going to turn to----
    Mr. McClintock. Show me.
    The Chairman [continuing]. Mr. Huffman. Sir, the floor is 
yours.
    Mr. Huffman. Thank you, Mr. Chairman. We are hearing some 
pretty rich stuff from the usual high tower of partisan 
sanctimony. But let me say I am grateful that you are forging 
ahead, getting this Committee back on the field so we can do 
our work. We are trying to weather a deadly pandemic that has 
killed over 110,000 Americans. This is no time to put the 
interests of partisan politics above common sense and basic 
public health protection. And I think in prior congresses, if 
it had some of the tools during previous periods of difficulty, 
some of the tools we are using right now, they would have used 
them too. So, I wish that we were all pulling in the same 
direction and trying constructively to make this work. But when 
you hear these arguments that you have to use words like 
``attend,'' ``assemble,'' and ``meet'' in the exact meaning 
that someone thinks they had in 1787, I just have to say why 
can't we apply that same standard to the Second Amendment right 
to bear arms, which apparently you see very differently. There 
is no modern weapon of war that you're not willing to interpret 
back into that word from 1787.
    This is disingenuous stuff, Mr. Chairman. I am so sorry 
that on a subject that should be of great interest and 
importance to all of us regardless of party lines that we see 
these games and this obstructionism. But I want to apologize to 
our panelists that they had to suffer through too much of it as 
they gave us their very important feedback on how we are 
recovering from these disasters and whether we're keeping faith 
with our fellow American brother and sisters in Puerto Rico. 
With that, Mr. Chairman, I will yield the balance of my time to 
yourself or to Ms. Velazquez if you'd like to ask any more 
questions.
    The Chairman. Ms. Velazquez, the time is yours. The 
gentleman has yielded to you.
    Ms. Velazquez. Yes, sir. This will not count against my 5 
minutes, right?
    The Chairman. Absolutely not.
    Ms. Velazquez. OK. Very good. Thank you. And thank you, Mr. 
Huffman. You know, it is really sad. And I am sorry for the 
people of Puerto Rico that in an issue that is so important and 
that is not only the public debt restructuring but everything 
that is happening regarding the rebuilding of Puerto Rico, the 
earthquakes, the hurricanes, and the public policies enacted by 
the U.S. Congress, Congress gives something to Puerto Rico and 
then takes it away. And we have a responsibility with the 
people of Puerto Rico because they are our colony.
    When it comes to the unequal treatment, yes, that is right. 
But some people in Puerto Rico feel that resolving the 
political limbo where Puerto Rico is today or unequal treatment 
doesn't mean statehood for Puerto Rico. Some other people in 
Puerto Rico feel that it might be enhanced Commonwealth. Some 
other people might think that that might be statehood. But for 
anyone to come here and say that to respect the civil rights of 
the people of Puerto Rico, you have to give them statehood, 
well, that is for the people of Puerto Rico to decide.
    And, by the way, PROMESA was written by the Republican 
Majority. And thank God that some of the Democratic members 
were there. You tried to water down the impact of that 
legislation toward the people of Puerto Rico. Ms. Jaresko, 
according to the government of Puerto Rico, the consequences of 
COVID-19 will significantly impact UPR's available cash before 
debt service. This amount is expected to decrease from $198 
million to $98 million by June 30. So, my question to you is 
what is the Board going to do to ensure that the University of 
Puerto Rico system has enough working capital for Fiscal Year 
2021 and beyond?
    Ms. Jaresko. Thank you, Representative Velazquez. The 
numbers that you state are never heard. I don't believe UPR is 
actually utilizing its cash. Most of the cash has been set 
aside for capital expenditures. So, that is news to me. That 
said, what we have done is, as I described earlier, we have 
left the subsidy from the Commonwealth to UPR at the same 
level.
    Ms. Velazquez. You are telling me that the government of 
Puerto Rico is not providing real data? Those numbers are not 
correct?
    Ms. Jaresko. I don't know what those numbers are. I know 
that UPR should not have to use its cash right now, that its 
budget is sufficient for its operations this fiscal year. So, 
if it is using its cash, I am unaware. And they have not let me 
know that or I might be behind. But I am unaware of them 
utilizing their cash.
    Ms. Velazquez. OK. My time is up, and then, Mr. Chairman, 
you will recognize me a second time.
    The Chairman. Mr. Gosar, you are recognized, sir.
    Dr. Gosar. Thank you, Mr. Chairman. And I yield to the 
gentlewoman from Puerto Rico, Ms. Colon.
    Miss Gonzalez-Colon. Thank you.
    The Chairman. The floor is yours.
    Miss Gonzalez-Colon. I am sorry. Thank you, Gosar, for 
yielding. One of the questions I do have now is to Mr. Marrero. 
And yes, I can see you. In the past, we heard that the governor 
of Puerto Rico only participates in or competes in just 214 out 
of 841 Federal competitive programs, failing to receive over $1 
billion in Federal programs just because we are not even 
competing or submitting in proposals or even matching the funds 
for a lot of the programs that need to have at least a state 
chair. What actions will the government of Puerto Rico need to 
pursue to increase this participation in Federal programs? What 
do you need from the fiscal board to make that happen? And how 
does the Fiscal Plan build these capabilities?
    Mr. Marrero. Excellent question, Congresswoman. Thank you 
for it.
    Miss Gonzalez-Colon. You are in mute. I can't hear you.
    Mr. Marrero. Hello. Can you hear me?
    Miss Gonzalez-Colon. Now, yes.
    Mr. Marrero. OK. Thank you for your question, 
Congresswoman. As you recall, one of the initiatives that we 
were trying to achieve in order to optimize Federal funding, 
was to create a Federal opportunities OGP or the local--what we 
need is to fulfill the commitment of the Oversight Board with 
the OMB in order to increase the staff which the Oversight 
Board has said that it will support OGP not only to optimize 
their system but also to increase the staff necessary in order 
to make that work. So, one of the principle initiatives at OGP 
is essentially to create this structure that will not only 
advise but also support the different government agency that 
does not have Federal funds to--local expertise in order to 
provide that expertise to make sure that we participate.
    Not only that, but in addition to that, as soon as I was 
appointed to AAFAF, we also created an internal Federal funds 
division in order to support not only the different 
receiverships that we have been supporting through AAFAF but 
also the different agency that may need support in order to 
access Federal funding. So, not only the OGP has the intent and 
the initiatives in order to pursue it but also AAFAF will be 
supporting in that regard. And that is why, in one of the best 
examples that we have been doing that is with the CRF fund.
    Miss Gonzalez-Colon. Mr. Marrero, my second question will 
be I do know that Congress approved some funds through the 
CARES Act directly to the Governor's Fund. And I am aware that 
there are some provisions regarding the Department of Education 
that they are not allowing the government of Puerto Rico to 
actually use those funds. And those funds are going to be 
subject to third-party monitoring for the Oversight Board. What 
is the reality behind that? And is that happening in any other 
territory or state?
    Mr. Marrero. Well, the quick answer, it is not happening in 
any other state or territory. As you know, those funds that 
were available not only for the Governor but also for the 
education agencies from the states are funding for emergency 
assistance. Unfortunately, the Department of Education at the 
Federal level informed the local Department of Education that 
in order to access that emergency aid, they needed to finalize 
the engagement of the third-party fiduciary. We have been back 
and forth.
    The Committee--actually, the staff of this Committee--has 
been helping the Puerto Rico government in order to make sure 
that the Federal Education Department understands that the 
third-party fiduciary engagement should not be a condition in 
order to access emergency aid. That message has been conveyed 
not only by us but also by different government agencies, the 
Governor, as well as the staff. So, we will appreciate if you 
could also help in that regard because we have been waiting for 
the Department of Education. And unfortunately, the information 
is not totally accurate, what we received from their end.
    Miss Gonzalez-Colon. Thank you. Ms. Jaresko, I have another 
question. You say you were expecting $48 billion in disaster 
aid over the next 15 years. But the past fiscal plans have $72 
billion. So, why the lower estimate and why do we need to speak 
about 15 years? Have you done that in five?
    Ms. Jaresko. The number has not decreased--$48 billion is 
the FEMA portion of the hurricane funds. The number remains 
approximately the same, but it is made up of multiple 
components. So, there is approximately $20 billion you could 
add to that for CDBG-DR. There are private-sector insurance 
funds that are added to that. And in total, it is the same as 
it was previously--$83 billion. In terms of the 15 years, 
frankly speaking, that is not unknown. After Hurricane Katrina, 
the 15-year process, given the level of destruction on the 
island, it would not--in the best-case scenarios and how FEMA 
has implemented reconstruction and other major areas of 
devastation--it was very similar. So, it is not a testament to 
anything out of the----
    Miss Gonzalez-Colon. My time has expired, Chairman.
    The Chairman. If the gentlelady, Commissioner, would yield 
to me for a second, I wanted to ask you a question, if I may, 
Ms. Gonzalez-Colon. Given the specificity of your questions and 
your comments and the details that you know from representing 
the island and from being involved in these issues, I have a 
question that is puzzling me from the time you took the initial 
vote to adjourn. Why would you vote to adjourn if this issue is 
of critical importance to the people of Puerto Rico and the 
people you represent? I am just curious.
    Miss Gonzalez-Colon. So, Chairman, you are questioning me 
as a member of the Committee on my decisions on how to vote?
    The Chairman. No. That is not----
    Miss Gonzalez-Colon.  The Chairman of the Committee is 
questioning one of the Members. How much time do I have to 
answer? Do I have 5 minutes?
    The Chairman. I just wanted to know. I think a lot of 
people want to know because I think this discussion that we 
planned from this was to talk about what the response to the 
pandemic was. And my assumption is that this is of keen 
interest. But having said that, I yield back.
    Miss Gonzalez-Colon. Yes, I am willing to answer. My 
question is do I have 5 minutes?
    The Chairman. I am sure.
    Miss Gonzalez-Colon. OK. I will answer my question. First 
of all, I never expected this Committee to be so partisan that 
the Chairman of the Committee needs to have time to question 
one of the Members but I will do it. I am here in Washington, 
DC----
    The Chairman. I am constantly questioned myself by you 
Members.
    Miss Gonzalez-Colon.  I am answering the question. If I am 
here in DC willing to work and represent the people of the 
island, why can't the rest of Congress do that? The Senate is 
having hearings. The Senate are meeting. People in the 
airlines, people in the hospitals, everybody is working, and we 
are not doing that in Congress. I do believe that we should be 
present doing the people's job in the Capitol, as many other 
Members. That is the main reason I voted to adjourn for this. 
And why the Committee has to have a different procedure to do 
that? I am always meeting with Jaresko. I am always meeting 
with Marrero. I am always meeting with the cabinet members on 
