Strong similarities between DC, Puerto Rican fiscal boards

by | Jul 19, 2016 | Congress, Headlines | Comments

On June 30, President Obama signed the bipartisan Puerto Rico Oversight, Management, and Economic Stability act, or PROMESA.  The bill attempts to address Puerto Rico’s dire economic situation, aiming to mitigate the effects of possible defaults by the island’s government.  The bill, championed by Speaker of the House Paul Ryan, gives Puerto Rico bankruptcy protection without formally entering Chapter 9.

While many Puerto Ricans are grateful for the assistance of the federal government, other provisions of PROMESA have also stirred widespread controversy.  The legislation would also establish a 7 member financial control board that would make economic decisions for the island, capable of overruling Puerto Rico’s government and constitution.  While the governor and representative to Congress believe the board is the best way to stabilize the island’s economy, many other legislators condemned the fiscal board as a colonial mechanism.

Central the the criticism of the board is that the seven member panel would have unrestrained economic power, and could make far-reaching economic decisions without the consent of legislators or the Puerto Rican people.  Senator Bob Menendez, former chairman of the Senate Foreign Relations Committee, speculated that the board could potentially use its power to defund social services and lower the minimum wage, prospects that deeply concern progressives.  Additionally, many are disturbed by the fact that only one of the seven board members is required to reside in Puerto Rico.  Presidential candidate Bernie Sanders also spoke against PROMESA, echoing many similar and claiming that the legislation made the mainland United States into “colonial masters”.  Sander’s opponent, presumptive democratic nominee Hillary Clinton, supported PROMESA.

PROMESA is strikingly similar to the financial control board that exercised control over Washington DC’s finances from 1995-2001.  In the midst of economic troubles for the city, congress employed the same strategies currently being leveraged to solve the crisis in Puerto Rico.  Like the PROMESA board, DC’s financial control board exercised complete control over the city’s finances, and allowed non-residents to occupy seats.  It also allowed the board to override the city’s mayor and council, and required its CFO be confirmed by congress.  These requirements closely mirrored the current stipulations of PROMESA, fueling criticism that the board was of a colonial nature.

While DC officials now acknowledge that the board buoyed economic growth, they also found the loss of political independence humiliating.  “It motivates me to never have to want to have to go through that again”, said former mayor of Washington DC, Vincent Gary.  Marion Barry, a member of the city council, also admits that in hindsight, the fiscal control board solved many of the capital’s economic problems.  The opinion is a dramatic shift from when the board was first proposed– then, Barry described the legislation as a “rape of democracy”.

Whether skeptical Puerto Rican officials will have a change of heart remains to be seen, but the perception of PROMESA may change depending on the decisions it makes with Puerto Rico’s economy.  Adding to the skepticism is the fact that many of PROMESA’s strongest supporters have ties to Koch brother companies— entities that would likely benefit from the bill.

Although both Washington DC and Puerto Rico have been politically limited by the federal government, the District of Columbia has reaped the benefits of serving as the nation’s capital, and has votes in the electoral college. Perhaps this has made the city less resistant to federal control.