Sunday, August 18, 2019

Federal Disaster Aid Not Around the Corner?

By on August 1, 2019

The Rosselló Administration’s Implosion Has Set in Motion Discussion in the Federal Realm to Rescind Disaster Funds

Editor’s note: The following was first published in print on the Aug. 2, 2019, edition of Caribbean Business.

As the drama over the succession of Gov. Ricardo Rosselló unfolds—amid rumors of pending arrests tied to further acts of malfeasance—Puerto Rico’s government is collapsing like a house of cards. By the time the last joker hits the deck, no one seems to know which vacant cabinet posts will be in place to deal with a Puerto Rico Oversight, Management & Economic Stability Act (Promesa) board that essentially manages all of the island’s financial affairs. The big question looming on the federal horizon as the local carnage of governance unfolds—“will the crisis of confidence claim federal relief funds as collateral damage?” 

So severe has been the injury inflicted to the confidence in Puerto Rico’s ability to govern that some members of the U.S. Congress are discussing the use of rescission to divert funds earmarked for Puerto Rico’s disaster recovery to be pulled back and rerouted. 

“There’s a lot of talk right now—very privately in U.S. Congress—among members on both sides of the aisle of Congress to use rescission for all of the unspent money that was allocated for Puerto Rico; that is a pretty big deal,” one Capitol source with ties to the GOP told Caribbean Business on the condition of anonymity. 

Rescission is a budget process of the United States—the cancellation of a budget authority previously provided by U.S. Congress—whereby the president may propose to Congress that funds be rescinded. According to a report in the Wall Street Journal: “Congress may always—and sometimes does—cancel appropriations that it has made, but the Congressional Budget & Impoundment Control Act of 1974 provides for special rescission legislation that is considered under expedited procedures, making it easier for a simple majority of each chamber of Congress to revisit spending decisions.

The executive and legislative branches haven’t rescinded appropriations in this manner in nearly two decades, but the Trump administration recently sent rescission proposals to Congress. The administration has proposed cutting only 0.4 percent of the federal budget with its first rescissions package. Although the idea is not without merit—after all the federal debt is reaching crisis proportions—using the process in an overtly political manner could, in the long run, hamper the ability of Congress to make future bipartisan deals.” 

The GOP source went on to explain that the idea is to use rescission “to do a different appropriation to direct the administration to use a very specific entry in the Promesa law, where OMB [Office of Management & Budget] will write a disbursement directive. So, OMB will say to all the agencies that any money destined for Puerto Rico will have to be sent to” the Financial Oversight & Management Board. 

Rescind and Conquer 

Two sources with knowledge of the initiative told Caribbean Business that several members of Congress are suggesting privately to the legislative affairs office at the White House that rescission could be just the mechanism that the federal government needs to reroute funds so the Oboard has the final say about how the funds are used. 

—Read the rest of this story in the Aug. 2, 2019, print edition of Caribbean Business.