Puerto Rico Oversight Board, governor preparing for federal cuts

The Puerto Rico Oversight Board and the territory's governor are bracing for a hit from the Trump administration's avalanche of budget cuts.

Federal aid accounted for 50% of the current fiscal year's budget, said Board Executive Director Robert Mujica, Jr. at Wednesday's board meeting. This was up from 34% in fiscal 2017, said Elisa Guardiola, board budget management director.

With federal cuts being prepared in Washington, Mujica and his staff will continue to work with local government to "prepare for a more dire outcome but continue to hope for the best," said Board Chairman Arthur Gonzalez.

Mujica said the territory's Education Department is particularly susceptible to potential federal cuts.

Puerto Rico's increasing reliance on federal funds has mainly come in the form of disaster recovery and COVID-19 response funding, Guardiola said. Excluding this nonrecurring funding, the dependence is a little less than it was in 2017.

Oversight Board Member John Nixon said the board and Puerto Rico government would almost certainly have to adjust the budget to accommodate federal cuts.

"While we'll certify the budget next month, I think that we will definitely be back to the table later this summer, once the federal government and Congress passes the budget reconciliation bill," Nixon said.

Puerto Rico's restructured general obligation bonds are paid from allocations made in the general fund.

Gov. Jenniffer Gonz?lez Col?n said she is talking almost daily with the board about federal funds, the budget, and other issues.

The governor said the "silver lining" to Trump's tariffs is that they are an opportunity to bring back pharmaceutical manufacturing to Puerto Rico. A greater proportion of this was based on the island until about 20 years ago.

Gonz?lez Col?n said the territory's top priority must be improving the electrical grid. Electrical generation capacity is also inadequate for the coming summer season.

Puerto Rico's government has put out a request for proposals for an additional 800 megawatt of temporary generation capacity, Gonz?lez Col?n said. The government is also trying to have 1500 MW of permanent generating capacity.

Mujica said it was imperative that the island spend Federal Emergency Management Agency obligated funds in the aftermath of the 2017 Hurricane Maria for the electrical system as quickly as possible. Just $4 billion of the $17 billion made available has been spent and he said that was unacceptable.