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/ Wednesday, March 9, 2022
The Center for a New Economy’s Take on 2022
Think tank experts assess the pitfalls of the FOMB’s Plan of Adjustment
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Zoe Landi Fontana, The Weekly Journal
arely three months in, and 2022 has brought plenty of new developments on both the local and global stages. The Financial Oversight and Management Board’s new Plan of Adjustment (POA), certified on Jan. 27 of this year, is one such development. The Center for a New Economy, Puerto Rico’s foremost policy think tank, evaluated the highlights of the POA and gave its assessment of the plan’s feasibility – which was not always in line with the FOMB’s nor the current administration’s. “[We] shouldn’t make the mistake of equating
a set of quite disparate and perhaps marginally effective structural reforms with an economic strategy. Simply stated, the structural reforms favored by the FOMB and set forth in the Fiscal Plan are second-order issues and will not generate the economic growth Puerto Rico requires, both for increasing the living standards of its people and to pay off its restructured debt, unless they are embedded or framed within a larger economic strategy or vision,” warned Sergio Marxuach, Director for Public Policy at the CNE.
Debt Restructuring
The POA decreases the Puerto Rico government’s debt obligations by nearly 48%, but total debt relief may not be as high as the FOMB claims because it does not take into account potential recoveries made through payments on the Contingent Value Instruments (CVIs). The Plan of Adjustment reduced debt services from an annual average of $1.33 billion to $666 million. Additionally, it put into place multiple
measures to limit falling further into debt in the future based on the assumption that the island will not borrow for any reason over the next five years.
Medicaid
The CNE does not approve of the Centers for Medicare and Medicaid Services (CMS) interpretation of the Medicaid funding cap provision for Puerto Rico. The new interpretation, under Section 1108(g) of the Social Security Act, raised the allotted cap for FY2022 from $406 million to $2.943 billion. While the FOMB regards this new interpretation as a long-term solution to provide Medicaid funding to the island, the CNE does not agree, referring to the fact that the CMS letter is not a binding administrative order.
Pensions
The CNE found that the true cost of the retirement system this year will be $5.146 billion,