the island. I am always doing my job in Puerto Rico. What is a 
shame is that you use this Committee to have informal forums 
without even inviting the members of this Committee like me and 
Amata Radewagen when you are discussing territory issues.
    So, if you want to talk about why you are using this 
Committee and having this hearing, this one that we were 
invited to, but not in the rest of the informal Zooms, that is 
one of the reasons that if we have present meetings, hearings 
like we used to have, like they have in the Senate, like they 
are doing actually in Puerto Rico--the House and the Senate, 
they are meeting and they are having session as we speak. Why 
can't Congress do the same thing we are asking for all 
Americans and all businesses among the nation? And that is why 
I voted to actually adjourn the Committee and have a formal 
meeting.
    The Chairman. I appreciate your response and thank you. Not 
really an answer but, nevertheless, an attempt. Let me now 
recognize Ms. Velazquez. The time is yours.
    Ms. Velazquez. Well----
    The Chairman. Oh, Ms. Haaland. I am----
    Ms. Velazquez. Oh, OK.
    The Chairman. I am sorry. I didn't look at the list. Ms. 
Haaland, the gentlelady from New Mexico, the time is yours. 
Thank you.
    Ms. Haaland. Thank you, Chairman, and I'd like to thank the 
witnesses for being here today and would like to thank every 
single one of my colleagues as well. I appreciate having all of 
you here. I would like to yield my time to Ms. Velazquez if she 
would like my time.
    Ms. Velazquez. Thank you so much. Sure. And thank you for 
yielding your time to me. You know, I was stricken by COVID-19, 
and I self-quarantined here in my apartment in New York. It was 
quite an experience when you have to be by yourself and you are 
not allowed to bring anybody else to take care of yourself. So, 
the fact of the matter is that there is a lockdown here in New 
York. And there is a lockdown in many states in the country. 
And if you look at the market today, the Dow Jones is 1,400 
points down. You know why? Because the spike of coronavirus in 
other states.
    So, the fact that we are not conducting business in 
Washington is related to the lack of strategy, a national 
strategy, to deal with the coronavirus pandemic. It is quite 
simple. Yesterday, I held a hearing in my committee. And one 
member of the Republican Party was using my committee. And he 
was just chastising off because we were not in Washington. And 
I said to him, ``Well, now when you leave, we are going to have 
to send a crew to disinfect the hearing room because that is 
the guidance by the physician in the Capitol.''
    So, until we have a national strategy to deal with the 
pandemic, until we have testing, until we have PPE, I can 
assure you that I am not going to put the lives of my staff at 
risk and that is the issue here.
    Ms. Jaresko, this past month San Juan Power Station 5 and 6 
were converted to LNG under a $1.5 billion contract awarded to 
New Fortress Energy.
    Back in March 2019, the Oversight Board expressed concerns 
that the New Fortress Energy agreement for the conversion of 
San Juan 5 and 6 had a pricing structure 30 to 40 percent 
higher than industry benchmark. Why did the Oversight Board 
decide to approve this agreement notwithstanding the pricing 
structure?
    Ms. Jaresko. Thank you, Congresswoman Velazquez. We take 
the situation at hand when we are provided those contracts. And 
we try to move forward to the extent possible. Moving to LNG 
was a critical part of reducing the cost of electricity on this 
island and moving to cleaner fuel on the island from the bunker 
fuel, bunker oil that is used currently in the----
    Ms. Velazquez. Yes, I hear you but then----
    Ms. Jaresko. We reviewed the contracts the best that we 
could.
    Ms. Velazquez [continuing]. You opposed the agreement or 
you criticized the agreement because you said that the pricing 
structure, 30, 40 percent higher than the industry benchmark. 
How is that going to reduce the cost of energy in Puerto Rico?
    Ms. Jaresko. Because it was still cheaper than oil, cheaper 
than the fuel that they were using at the time. The RFP process 
did not bring in other players. So, those industry benchmarks 
are what we use and what we know. But that doesn't mean that 
the industry benchmark necessarily is available to Puerto Rico. 
In particular, available to PREPA, which remains in bankruptcy 
so that every bidder sees that there is financial and fiscal 
risk in bidding.
    Ms. Velazquez. Ms. Jaresko, Mr. Jaramillo reported that San 
Juan 5 and 6 are still using diesel because New Fortress Energy 
has failed in the LNG safety tests. Are you aware of this 
situation, and how does that impact PREPA's fiscal plan?
    Ms. Jaresko. I saw this in the news as you did this 
morning, and I do not know whether it is true or not that New 
Fortress has failed in turning on the LNG.
    Ms. Velazquez. And were you going to investigate whether or 
not that is true?
    Ms. Jaresko. Of course.
    Ms. Velazquez. Mr. Marrero, the Washington Post--well, my 
time is up.
    The Chairman. Thank you, Ms. Velazquez. Let me now turn to 
Mr. Westerman. Mr. Westerman, the floor is yours. Am I muted? 
Would the staff indicate to Mr. Westerman's staff that he is 
still muted.
    Miss Gonzalez-Colon. He is unmuted, Mr. Chairman. I don't 
know why we couldn't hear him.
    The Chairman. Thank you.
    Mr. Westerman. OK. I am using another computer now. Can you 
hear me, Mr. Chairman?
    The Chairman. Absolutely. Thank you, Mr. Westerman.
    Mr. Westerman. OK. And before my time starts, can I make an 
inquiry?
    The Chairman. Please.
    Mr. Westerman. OK. I don't know what the problem was with 
the sound on my computer. We checked it out beforehand. I 
logged on last week. Everything worked. But when we voted the 
first time, my computer would not unmute even though it unmuted 
on the screen. Ms. Radewagen couldn't be recognized, and Mr. 
Graves couldn't get into the system. So, I don't know what the 
problem is there, but it is ironic that it is just happening to 
Republican members or to Minority side members.
    And also, I have an inquiry as to who controls the mute 
button because I don't think Members' microphones should be 
muted unless they mute them. And an unelected staff member 
shouldn't be controlling when a Member of Congress gets to make 
a point of order or interject in a meeting.
    The Chairman. It is my understanding from all the specific 
guidelines that were sent to all the Members that the only time 
that the staff is involved in any muting is if there is 
inadvertent background noise. Other than that, that 
responsibility is wholly the Members'. We are not gagging 
anybody. There is no conspiracy to make sure you don't get on 
but Ms. Haaland does get on. Those are technical issues above 
my pay grade. And I would suggest that your staff work with the 
technical staff of the Committee about any of these glitches. 
They are----
    Mr. Westerman. Well, we had a committee hearing in 
Transportation and Infrastructure earlier this week. We met in 
the committee room. They used the equipment. There was no 
problem with Members being muted or not being able to be 
recognized. So, I mean, if we're going to use this system, 
let's at least try to get something that works and have it so 
that Members can speak up when it is time for them to speak up 
or when they wish to speak up. I was trying to notify you that 
Mr. Garret couldn't get logged on, and he missed the vote 
because--finally Mr. McClintock on his machine was able to make 
a point of order.
    The Chairman. Yes. I should note for the record that Mr. 
Gallego on the Majority side has had technical problems, hasn't 
been able to join us and is still attempting to do that. Like I 
said, this is the first hearing that we have had for the 
Natural Resources Committee as a full committee. And the 
difficulties that you have encountered are purely of a 
technical nature, not of a conspiratorial nature. And as such, 
those can be worked out. The conspiracy thoughts that anybody 
might have, I can't help you with that.
    Mr. Westerman. Well, I am not raising a conspiracy. I am 
just stating the facts of what happened. And I know that in the 
T&I Committee there weren't any problems.
    The Chairman. And I was just giving a disclaimer. That is 
all.
    Mr. Westerman. I will move on to questions now. And since 
the rules seem to be changing here, if you want to put a 
suggestion box in, my first suggestion would be to let Members 
have control of their own mics.
    Mr. Marrero, in the interest of transparency, did the 
government of Puerto Rico submit agreements to purchase medical 
products from 313 LLC, Apex General Contractors and perhaps 
other vendors for review by the Oversight Board established in 
PROMESA that is required under Section 204(b)(2) of PROMESA?
    Mr. Marrero. Congressman, thank you for your question. 
Unfortunately, those purchase orders that you are referring to 
were not submitted to PROMESA with the contract review policy.
    Mr. Westerman. I am sorry. Could you repeat that, please?
    Mr. Marrero. Yes, sir. The purchase orders that you are 
referring to, they were not submitted to the Oversight Board. 
However, other contracts that had been executed during the 
crisis have been submitted to the Oversight Board according to 
the contract review policy.
    Mr. Westerman. And why were those contracts not submitted?
    Mr. Marrero. Unfortunately, sir, it was an interpretation 
at a local government agency that because it was a purchase 
order, which is a mechanism that some agencies use to purchase 
goods and services during emergency that they thought they were 
not required to submit those purchase orders under the contract 
review policy.
    Mr. Westerman. There was a May 19 article in El Nuevo Dia 
which states that one of the lawyers for Apex General was 
quoted as saying the deal would, ``make millions of dollars.'' 
Why was this contract not recorded through PROMESA, and what is 
the government doing about it to ensure transparency going 
forward?
    Mr. Marrero. Excellent, excellent question. Well, first of 
all, after we have been collaborating with the investigation 
and the review that has been conducted by the Oversight Board, 
the Department of Justice, the local Department of Justice, has 
also conducted an investigation of those contracts. However, as 
to the Federal funds for COVID-19, I will invite you to go to 
the AAFAF COVID-19 website, which is a transfer in the portal 
similar to what we did at the FEMA level as well as in the 
CDBG. And you are going to be able to see information related 
to the funds and the programs that we are implementing with 
those Federal funds.
    Mr. Westerman. Mr. Chairman, I would like to give Mr. 
McClintock his machine back and yield the remainder of my time 
to the gentlewoman from Puerto Rico, Ms. Gonzalez.
    The Chairman. Ms. Gonzalez-Colon. The time is yours.
    Miss Gonzalez-Colon. Thank you, Mr. Westerman. Thank you, 
Mr. Chairman. I just want to clarify some of the issues that 
were said a few minutes ago--I think the Republican Minority 
never wrote PROMESA. Actually, PROMESA was brought by a 
Democratic governor, Garcia Padilla, at the time when he 
contracted John Ravitch--Richard Ravitch, actually, from New 
York. And then it was pushed by the Treasury Department at that 
time supporting that legislation.
    And actually it was President Obama's Treasury Department. 
And it passed because of the Democrats and the Republicans. 
That is true, and actually the gentlelady from New York helped 
out with that time the Minority leader, today, Speaker of the 
House because the Republicans were divided in the House. That 
is the reality behind it. Republicans and Democrats voted for 
it. And President Obama signed it.
    So, saying that this was just a Republican bill, that is 
incorrect. But I do have another question to Mr. Marrero. And I 
want you to tell me what are the recent developments on Title 
V.
    Mr. Marrero. On the Title V of PROMESA, Congresswoman, 
unfortunately, the Title V of PROMESA has been stalled. The 
process--I believe that the executive director could shed some 
light on it. But the recovery coordinator position has been 
