A team of U.S. officials is being dispatched to Puerto Rico to help the island better manage its almost decade-long economic crisis.
Officials from the Department of Education, the Department of Health and Human Services, the Department of Housing and Urban Development, and the Environmental Protection Agency will participate, according to Katherine Vargas, a White House spokeswoman.
Puerto Rico debt is having its worst year since at least 1999, as a shrinking economy strains the island’s finances. The territory and its agencies face $70 billion in public debt and a 13.9 percent unemployment rate, higher than any U.S. state. All three major rating companies grade the island’s bonds one step above junk, with a negative outlook.
The federal team was created out of a presidential task force that has worked with Puerto Rican authorities since 2009 on fiscal management and economic development, including energy and air-travel projects.
“The team will offer strategic advice to assist Puerto Rico in promoting its economic development and maximizing the impact of existing federal funds flowing to the island,” Vargas said. “These efforts should not be viewed as federal intervention.”
The decision to send officials from President Barack Obama’s administration follows speculation that the U.S. would bail out the island. Puerto Rico’s $29 billion total budget for this fiscal year relies on about $6.7 billion of federal funds. The group will advise the Puerto Rican government on how to maximize federal funds to help the struggling island’s economic outlook, the official said.
“This support provides additional expertise so that our team best maximizes the resources we have to improve the economy for all Puerto Rican families,” Ingrid Vila, Chief of Staff to Puerto Rico Governor Alejandro García Padilla, said in a statement. “Let me repeat the reassurances of the White House and the García Padilla Administration: there is no federal takeover of Puerto Rico.”
Mary Miller, the U.S. Treasury Department’s undersecretary for domestic finance, said at the Bloomberg Link State & Municipal Finance Conference in New York this month that there is no “deep federal assistance right around the corner” for Puerto Rico. The U.S. government will give “any assistance we can on fiscal management” within the confines of current federal authority, she said.
Puerto Rican officials vowed seven years ago to fix its finances after posting a $740 million budget deficit. Yet the commonwealth and its agencies have more than doubled borrowing since 2004, aided by Wall Street banks selling Puerto Rican bonds to money managers and individuals.
Even as the island’s population shrank and the economy contracted 16 percent over the past nine years, the government kept selling enough bonds to saddle each man, woman and child with $19,000 in debt.
The island’s bonds are held by more than three quarters of U.S. mutual funds that invest in municipal bonds, according to Morningstar Inc. in Chicago.
The territory’s debt, which is tax-exempt nationwide, has lost about 16 percent this year, more than seven times the decline of the municipal market as a whole, Standard & Poor’s data show.
While revenue collections are above budget, the economy is projected to shrink 0.8 percent in fiscal 2014, according to Puerto Rico’s Planning Board, which calculates economic growth.
The Associated Press reported on the advisory team earlier.