vacant for over a year. And I believe that only one project was 
being worked through that process. However, I would avail my 
time of this opportunity to say that we believe that the Title 
V could be more productive. However, it should be amended, 
particularly for the Federal permitting processes. But I will 
allow Ms. Jaresko to answer.
    Ms. Jaresko. Representative Colon, the demand for the Title 
V permitting has not been very great. The demand that came into 
the pipeline when established was primarily PREPA-related. And 
all the PREPA contracts needed to first be either approved or 
rejected in the Title III court. PREPA only last week announced 
what they were going to do with the bulk of those contracts. 
And that process is ongoing.
    I expect that the demand for Title V will grow now that 
those contracts are in place. We have also started to see some 
other private sector investment. Remember Title V is the only 
private sector investment coming in. We have a new project that 
has been put into the pipeline. So, as we encourage and as the 
business environment gets better, hopefully, you will see more 
private sector investment. And I believe they will take 
advantage of Title V. We have a candidate that we are prepared 
to hire. We have already discussed preliminary fashion with the 
Governor's representative, Mr. Marrero.
    Miss Gonzalez-Colon. Mr. Chairman----
    The Chairman. Thank you. The time is up on the time yield.
    Miss Gonzalez-Colon. I would like the----
    The Chairman. Let me now turn to Ms. Velazquez for her 5 
minutes. Ms. Velazquez.
    Ms. Velazquez. Yes. The Chairman at the time was Mr. 
Bishop, and we worked with him. But basically he carried the 
bill, and we worked to make it more feasible for the people of 
Puerto Rico to confront the public debt. Mr. Marrero, previous 
press reports have indicated numerous problems with the 
department's capability to process unemployment insurance 
claims. How many pending claims currently exist?
    Mr. Marrero. Thank you for the question, Ms. Velazquez. As 
you know, Puerto Rico, as any other jurisdiction, has faced a 
struggle a lot with the pandemic insurance benefits. Right now, 
of the 300,000, approximately, applicants, 180,000 are already 
receiving the benefits. And the remaining 100,000 are being 
worked as we speak.
    Ms. Velazquez. How many pandemic unemployment assistance 
claims for the self-employed are still pending?
    Mr. Marrero. I will submit that information in a reasonable 
time frame, Ms. Congresswoman, because I don't want to inform 
any, or provide any incorrect or inaccurate information.
    Ms. Velazquez. What safeguards have you employed to address 
the issues in unemployment insurance processing as reported by 
the press? Has the Puerto Rico government designed a transition 
plan at the Department of Labor considering the recent change 
in leadership?
    Mr. Marrero. Yes, ma'am. Not only do we have our recently 
appointed or our newly appointed Secretary of Labor but also he 
is already partnering up with the Secretary of Hacienda to see 
how we can avail ourselves of the technology that has been 
deployed at the Department of Hacienda. The provider of the 
technology that we have been using at Hacienda in order to 
expedite the disbursement to taxpayers--the same provider has a 
solution that has been able to implement it stateside for the 
pandemic unemployment benefits. So, right now, part of the 
transition plan not only is to have several distribution 
channels, several lines in order to serve the people, but also 
to implement new technologies that have been successful 
stateside in order to expedite those----
    Ms. Velazquez. Well, we hope so. We all know how the people 
of Puerto Rico are suffering. Particularly, 65 percent of the 
children in Puerto Rico live in poverty. And every week, it is 
promised that the money is going to get there. And then 5 
months later, 3 months later, still people are waiting for 
their unemployment insurance claims to be processed. So----
    Mr. Marrero. We will not rest until that happens, ma'am.
    Ms. Velazquez. Ms. Jaresko, at the start of the lockdown, 
you claimed in the Puerto Rican press that the measures taken 
by the Oversight Board have led to the successful response by 
the Puerto Rico government. But just this week, the Washington 
Post included Puerto Rico and seven other states that are, 
right now, dealing with a spike in coronavirus.
    As we all know, the local Department of Health has been 
incapable of providing timely and reliable data and 
administering the required diagnostic tests. This is partly due 
to consistent personnel cuts and efforts to privatize key 
functions to the local health system, a position that the 
Oversight Board advocates. Are you willing to accept that many 
of the shortcomings in the local Department of Health have been 
caused by the rightsizing and austerity measures that the Board 
has implemented since Day 1? In other words, do you also claim 
responsibility for this debacle?
    Ms. Jaresko. With all due respect, Representative 
Velazquez, we do not. The Board has made it possible in a very 
difficult environment for the Department of Health and for the 
government of Puerto Rico to have funds available even prior to 
the President's declaration of a disaster. So, with $160 
million in an emergency reserve, the capacity to spend those 
funds to purchase test kits was there from Day 1.
    Ms. Velazquez. Ms. Jaresko, the problem is not the money 
that you are giving them now. The problem is the money that was 
taken away and the lack of infrastructure that they needed to 
have in place in order to tackle the pandemic. That is the 
issue, an infrastructure that basically has been destroyed by 
the austerity measures taken by the Board at the expense of the 
people of Puerto Rico. I yield back my time. My time has 
expired, Mr. Chairman.
    The Chairman. Thank you. The gentlelady yields back. Mr. 
Graves, the time is yours.
    Mr. Graves. Thank you, Mr. Chairman. Mr. Chairman, I 
actually want to first thank Mr. McClintock for watching my 
back earlier. But I also want to associate some of my concerns 
with the gentleman from Arkansas, Mr. Westerman. Mr. Chairman, 
we had three different people in the office, myself included, 
trying to log on during the vote. Couldn't get in. Finally 
sometime after the vote, using the exact same credentials, we 
were able to get in. So, you can call me a conspiracy theorist 
if you want, but I want to reiterate it was the exact same 
credentials.
    No. 2, in regard to the dialogue previously with Ms. 
Gonzalez-Colon, I want to make note, Mr. Chairman, I have sat 
here and listened to speakers virtually raising a concern about 
Puerto Rico, about the Oversight Board, about FEMA, about 
Federal agencies, yet grocery stores, barbershops that I need 
to visit, tattoo parlors and other entities have opened right 
now, yet the U.S. Congress as we sit here and beat the heck out 
of what's going on in Puerto Rico, we can't meet and actually 
devise solutions.
    I don't believe that our role is less important than a 
grocery store in a global pandemic, a civil rights crisis, and 
many other challenges that are facing our Nation today. With 
that being said, I actually do have some questions. No. 1, in 
the 2020 certified fiscal plan for Puerto Rico, the plan 
indicates a contracted or a shrinking of the economy of Puerto 
Rico. It indicates a 65 percent reduction in savings or funds 
available. I am struggling--and it appears to blame largely on 
coronavirus. While I fully appreciate the devastating economic 
consequences of the virus and, in some cases, exacerbated by 
government response, I don't think that I fully understand how 
in the world we could have that type of contracting projected 
over that period of time with the extraordinary influx of 
Federal funds. Could I get an understanding there, please?
    Ms. Jaresko. Of course. Representative Graves, the 65 
percent decline that you referred to is a 65 percent reduction 
in the surplus over a period of time, not in revenues. Revenues 
are not----
    Mr. Graves. Availability of funds or savings, yes.
    Ms. Jaresko. No. It is the excess of spending. So, it has 
to do with the level of spending as much as it has to do with 
the revenues. The decline in revenues is only about 12 percent 
this year. We are in about the median of the U.S. states. And 
it is about the same, about 10 percent next year. So, the 
surplus declining is primarily for that reason but the issue in 
terms of overall also has to do with the second element, which 
is structural reforms that have been delayed.
    The second change that is critical to the fiscal plan from 
2019 to 2020 is the delay in the structural reforms. And by 
delaying them, they don't start to provide growth, and the 
growth doesn't start to generate revenues. So, revenues are 
down as well because of the delay in full implementation of the 
structural reforms. But that has a larger impact farther out, 
not in the next 2, 3, 4 years because that accumulated growth 
is later.
    Mr. Graves. I am probably going to have some follow-up 
questions because I don't want to belabor the question. But I 
had a little bit different understanding of the out-year 
projections and will submit some questions for the record. But 
I do have another question on the Oversight Board. After 
President Obama appointed members of the Oversight Board, the 
audited financial statements went from being submitted within 
approximately 1 year--and that was for about a 5-year period. 
It was fairly consistent to now here we are in 2020, and we 
still don't have certified statements from 2017. Can you help 
me understand why that is happening?
    Ms. Jaresko. During the time of PROMESA, we saw the 2016 
fiscal year financial statements be completed. But, yes, the 
2017 remained incomplete. The targeted date by the Secretary of 
Hacienda, the Secretary of the Treasury, is July 30 for those 
financial statements. But it has been a long slog. And we have 
been doing everything we can to urge, to press the auditors, to 
press the government, to meet with those elements of government 
that are delayed. In this case, the government is waiting for 
PREPA, the electricity utility, to complete its 2017 to be able 
to consolidate. So, I can't explain. Perhaps Mr. Marrero can.
    Mr. Graves. I apologize for interrupting but I am out of 
time. I just want to ask. Could you please submit something to 
the Committee in writing? I believe we are approaching 1,500 
days after the end of the appropriate 2017 period to actually 
have these documents available. We are talking tens of billions 
of dollars in Federal funds. And it is difficult for us to have 
an understanding of the financial situation without audited 
statements. Thank you and I yield back. Thank you, Mr. 
Chairman.
    The Chairman. Thank you, sir.
    Ms. Jaresko. Representative Graves, but the question also 
needs to be answered by the government because I am not in 
control of the financial statements.
    The Chairman. Ms. DeGette.
    Ms. DeGette. Thank you so much, Mr. Chairman. And I want to 
thank you for having this hearing. I went to Puerto Rico in 
2017 with Representative Gonzalez-Colon and others on a trip. 
And what you said in your opening statement, Mr. Chairman, 
really resonated with me. Puerto Rico has had one, two, three, 
four punches. They had the two hurricanes. Then they had the 
earthquake. And now they have COVID. And I frankly think that 
the residents of Puerto Rico and everybody in this country 
concerned about COVID are a lot more concerned about having 
these facts get out into the open than to hear Republicans 
griping about the process and having trouble using their 
technology. So, thank you for doing this. And I know we're all 
going to get better and better at it as it goes along.
    I want to ask the witnesses today about something that I 
have been amazed hasn't been asked before. And that is what's 
going on in Puerto Rico with how they are dealing with the 
COVID-19 pandemic. Currently, as you may know, as our witnesses 
may know, Puerto Rico has one of the lowest testing rates in 
the United States.
    And we don't see much in the way of contact tracing 
protocol. So, I'd like to ask you, Mr. Marrero, through the 
CARES Act, the Federal Government assigned $2.2 billion to 
Puerto Rico to address the coronavirus pandemic. And these 
funds were then factored into the 2020 Fiscal Plan, which 
outlines how the funds will be allocated by the government. As 
of today, Mr. Marrero, how much of the CARES Act funds have 
been distributed to Puerto Rico? How much have they gotten?
    Mr. Marrero. Of the coronavirus relief fund? $2.2 billion, 
ma'am.
    Ms. DeGette. So, they got the whole $2.2 billion amount, 
right?
    Mr. Marrero. Of the coronavirus relief fund.
    Ms. DeGette. OK. And how much of the funding has already 
been used by the government?
    Mr. Marrero. We are talking about--well, right now you have 
to factor in also the----
    Ms. DeGette. OK. How much has actually been used by the 
government?
    Mr. Marrero. Of the $2.2 billion, we are talking about $300 
million that has been disbursed through the different programs.
    Ms. DeGette. OK. So, a tiny fraction of it, really. Are you 
confident that the government is going to be able to make use 
of the available funds before the December 31, 2020, deadline 
that has been established by the CARES Act?
    Mr. Marrero. Yes, ma'am. As opposed to any other 
jurisdiction, we unveil a very comprehensive plan, which is 
publicly available----
    Ms. DeGette. So, you're going to have to do that all 
between now and the end of the year and you think you can do 
that?
    Mr. Marrero. Oh, yes.
    Ms. DeGette. OK. Now, also you mentioned in your testimony 
that $500 million is being allocated to health-related 
expenses. Is the government prioritizing rapid deployment of 
testing capability as part of these funds?
    Mr. Marrero. Yes, ma'am.
    Ms. DeGette. Thank you. Is the government using the funds 
to also support better data collection?
    Mr. Marrero. Yes, ma'am.
    Ms. DeGette. And is the government using the funds to 
develop and deploy a contact tracing system for the island?
    Mr. Marrero. Yes, ma'am.
    Ms. DeGette. OK. Now, I know we don't have time in this 
hearing, but I would appreciate it if you could supplement your 
testimony to give us a detailed written breakdown of the $500 
million for healthcare-related expenses and where it is going 
to go. Can you do that for us and when?
    Mr. Marrero. I will provide you the detailed response for 
the entire $2.2 billion.
    Ms. DeGette. Thank you, sir. That would be fantastic. Now, 
Ms. Jaresko, I'd like to talk about the role that the Oversight 
Board is playing in Puerto Rico's coronavirus pandemic 
response. The Oversight Board recently sued the government of 
Puerto Rico for not turning over documents related to the 
controversial purchase of rapid test kits for $38 million that 
never arrived. What are the systemic issues that you have 
identified that led to the decision to enter into the contract 
with the Australian company, Promedical Equipment, for the 
testing kits?
    Ms. Jaresko. Thank you, Congresswoman. Unfortunately, I 
can't answer that question because to answer that question, we 
need to get the documents that come before any contracted 
purchase order. The documents that show the procurement 
process, the e-mails, the memos.
    Ms. DeGette. And have you requested those documents?
    Ms. Jaresko. We have requested them seven times but have 
not received them from any contract.
    Ms. DeGette. Well, Mr. Chairman, maybe we can get those 
documents. And then we can have Ms. Jaresko answer that 
question. And let me just ask one more question of you, Ms. 
Jaresko. As we continue to address the challenges of the COVID-
19 pandemic, you recently said that you would postpone 
austerity measures for a year and acknowledged the austerity 
plan needs to be redrawn. If you're forecasting economic 
contractions, why not shelve the austerity altogether and focus 
on economic growth?
    Ms. Jaresko. Economic growth is something that is primarily 
in the government's hands. We have included economic growth 
efforts in terms of structural reforms, but they have to be 
implemented by the government, by the elected government of the 
island. So, the only portion of this that is within PROMESA's 
mandates to manage is the expenditure side of the budget. I 
can't grow the revenues. I can't change the tax incentive 
structure that is on the island.
    In that light, to the extent that the economy continues to 
become smaller, unfortunately, if we don't take these measures, 
we will have to cut even more later. So, the combination of 
non-action on the structural reforms to increase revenues and 
not cutting costs, not making the government more affordable, 
more efficient, more limber, will actually put us in a worse 
position as the economy gets smaller.
    Ms. DeGette. Thank you. Thank you very much, Mr. Chairman. 
Thank you for your commenting.
    The Chairman. Thank you.
    Mr. Fulcher, the time is yours. Is he there? Mr. Fulcher? 
Mr. Hern?
    Mr. Hern. Thank you, Mr. Chairman. It is good to see 
everyone today. These are long calls, doing it this way. But it 
is good to be able to talk to our friends here. I thank the 
witnesses for being here as well. It is always troubling to 
see--we have had so many of these conversations about Puerto 
Rico and about the economy there and what's going on. And 
somebody that has been in business my entire life prior to 
getting into Congress this term, I am shocked to see that 
Puerto Rico has amassed about $72 billion in debt, bonded debt, 
$40 billion--$49 billion in unfunded pension liabilities and 
has effectively lost all access to the capital markets.
    With that said, Ms. Jaresko, in your testimony, you touched 
on this. And you state that the Oversight Board has worked with 
the Puerto Rican government to implement numerous structural 
reforms, but there has been little meaningful progress. You 
state that this is a result of disasters, poor implementation 
of the Board's recommendations. Could you explain how the lack 
of structural reforms has hurt Puerto Rico's growth and how 
implementation of the recommended structural reforms for the 
last fiscal plan would improve Puerto Rico's economy on both a 
short-term and a long-term basis?
    Ms. Jaresko. Thank you, Congressman. The structural reforms 
are meant to do a couple things in terms of changing the nature 
of the economy: (1) to increase labor participation; (2) to 
improve the environment for attracting investment, Puerto Rican 
investment, national investment, international investment; and 
(3) to improve the quality of electricity and resiliency of 
electricity and the infrastructure of the island, all taken 
together to make Puerto Rico a more competitive place for 
businesses to invest and for jobs to be created.
    In terms of the human welfare and human capital reforms 
that would improve labor participation, the government did 
implement an earned income tax credit. We did agree and put 
money in the budget. However, they haven't made it well-known 
throughout the island such that individuals could make time-
sensitive decisions about whether or not to stay in the formal 
economy and get that credit or leave and go into the informal 
economy or, worse yet, leave the island.
    So, that EITC has to be developed further in terms of 
getting people to understand it. On the welfare to work plan, 
we asked for it to be implemented in a 1-year so that it could 
be quick, so that people could actually understand and start 
moving slowly, not necessarily to work but education, to 
volunteer, along with the plan. And that has only been 
implemented--or they agreed to implement it over 4 years.
    Those delays mean our labor participation rate remains low. 
It also means that the labor market is going to be more 
difficult. We have a massive unemployment level right now, 
close to 40 percent. And for those folks to re-enter the market 
is going to be harder because labor participation rates are 
low, and the environment for labor is complex. Not having those 
structural reforms in the short-term has a $200 million effect 
on the surplus, over the long-term, over 30 years, almost $25 
billion.
    Mr. Hern. Thank you. And you also talked about what is 
equivalent to the SNAP in the United States. And you talked 
about reform. And I was very happy back earlier in my first 
time in Congress here to sign on with 64 other Members about 
some reforms to SNAP. I noticed that there are no work 
requirements whatsoever for your nutritional assistance 
program. And in your opinion, what should we do to change that 
in the last few seconds that I have here?
    Ms. Jaresko. It is up to the government to file the plan 
with the FNS, with USA FNS and commit to making it possible. 
There is not a great deal more that is required.
    Mr. Hern. So, there is really no encouragement to go back 
to work, then, but to get assistance from the government? Is 
that what you're saying? That is what you're alluding to?
    Ms. Jaresko. No. I am not saying that. I am saying that it 
would be better to have that work/volunteer/education 
requirement such that people can start to make the move toward 
work and we don't have that requirement at this time. The 
government is committed to do it but only in the course of 4 
years.
    Mr. Hern. Well, I appreciate your details of what we need 
to do. There is a lot of work to do. And as we're following 
this on the Oversight Board's recommendation in helping to 
incentivize people to join the workforce, as you just 
mentioned, just unfortunately doesn't seem to be happening 
right now. If we are going to help, we have to get people back 
to work. As we know, Ronald Reagan once said, ``The greatest 
social program in the world is a job,'' and we need to get 
people back to work. Mr. Chairman, I yield back. Thank you.
    The Chairman. Thank you, Mr. Hern.
    Mr. Soto. Sir, the time is yours.
    Mr. Soto. Thank you, Mr. Chairman. And it is important to 
start by getting the record straight. We saw recession hit 
Puerto Rico well before the Great Recession even hit the United 
States, in part, by the loss of the 936 exemption and, 
unfortunately, pharmaceutical companies and others leaving the 
island. Then we saw PROMESA because bankruptcy was taken away 
from them for absolutely no reason. So, PROMESA represented a 
compromise, an imperfect one.
    The we saw Hurricane Maria and Hurricane Irma leading to 
the largest death toll of Americans in modern history, over 
3,000 people dying because of the terrible response by the 
Trump administration. Then we saw earthquakes hit where this 
House has passed $5 billion with some bipartisan support while 
the Senate sits there and does nothing.
    Now add COVID-19 on top of it, and it is just one after 
other after another. And it is important to get the record 
straight because it is very difficult to be able to speak up 
accurately, particularly for many elected officials back on the 
island who have to work with the Trump administration and are 
concerned about President Trump's well-known vengeful nature. 
So, they have to tiptoe around. But we need to keep the record 
straight so this Committee knows what actually is happening. We 
know that Americans in Puerto Rico continue to be treated like 
second-class citizens.
    The territorial status is part of this problem. There are 
3.2 million Americans living in Puerto Rico. It is 20 times the 
second-largest territory. It is also more populous than 20 
states--so it just doesn't work for them. So, having two U.S. 
senators, four Members of Congress, and a vote for president 
would go a long way to helping fix a lot of these things. I do 
agree the people of Puerto Rico have to determine this future, 
and they will have a vote on a simple statehood yes-or-no 
question this November, a simple question in a high-turnout 
election. And we need to respect the results and act upon them, 
regardless of what they are.
    And I do want to talk a little bit about the PROMESA 
reforms that this Committee has already filed. Mr. Marrero, you 
had talked about legitimate concerns about there is not a good 
dividing line of what essential services are in protecting 
Puerto Rico's sovereignty. So, the new definition of essential 
services, including public education, public safety, health 
care, pensions, and the University of Puerto Rico, does that 
better protect--does that get the dividing line right on 
protecting Puerto Rico's sovereignty to handle its day-to-day 
affairs?
    Mr. Marrero. Thank you, Congressman Soto, for your support 
with the people of Puerto Rico. I am going to be completely 
honest. Since the beginning, we have been reluctant to support 
this additional language because current interpretation of 
essential public services has been very beneficial for the 
people of Puerto Rico. Even though the including word can be 
interpreted as expansively and not necessarily limited 
essential public services--however, we believe that in order to 
make that workable, we will also need to amend other sections 
of PROMESA to make sure that the Oversight Board does not use 
other provisions of PROMESA to circumvent what you are trying 
to achieve there.
    Mr. Soto. OK. So, there are additional suggestions you have 
of potentially improving the legislation. We appreciate it. If 
you wouldn't mind sending those to the Committee, that would be 
helpful. Do you think us going to define this better--let's say 
we adopt the recommendations you just stated. Would this help 
ensure better response to COVID-19? I know it has been 
difficult to get tests there. And would this help improve the 
healthcare system to improve your COVID-19 response? Would this 
be a help to you on that?
    Mr. Marrero. Being honest, Congressman, I don't see one as 
a significant requirement for the other. I believe that the 
challenges that we have faced in Puerto Rico during the COVID-
19 are very similar to what other states and other 
jurisdictions in the world have been facing. I think that the 
most important amendment that PROMESA needs right now is to 
delineate the powers of the work, to make sure that the public 
policy of the government--the elected government at the time 
because this is not only for the present or the current 
government of Puerto Rico but also for any other government of 
Puerto Rico--is to make sure that the public policy, that it 
has been elected at the ballot with the power of the vote. It 
is totally respected.
    Mr. Soto. Well, that is the intent that we are seeking in 
this legislation, to define essential services in a way that 
protects the day-to-day responsibility and the duty and powers 
of the duly elected central government. So, please continue to 
work with us on that because we want to get that definition 
right. We have the same goal in mind, which is to protect 
services and the sovereignty of the island. It also includes 
relief for unsecured debt, an audit, which I know a lot of 
folks have asked about.
    I want to first thank you, Ms. Jaresko, for mentioning in 
your past testimony that you would be happy to cooperate to 
supply documents for any independent audit. That certainly 
would be helpful. Let's assume for a moment this became law. 
How would you be able to implement the conflict of interest 
provisions of it that are in the pending legislation?
    Ms. Jaresko. Very supportive, Mr. Congressman, of the 
conflicts of interest provisions in general. We have been very 
supportive of Congresswoman Velazquez's approach to that 
amendment. I think that the current version, frankly, is over-
expansive. To be very clear, the conflict of interest as 
written currently would force everyone to clarify whether there 
was a conflict with over 165,000 creditors that have made 
claims in the courts against the government of Puerto Rico. For 
anyone, whether it is Mr. Marrero or whether it is a Board 
member, or whether it is an advisor, to clarify 165,000 
conflicts of interest at every level would be an impossible 
exercise. So, we are in favor of and we are supportive of 
improving conflict of interest disclosure. But I believe that 
the current language is overly expansive.
    Mr. Soto. Well, we look forward to your additional guidance 
on that so that we could get it right. And certainly having 
Federal funding for the Board will allow you to be a little 
more independent of having to utilize the current revenue from 
the island, which certainly makes it more----
    The Chairman. Thank you, Mr. Soto.
    Mr. Soto. Thank you, Chairman.
    The Chairman. The gentleman yields back. Ms. Radewagen? Is 
she still with us? I had called her before.
    Mrs. Radewagen. Thank you, Mr. Chairman.
    The Chairman. Thank you.
    Mrs. Radewagen. Can you hear me?
    The Chairman. Yes. The floor is yours.
    Mrs. Radewagen. I yield my time to the gentlelady from 
Puerto Rico.
    The Chairman. The gentlelady yields. Ms. Gonzalez-Colon.
    Miss Gonzalez-Colon. Thank you. Thank you, Amata, for 
yielding and Chairman for recognizing. I have a question to Mr. 
Marrero. In terms of--we have been losing a lot of money and a 
lot of revenue during the last 3 months with the situation of 
COVID-19. Many people may not be aware. But the first lockdown 
in the Nation actually was in Puerto Rico since March 15. There 
was a curfew. There was a lockdown. I think at that time, there 
were proper decisions. The Governor just announced a few 
minutes ago that they are getting rid of the lockdown and 
moving the curfew to 10 p.m., which is good. I do understand 
that we should open and be prepared for living with this kind 
of pandemic. Today, it is COVID. It will be another in a few 
months, sadly.
    But my concern is there is a projection that we are going 
to be losing between $1.5 billion to $3 billion during the next 
3 years because of the revenue that we lost. What is the plan 
of the government of Puerto Rico to close the budget due to the 
loss of revenue and the measures that need to be taken in order 
to comply with the fiscal plan?
    Mr. Marrero. Excellent question, Congresswoman. Thank you 
for it. As you mentioned for Fiscal Year 2020, the government, 
as well as the Oversight Board, anticipates a decrease in 
revenue of around 18.9 percent--but a small increase the next 
fiscal year of 1.7. However, we have to stress the timing 
difference that we have because there are several tax returns 
that has been postponed or delayed for the next fiscal year. 
So, that takes into account also that percentage or that high 
percentage of decreasing revenues. However, as any other 
government in the Nation, we will use reserved funds to manage 
some of the shortfall as provided in the fiscal plan and the 
budget. However, I think that this brings the question, more 
importantly, that we would like to support and we would like to 
ask Congress to act and pass legislation to provide support to 
state and local governments across the Nation as well as 
territories that we are dealing with lost revenue because, as 
you know, the funds that have been available through the 
coronavirus relief fund under the CARES Act are not allowed to 
be used for lost revenue, only expenses.
    Miss Gonzalez-Colon. I know, and actually, my second 
question will be--and this is for you and for Ms. Jaresko. 
There are many in Congress discussing even another phase of 
recovery process for COVID-19 through the Nation. What 
specifically will we need in Puerto Rico--like in Florida, the 
tourism industry has been impacted, the hospital industry as 
well. What specifically should be included in the case of 
Puerto Rico, Mr. Marrero, Ms. Jaresko?
    Mr. Marrero. Obviously lost revenue for state and local 
governments, as well as public corporations, which have been 
hit by COVID-19. And also, I would say that, in addition--the 
government, hospitals, and the tourism industry definitely 
should be a priority in Puerto Rico because of the lockdown, 
how they affected not only the revenues and the visitors but 
also the elective operations and elective procedures the 
hospital used to be making before COVID-19.
    Miss Gonzalez-Colon. Ms. Jaresko?
    Ms. Jaresko. I would just add that I would hope, in 
addition to what Mr. Marrero has said, that you would consider 
the Governor's request and ours to support including Puerto 
Rico in the pandemic EBT program such that in case--God 
forbid--we're back in this situation again in the autumn when 
the children are back in school that we can more easily get the 
breakfast and lunch to them on the EBT cards, as is allowed 
under the SNAP program.
    Miss Gonzalez-Colon. We are pushing for that as well, 
sending letters and dealing with that with the USDA since the 
beginning. So, once we're in that, I think the poverty level on 
the island is more than 60 percent. It is actually among 
children, women. But if we do have specifics--because we have 
been having meetings with the hospital industry and medical 
industry. And we are facing at the same time the new hurricane 
season. My third question, Mr. Marrero, will be specifically do 
we have enough----
    The Chairman. I am going to have to go to another--Miss 
Gonzalez-Colon, your time has already passed.
    Miss Gonzalez-Colon. I do have 13 seconds, sir, so I am not 
finished.
    The Chairman. When it turns that color, that means you went 
over.
    Miss Gonzalez-Colon. No. Actually, it is saying 4, 5. When 
it is over, it is going red.
    The Chairman. OK. Thirteen seconds. Start counting.
    Miss Gonzalez-Colon. Thank you, and stop chasing me, sir.
    The Chairman. I am just asking the question.
    Miss Gonzalez-Colon. Mr. Marrero, you should be giving us a 
complete number of what specifically you understand the 
industry is requesting in terms of power. Do we have enough 
resource for back-up for the industry on the island?
    Mr. Marrero. I will provide that information in more detail 
but definitely. We will need more back-up in order to make sure 
that we are as resilient----
    Miss Gonzalez-Colon. Thank you. I am waiting.
    The Chairman. Mr. Tonko, you are recognized, sir.
    Mr. Tonko. Can you hear me, sir?
    The Chairman. Absolutely.
    Mr. Tonko. OK. Thank you, Mr. Chair, for hosting this 
important discussion. And let me just state that I regret that 
this hearing has been so contentious. It breaks my heart that 
the people of Puerto Rico have to deal with this. We shouldn't 
have this kind of partisan trouble to talk about aid to peoples 
who are desperately in need. Like many of my colleagues, I am 
concerned about the speed at which aid has been delivered, Mr. 
Chair, to our Puerto Rican brothers and sisters.
    I have heard that up to $3.1 billion in community 
development block grant dollars under the disaster recovery 
have been approved for Puerto Rico. Only $47.3 million has been 
disbursed. Can someone tell me what the hold up is, and how can 
the government or the Board help solve that concern?
    Mr. Marrero. Well, definitely. Thank you for that question, 
Congressman Tonko. The reality is the CDBG-DR program, it is 
not as straightforward as we would like. Since the beginning of 
the allocation by Congress, we have been working very actively 
to make sure that we have the action plan in place, the 
structure, the policies, and procedure. Everything has been 
done at the Department of Housing locally. However, once the 
grant agreement included additional requirements for the second 
tranche or the second allocation of the CDBG funds, additional 
structure, additional policies needed to be put in place. 
However, the government, the governors and myself, it is a 
priority to make sure that we expedite the CDBG funding. Right 
now, obviously, the COVID-19 and the earthquakes prior to the 
COVID-19 delayed the launch date for several of the 26 programs 
included in the action plan. However, the Secretary of Housing 
has already launched the R3, which is the most important 
housing program.
    However, I am going to be honest. It is not up to the speed 
that we would like to see it. The Governor, nor myself, nor 
anyone within the team is satisfied with the speed of those 
fundings. So, again, we are looking for ways within the four 
corners of the law to make sure that we can expedite the 
funding to make sure that who needs it the most have them, 
obviously, as soon as possible.
    Mr. Tonko. OK. I appreciate that. Any other response?
    Ms. Jaresko. I would just add that our only role in that 
program is the certification that was included in the grant 
agreement and in the Federal Register. We did do that very 
expeditiously, in less than 45 days, so that there would be no 
hold-up in that second approval. But other than that, we don't 
have any visual entry into what's going on in the disbursement.
    Mr. Tonko. Well, it seems to me that there should be some 
effort to coordinate so that the people can rightfully get the 
dollars that they so desperately need. Puerto Rico is poor. 
Their power grid is particularly fragile after Hurricane Maria 
and the earthquakes in Southern Puerto Rico. And after the 
earthquakes this January, the Costa Sur Power Plant has been 
out of service. What are some of the preparations that the 
Puerto Rico Power Electric Authority is taking for the upcoming 
hurricane season?
    Mr. Marrero. Thank you, Congressman. As opposed to what 
happened when we got into office in 2017 when Maria hit, this 
hurricane season, we have several warehouses across the island. 
Not only do we have several warehouses, but we also have around 
$150 million in materials and equipment across the island to 
make sure that, if something happens, PREPA, the electric 
utility, is able to respond in a swift manner. Not only that--
we have made sure that also PREPA has entered into initial aid 
agreements with the utilities stateside to make sure that if 
there is any help that we may need when a disaster strikes that 
we can, again, go through those initial aids and be able to get 
that help from our counterparts on the mainland.
    So, as opposed to Maria and Irma, we believe that we are in 
a situation better prepared because we have the materials, 
equipment, the initial aid, and obviously the lessons learned 
from it.
    Mr. Tonko. And how will that all be impacted by the 
upcoming privatization of the power utility?
    Mr. Marrero. Excellent question, Congressman. When we 
designed the old operation and maintenance agreement, when we 
designed the structure of this agreement for PREPA, we made 
sure that only we preserve the access to current and future 
disaster funding. But also we made sure that doesn't derail or 
affect the tax-exempt financing. This is quite technical, but, 
again, we made sure that any agreement that we enter will not 
affect the requirements of the Stafford Act under FEMA as well 
as the health regulation for the CDBG funding. And that is 
because we are retaining the ownership of the title for the 
people of Puerto Rico.
    Mr. Tonko. OK, thank you so much. Mr. Chair, do I have any 
time remaining?
    The Chairman. No.
    Mr. Tonko. Oh. Well, I yield back then, Chair.
    The Chairman. Thank you, sir. Ranking Member Bishop, sir, 
you are recognized. Mr. Bishop.
    Mr. Bishop. Yes. All right. Am I on here? Have all the 
other Republicans already gone? Am I the last one? You can't 
hear me, can you?
    The Chairman. As far as I can tell, you are the last member 
of the Minority to speak.
    Mr. Bishop. All right. Well, fine. Mr. Chairman, a couple 
of complaints, obviously, as we go forward with this. The 
voting that took place earlier on was a huge kerfuffle. We will 
be asking some specific questions of how we can avoid those 
kinds of problems in the future and avoid staff telling how 
Members should or should not be voting.
    Mr. Grijalva, I also wanted to take issue with you on some 
of the conversations you have had with the Ranking Chairwoman 
of this particular portion. It is better than that. You are a 
better person than that. I also realize that this is unique in 
some situations. You have had a whole lot of these kinds of 
hearings going on. This is probably the first time you have had 
more than one point of view that has been presented with it. 
And that presents some difficult situations.
    And some of those in the past have been on issues that I 
think are somewhat extreme. However, I just want this Committee 
to realize, despite this vehicle that we are using which is so 
inappropriate, that any discussions on solutions or changes of 
what will take place in Puerto Rico without the discussions or 
the commitment and inclusion of the Resident Commissioner from 
Puerto Rico are futile. She is the Representative and the 
spokesman for the island, and her point of view must be 
considered at all times. And because of that, Ms. Gonzalez-
Colon, if you have another question, I would like to yield the 
remainder of my time to you.
    Miss Gonzalez-Colon. Thank you. Thank you, Mr. Chairman, 
for always allowing us to represent the people of Puerto Rico. 
And that is what I am doing here in Congress. The people voted 
for me for 4 years even when some people want to represent the 
island in their own views. I am the one elected to do the job. 
And I appreciate my delegation for always being available and 
allowing me to do my job as every other member of this 
Committee do represent their districts.
    And this is the same thing we are all doing, representing 
our people. So, in that sense, we have been always available to 
work in a bipartisan way. Actually, all my bills in this 
Committee and in the rest of the committees are bipartisan, all 
of them. And the reason for that is that not having the power 
of vote in the Floor, not having a formal Delegation of four or 
five members, not having a Senate representative of Puerto 
Rico, that is the way to do things in a bipartisan way. And I 
am so sorry that some folks would try to do politicking or 
trying to do this in a partisan way. I think that if you really 
want to help Puerto Rico, that is not the way to do it. It is 
sitting. It is having discussions. It is having a reflection 
and actually working to that end.
    And I want to say thank you to all the members of this 
Committee that actually--every time I reach to them asking for 
their help, they have been doing that. Many of them here today 
are being sponsors or leading sponsors in many of those 
legislation so thank you for all the people that have voted for 
Puerto Rico not once, but many times. And I am not going to aim 
at all of you, but you all know who you are.
    Ms. Jaresko, I do have other questions. I want you to 
provide the Committee a list or log of the issues that you 
understand may be helpful if we amend the PROMESA law. What can 
be expedited? How can we cut red tape and bureaucracy, not just 
at the Federal level but what should be done at the government 
of Puerto Rico level to access, enhance a clear way to move the 
Federal funds.
    In terms of Mr. Marrero, my question will be how to make 
that happen. How the people of Puerto Rico can access--
honestly, if it were not for the Federal funds, how bad would 
the situation on the island be right now?
    Ms. Jaresko. Of course, Congresswoman, we will get that to 
you.
    Miss Gonzalez-Colon. Thank you. Mr. Marrero, how bad would 
the situation in terms of the fiscal plan, in terms of the 
budget, be right now for the people of Puerto Rico if not for 
the Federal funds that were approved in the last 3 years?
    Mr. Marrero. Definitely, without the Federal funds, with 
the Federal support that we have gathered from Congress and the 
Administration, Puerto Rico will not have the resources to 
recover from Irma, Maria, earthquake, COVID-19 and everything 
that we have been suffering since 2006 of the fiscal economic 
crisis.
    Miss Gonzalez-Colon. What is your understanding of what 
should be the first priority right now if you got the access to 
make a change in the law?
    Mr. Marrero. On the PROMESA, to make sure that the public 
policy in Puerto Rico is fully respected. Again, I think that 
the best idea to describe this, Congresswoman, is PROMESA, the 
Board, should be able to set the size of the room. But the 
government, the elected government of Puerto Rico, this current 
government as any other future government, should have the 
ability to decide how to arrange the furniture to the extent 
that you are within the size of the room. As simple as that.
    Miss Gonzalez-Colon. Thank you. My time is expired, 
Chairman. I yield back.
    The Chairman. Mrs. Napolitano. The time is yours. You are 
recognized.
    Mrs. Napolitano. Thank you. And I won't tell Bruce and 
Garret that I have been trying to get on for an hour and a 
half. So, don't feel like you go arrange your swords--it is 
bipartisan. Mr. Marrero, on the task force, the Governor 
created a medical task force. Can you go into detail on the 
role of the task force and address the impact during the last 
four events that you have had that are horrible and give 
statistics or how much funding is addressed to mental health? 
Nobody has addressed the issue of mental health, and it is a 
critical thing for the people who are facing unemployment, who 
are facing just everything else that you can think of.
    Mr. Marrero. Thank you, ma'am, for the question. First of 
all, as to the mental health area, I really want to make sure 
that you know this. Not only were we able to identify or 
earmark $150 million for private hospitals, but we were also 
able to for mental health institutions, private hospitals that 
are aimed to treat those important patients that are 
participating. And then we are able to assign money in order to 
cover those expenses----
    Mrs. Napolitano. How much money? And is it sufficient 
personnel?
    Mr. Marrero. I will provide every detail to you, ma'am. We 
are making sure that all this information is publicly available 
on your website. But I will provide it with the detail that you 
requested.
    Mrs. Napolitano. I would really like to know any 
information you may be able to provide on it because it is an 
important issue for the people of Puerto Rico. Another question 
has to deal with the Army Corps of Engineers and the power 
grid. Have they done everything they are supposed to, and what 
status do you have on that?
    Mr. Marrero. On the power grid, ma'am, the Corps of 
Engineers, their main responsibility was during the emergency 
response phase. Now, as we are transitioned into the 
reconstruction work and as FEMA obligates the permanent work 
funding, the Army Corps does not have that leading role that 
they used to have during the emergency response phase, ma'am.
    Mrs. Napolitano. Are they done with their part of it?
    Mr. Marrero. Yes, ma'am.
    Mrs. Napolitano. OK. I yield my extra time to Nydia 
Velazquez.
    The Chairman. The gentlelady yields. Ms. Velazquez.
    Mrs. Napolitano. Has she left?
    The Chairman. I think she has left.
    Mrs. Napolitano. Well, I would appreciate if those 
questions were answered for the whole Committee, not just for 
us. Thank you, and I yield back.
    The Chairman. Thank you very much, Mrs. Napolitano. Mr. 
Garcia, you are recognized.
    Mr. Garcia. Thank you, Mr. Chairman. Can you hear me?
    The Chairman. Yes, sir.
    Mr. Garcia. And I apologize. Just to show fairness, I was 
not able to get on via my computer, so it is a bipartisan 
effect. Thank you, Chairman and Ranking Member, for convening 
this hearing. And thank you, Ms. Jaresko, from the FOMB and Mr. 
Marrero from the government of Puerto Rico. Natural disasters 
and crises are not new to Puerto Rico and neither is a poor 
government response. In the last few years, the people of 
Puerto Rico have faced hurricanes, earthquakes, and now a 
pandemic. This comes after decades of disinvestments, 
ineffective economic policies, and a broken, shortchanged 
healthcare system due to its status.
    The U.S. citizens of Puerto Rico have suffered too much for 
too long. While much-needed funds from the CARES Act and other 
relief packages reach the island, we know that it falls short. 
And despite the worsening fiscal crisis, Puerto Rico was 
excluded from the Federal Reserve's emergency loan program 
during this public health crisis.
    The Puerto Rican government is already anticipating a $1.6 
billion deficit by the end of this month due to the virus. 
Congress approved trillions of dollars worth of relief to help 
fix our economy. It still isn't enough. What has been clear 
throughout this process, however, is that communities need 
stimulus and investment to come back strong, not austerity and 
cuts. That is not how economics works.
    And even Mitch McConnell and President Trump recognize that 
in working to pass the CARES Act that was the case. So, why are 
we acting like cuts and austerity will work for Puerto Rico if 
it doesn't work for the 50 states? I appreciate that the FOMB 
delayed the implementation of its plan of adjustment, but I 
still hear talk about leaner government, rightsizing, and 
pension cuts.
    These words mean the same thing for the people in 
Guayanilla and San Juan that they mean for my constituents in 
Chicago. And they mean less money for communities and longer, 
harder economic recovery. The sacrifices are made by working-
class people and investors take profits. Question No. 1, in 
February, Researcher Cate Long from the Puerto Rico 
Clearinghouse wrote a letter to Bankruptcy Judge Laura Swain 
and mediator Barbara Houser with some alarming allegations.
    She provided data indicating that people involved in this 
winter's mediation negotiations have traded bonds based on 
information that was not available to the public. In other 
words, bondholders may have conducted insider trading. Ms. 
Jaresko, are you aware of these allegations of insider trading? 
And is the Board investigating them?
    Ms. Jaresko. Thank you, Congressman. Yes, I am aware that 
allegations have been made. But, no, we are not investigating 
them. They are in the hands of the court and the mediator.
    Mr. Garcia. Do you think that there is a role for 
investigation by you?
    Ms. Jaresko. It wasn't delivered to me. We weren't asked to 
do so. And I don't have the means to do so, in fact. It really 
is a law enforcement issue. And we would expect law enforcement 
to be engaged.
    Mr. Garcia. OK. Do you know what the consequences would be 
if a bondholder in the mediation process was found to be 
insider trading?
    Ms. Jaresko. I am not a securities lawyer, but I can 
imagine what the securities law would require.
    Mr. Garcia. OK. On bankruptcy. Sometimes these plans look 
like they are constructed backward, starting with payments to 
creditors and then filling in the rest of the economy after 
that. The fiscal plan certified by the FOMB last month admits 
that Puerto Rico has not achieved significant growth after 
years of austerity. The plan predicts more tough times ahead, 
projecting GNP growth of .5 percent next year followed by a 
contraction when Federal funds for fighting COVID wind down.
    It looks like Federal funds are the only concrete positive 
input to the Puerto Rican economy in the next few years. Other 
growth factors seem much more vague. And the government of 
Puerto Rico is blocked from spending its billions in reserves. 
Mr. Marrero, if Puerto Rico's economy fails to grow over the 
next 2 years, are you concerned that the island will face 
another bankruptcy?
    Mr. Marrero. Definitely, sir. And more importantly than 
that, I think that in the end, more than the bankruptcy, the 
more important part is the people. The people will continue to 
leave the island, and we will end up with less folks, not only 
to pay our debts but also to maintain a government that needs 
to provide essential services to the people.
    Mr. Garcia. Thank you. I find it disgraceful that nearly 3 
years after Maria, our sisters and brothers on the island 
remain without roofs. Children don't have schools, and people 
continue to die as a result of inadequate access to health 
care. This pandemic has only exacerbated the situation on the 
island. One thing is clear. We can't continue squeezing the 
people, and we can't go back to normal. Normal is what got us 
here in the first place. We must do everything we can to put 
the people of Puerto Rico on the path to long-term recovery and 
economic stability. Thank you, Mr. Chairman and Members. I 
yield back.
    The Chairman. Thank you very much, Mr. Garcia. I appreciate 
it. And I believe that that is the end of the questions by 
Members. I will be submitting some questions in writing to both 
our witnesses and thank you very much. But just a couple of 
quick notes before adjourning the hearing. Ms. Jaresko, the 
2020 Fiscal Plan relies on approximately $83 billion of 
disaster relief funding in total to be disbursed from Federal 
and private sources, part of Maria and Irma reconstruction 
effort. And of this amount, how much has been disbursed so far 
by the Federal Government, and how confident are you that the 
remaining balance would be disbursed to the government of 
Puerto Rico?
    Ms. Jaresko. Yes. Thank you, Chairman. Let's take different 
pieces of the numbers. And I will go through them individually. 
The private sector funding, the private sector insurance, has, 
for the most part, all been received to date. The FEMA funding, 
which I described to you, is estimated to be $48 billion--$17.4 
has been obligated, and $13 billion of that has been disbursed.
    If you ask me what my expectation is, my expectation is 
that Puerto Rico will receive everything it is estimated to 
cover the full $48 billion. The third large piece is the $20 
billion that you have all appropriated already for CDBG-DR. Of 
that, $3.1 has been obligated. And actually, the current 
disbursement level is about $70 million. I think someone used 
something lower. But now that the economy is starting to open, 
the disbursements are starting to flow, in particular, in the 
construction area.
    And I would expect all of the $20 billion appropriated to 
indeed be received as it has already been appropriated. The 
last category is a combination of various Federal programs, 
some of which has been received--I don't have that list in 
front of me right now--and others which are still being 
received over time. Those are things like Job Corps, like the 
USDA funding, incremental funding for supplemental food 
assistance, and so on.
    But the general answer to your question, I would expect all 
of this funding to be received because all of it is necessary, 
needed, and appropriate for the disaster. Chairman, I can't 
hear you. You are on mute.
    The Chairman. Thank you because Congress does appropriate. 
But the implementation on disbursement and the guidelines that 
follow those kinds of appropriations have not always expedited 
the money to get to the targets that it was intended for. We 
have many examples of that. But Mr. Marrero, does the 
government of Puerto Rico project it will receive the Federal 
aid that Ms. Jaresko just talked to from the present 
Administration to rebuild? And if we continue at this 
percentage that we are talking about, what would be the impact 
if the funds aren't received?
    Mr. Marrero. Well, sir, I am very hopeful that that promise 
will be fulfilled and that Puerto Rico will receive the funding 
that has been promised. However, if we don't get that funding, 
definitely all the entire fiscal plan, entire fiscal roadmap 
that we are trying to lay out for the next couple years will 
not be attainable. Puerto Rico will not only not be able to pay 
their debt as contracted, but it will not be able to provide 
essential services. And the economy will not grow.
    The Chairman. Yes. And like I said, I have specific 
questions on PREPA and specific questions on some things that 
haven't been requested by the government of Puerto Rico and the 
status of those requests. I will send those forward. But Mr. 
Marrero, just one question that was brought to my attention by 
a resident of the island, a teacher, that as of 2 weeks ago, 
141 of 834 school cafeterias in Puerto Rico were providing 
children with hot meals. And the Puerto Rican Department of 
Education has argued in court the department does not have the 
duty to provide meals. Could you elaborate on why the 
department has taken this stance and how will we deal with 
this, and have Federal funds already been authorized for the 
ability to provide nutrition to children?
    Mr. Marrero. Definitely, sir. Well, first of all, the 
Governor and myself have been committed to make sure that we 
can expedite the opening of the school cafeteria to provide 
that food that is needed, obviously, as the Resident 
Commissioner, Congresswoman Gonzalez-Colon, said. Sixty percent 
of our children live below poverty levels, so we have to make 
sure that we can fulfill that duty, particularly during COVID-
19. The initial reluctance of the secretary was because, at 
that time, the personnel of the school cafeteria were the 
vulnerable population that could be affected by COVID-19. 
However, we have already opened several cafeterias, several 
places around the island. Right now, it is making sure that can 
be fulfilled through NGOs and through other organizations to 
make sure that we can provide that food.
    The Chairman. Thank you. And I want to thank the panel for 
the testimony. And like I said, all of the full testimony was 
in writing. Members will follow up in writing. We will 
distribute it to the rest of the Committee in terms of your 
responses before adjourning. Let me thank you again. Well, I 
did want to say that I appreciate the fact that we are trying 
to work through some of the newness to say the least of the 
process that we're going through to have these hearings. I 
think it is important.
    To sit on our hands for the next 45 days, 35 days, 60 days 
without having hearings, oversight, without having markups and 
moving legislation along, I think is a detriment to the people 
that elected us to office. And that is No. 1. You know, 
discretion being the better part of valor, some people choose 
to be there in face versus the person right next door doing 
business. God bless you. I personally think that some of the 
other Members that are indicating their willingness to be part 
of an online process that has been approved by Congress, by the 
House of Representatives, as part of the rules, that we do so 
with discretion in the sense that not only for self-
preservation but also the preservation of others, the staffs, 
the public that we come in contact. And as we see some surges 
and some spiking going on in terms of the pandemic--and Puerto 
Rico is not alone. Unfortunately, the state of Arizona is right 
up there.
    I think No. 1 on the hit parade list of least testing and 
the surge coming back with a lot of ferocity and a lot of 
strength here in the state of Arizona--so I mention those 
things. This isn't about not who was more macho, about being 
able to sit on the dais. This is about getting business done. 
This is a vehicle to do it. I prefer the in-person. I always 
have. The format is not the favorite thing that I like to do. 
But we will be there at that other point as well.
    I also want to say that this is not a partisan issue. I 
struggled through this issue of Puerto Rico and what's 
happened. And we already went through the accumulation, the 
cumulative effect of what has occurred in Puerto Rico from 
nature to the virus and to the economic collapse. And I think 
we struggled on how to balance the sovereignty and the self-
determination of the Puerto Rican people and the need for the 
Federal Government to intervene and provide supplemental 
support to Puerto Rico, for it to be able to not only survive 
but develop and become sustainable. That is the goal. It is not 
a partisan issue. It is not partisan when we want to do reform 
for PROMESA to make the process more defined and provide the 
people of Puerto Rico a forum and transparency, making sure 
that either government, whether it is the Federal Government or 
the central government, are being transparent, clean, and free 
of conflict.
    H.R. 5687, that the House of Representatives passed, that 
the Senate has killed, and the President has indicated he 
wouldn't sign, provides earned income tax credit for the people 
of Puerto Rico, child tax credit, and additional support after 
the hurricanes that was badly needed and is since in the abyss 
on the other chamber. There are steps to go forward. And as we 
go forward to look at markups for reforms to PROMESA, as we 
look at other pieces of legislation in other oversight 
hearings, I am taking the advice and the suggestions of my 
colleagues on both sides of the aisle on how to technologically 
make ourselves better, not necessarily make us more 
comfortable, but it should make us better. With that, let me 
adjourn the meeting. Thank you for your attendance and----
    Miss Gonzalez-Colon. Mr. Chairman, just one point.
    The Chairman. The meeting is adjourned.

    [Whereupon, at 6:15 p.m., the Committee was adjourned.]

            [ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

                                Hispanic Federation
                                      San Juan, Puerto Rico

                                                      June 25, 2020

Hon. Raul M. Grijalva, Chairman,
House Committee on Natural Resources,
1324 Longworth House Office Building,
Washington, DC 20515.

Re: June 11, 2020 HNR Committee Hearing: PROMESA Implementation during 
        the Coronavirus Pandemic

    Dear Chairman Grijalva:

    Hispanic Federation (HF) is a leading social service and advocacy 
member organization with a national network of hundreds of Latino 
community-based health and human service agencies working to promote 
the social, political, and economic well-being of Latino communities. 
Founded in 1990 to support Latino institutions in New York City, today 
the Federation works in twenty-two states, Puerto Rico, and the 
District of Columbia.

    On June 11, 2020, the House Committee on Natural Resources held a 
hearing titled ``PROMESA implementation during the Coronavirus Pandemic 
in Puerto Rico.'' We thank you and the Committee for holding this 
important hearing to ascertain the impact of the PROMESA law on the 
island's ability to respond effectively to the current health crisis 
combined with the preexisting crises created by the previous economic 
and natural disasters.

    In our opinion, the following five areas are especially important 
for Puerto Rico's economic and social recovery, self-determination, and 
wellbeing:

  1.  A moratorium on debt payments and suspension of austerity 
            policies until the economy has fully recovered and the 
            needs of the people struggling to recover from years of 
            economic and natural disasters have been met.

  2.  A commitment to investing in the development of human capital and 
            expertise instead of restricting the local government's 
            capacity to respond effectively to the ongoing crises, as 
            opposed to so-called ``right-sizing'' (Jaresko, p. 15) to 
            save money and hinder provision of government services and 
            essential services--especially in times of emergencies.

  3.  Compliance with provisions outlined in the Amendment to PROMESA 
            Act (H.R. 6975) that require full disclosure of conflicts 
            of interest of all FOMB members, employees, contractors, 
            and advisors as well as public disclosure of every 
            document, record, or information relating to the public 
            debt of the Commonwealth of Puerto Rico.

  4.  Compliance with provisions outlined in the Amendment to PROMESA 
            ACT (H.R. 6075) requirement for full funding of essential 
            services such as public education, public safety, health 
            care, and pensions, and any other essential service, before 
            prioritizing payments to bondholders.

  5.  A full and public evaluation of the FOMB's effectiveness, 
            utility, and success achieving the goals set out in PROMESA 
            to determine if the Board has failed in its mission (which 
            we believe), and, if so, to proceed with its disbanding and 
            respect Puerto Rico's sovereignty and self-determination by 
            providing the mechanisms available to other U.S. states and 
            municipalities to address its ongoing debt and economic 
            crisis.
    In written testimony, the Executive Director of the FOMB, Ms. 
Natalie Jaresko, states:

        ``The 2020 Fiscal Plan reflects a one-year delay in most 
        categories of budgetary reductions to allow the Government to 
        focus on implementation''.\1\
---------------------------------------------------------------------------
    \1\ Written Testimony of Natalie Jaresko, Executive Director, 
Financial Oversight and Management Board for Puerto Rico, at page 5 of 
15, https://naturalresources.house.gov/imo/media/doc/
Written%20Testimony%20-%20Ms.%20Natalie%20Jaresko%20-
%20Remote%20FC%20Ov%20Hrg 
%2006.11.20%20(PROMESA%20COVID%20Response).pdf.

    This is a necessary but insufficient step. U.S. Congress and the 
FOMB must understand that austerity measures, such as budgetary 
reductions, and continued prioritizing of debt payments over the needs 
of the people of Puerto Rico will inhibit economic growth in the 
island. In April, the G20 announced a year-long moratorium on debt-
payments and interest accumulation for low income countries in response 
to the global pandemic and economic crisis that is going to hit 
vulnerable economies hardest. Why didn't the FOMB adopt a similar 
position given the already high levels or debt, unemployment, and 
poverty in Puerto Rico which will only be exacerbated by the Covid-19 
---------------------------------------------------------------------------
crisis?

    During the hearing, Ms. Jaresko argued that the FOMB can only 
reduce spending and does not have the power to increase revenues, and 
therefore can only limit budgets to ensure debt payment. This 
demonstrates a lack of creativity and willingness to use the power of 
the FOMB budgetary oversight to increase revenues in other ways. For 
example, it could authorize a budget that will increase Puerto Rico's 
capacity to spend money on instead of cutting spending on essential 
services and needed human resources to promote sustainable economic 
growth in the island. It has become widely apparent that austerity 
measures imposed by the FOMB have only hurt the people of Puerto Rico 
while not increasing the island's ability to create a sustainable debt 
repayment plan. Therefore, harmful austerity measures and policies must 
be ended, especially while the island is reeling from disaster after 
disaster, and experiencing record high levels of poverty, food 
insecurity, and unemployment.

    Basic essential services must be defined, able to adapt to changing 
needs, prioritized, and sustainably funded to ensure long term results. 
For example, the FOMB keeps pushing for the University of Puerto Rico's 
budget reduction and has already promoted the closure of hundreds of 
schools across the island. These closures in the name of ``austerity'' 
have promoted unemployment, displacement of students, and inhibited the 
fulfillment of the right to education. Limited access to higher 
education eliminates the best opportunity of poor, vulnerable, or dis-
advantaged populations to attain a college education and contribute to 
the island's professional force and long-term economic sustainability.

    Last year, Hispanic Federation's Puerto Rico team members visited a 
community in the municipality of Carolina, Puerto Rico, and heard from 
local leaders how the closing of their elementary school by the 
government as part of island-wide austerity and cost-saving measures 
negatively impacted their lives. Every day, their children struggle to 
get to other schools without adequate public transportation or safety 
measures. Other community leaders shared their frustration with the 
bureaucratic hurdles to adapt the closed local school building into a 
center for community development. This is only one example on how 
austerity measures that prioritize the debt over basic services such as 
access to education negatively impact peoples' lives and abilities to 
access adequate public education--an essential public service.

    The FOMB does not seem to understand that prioritizing the 
financial bottom line can have long-term negative effects on the lives 
and futures of real people. Payment of the debt should not hinder the 
ability of Puerto Rico's essential services' institutions to pursue 
their prime objectives or sustain themselves as solvent institutions. 
There will be no economic growth if education, physical and mental, 
food, energy, water, employment, among other critical needs, are not 
adequately addressed.

    Previous austerity measures imposed by the FOMB have caused the 
significant reduction of human resources in Puerto Rico's agencies. As 
Hon. Nydia Velazquez mentioned in the hearing, these measures have 
significantly reduced the resiliency and capacity of agencies to 
respond adequately to major disasters, such as hurricanes, earthquakes 
and/or pandemics. The U.S. government constantly asks Puerto Rico to 
lead a successful recovery from repeated disasters yet, on the other 
hand, imposed an FOMB with the power to limit the tools Puerto Rico 
needs to succeed. This is a set up for failure and must end. The FOMB 
must stop prioritizing the payment of an unaudited debt over 
investments in sound governmental human resources, adequate provision 
of essential services, and measures to reduce poverty and stimulate the 
economy such as investments in education.

    Hispanic Federation strongly refutes the following statement by Ms. 
Jaresko in her written testimony (page 13) regarding the provision 
related to transparency and accountability in the Amendment to PROMESA 
ACT (H.R. 6075):

        ``Making public any document relating to the negotiations or 
        restructuring of the public debt would be prejudicial and 
        detrimental to the Board's effort to effectively and 
        expeditiously secure the best debt deal possible for Puerto 
        Rico and its people.'' \2\
---------------------------------------------------------------------------
    \2\ Written Testimony of Natalie Jaresko, Executive Director, 
Financial Oversight and Management Board for Puerto Rico, at page 13 of 
15, https://naturalresources.house.gov/imo/media/doc/
Written%20Testimony%20-%20Ms.%20Natalie%20Jaresko%20-
%20Remote%20FC%20Ov%20Hrg 
%2006.11.20%20(PROMESA%20COVID%20Response).pdf.

    The FOMB was created to protect the interests of the people of 
Puerto Rico and the Board's role is not to first protect the interests 
of Wall Street. The interests of the people of Puerto Rico are best 
served with transparency and accountability. The members of the FOMB 
are not negotiating personal debts. In fact, every document, record, or 
information relating to the public debt of the Commonwealth of Puerto 
Rico is a public document and must be accessible to any interested 
party. Congress is correct in requesting full transparency and 
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accountability from the FOMB.

    Finally, Hispanic Federation believes that following its oversight 
duties, the ultimate goal of the U.S. Congress should be the 
elimination of the FOMB which has not accomplished the intended to help 
the people of Puerto Rico by renegotiating its debt in ways that 
resolve its debt crisis and help move the island forward and begin the 
long road of financial recovery. After 122 years of colonial oversight, 
the United States of America has the obligation to respect Puerto 
Rico's self-determination. Instead of imposing a colonial FOMB, 
Congress should respect Puerto Rico's sovereignty and support its 
democratic institutions and right to self-governance. Puerto Ricans 
were able to peacefully achieve the resignation of former governor 
Ricardo Rosello, and keep standing up with dignity, pride, unity, and 
hard work even after one of its worst natural disasters, Hurricane 
Maria in 2017. Only through self-determination and democracy will 
Puerto Rico overcome its economic crisis.

    Thank you for your attention to these concerns. Hispanic Federation 
is committed to remain on the front lines to ensure that rights of 
Latino communities across the Nation are upheld.

    Feel free to contact Laura M. Esquivel at 
[email protected] or Charlotte Gossett-Navarro at 
[email protected] should you have any questions.

            Cordially,

        Charlotte Gossett Navarro,    Laura Esquivel,
        Puerto Rico Chief Director    VP for Federal Policy and 
                                      Advocacy