Puerto Rico Gov. Ricardo Rossello last month asked federal taxpayers to shell out $94 billion to pay for the territory’s recovery from Hurricane Maria — then turned around and paid out about $100 million in Christmas bonuses to government employees on the island.
The governor’s aides say the bonuses were part of a long-standing tradition and were included in the budget approved over the summer.
But that budget came well before Hurricanes Irma and Maria slammed into Puerto Rico, leaving much of the territory in ruin and the government begging for federal assistance.
The island’s financial oversight board, created by Congress as part of a deal to bail the government out of a potential debt default last year, had urged the governor not to make the payments, saying the hurricanes should have forced a rethink of the budget. The payments also could dent Mr. Rossello’s efforts to get Capitol Hill to pony up for the recovery.
“Puerto Rico has demonstrated time and time again that its government is incapable of responsibly handling its finances. This is yet another such instance,” said Rep. Tom McClintock, California Republican and a member of the House committee with oversight on Puerto Rico.
The bonuses have been controversial since Puerto Rico’s debt struggles began, with the payments in 2015 and 2016 also drawing scrutiny. The 2015 payment was about $120 million, while this year’s payment was $113 million, the government told Bloomberg News.
Some 250,000 people get bonuses, with current workers averaging $600 bonuses and retirees getting about $200, Bloomberg reported. For the majority of government employees who make $20,000 to $40,000, it’s an important boost, said Carlos Mentales, who leads Puerto Rico’s office in Washington.
He said payment of the provisions is written into law and the governor was following through on that.
Mr. Mentales said members of Congress who are pondering the territory’s massive relief request should be aware of all the moves already made by the governor, such as a 20 percent reduction in political appointees in the government and a 15 percent cut in the operating budget.
“I would challenge whoever argues that the government hasn’t been austere in this whole process. The government has been saving money from the get-go,” Mr. Mentales said.
The bonuses raised questions at the oversight board, which fired off a letter Nov. 27 saying the governor should have talked with the board before making the payments and called the bonuses imprudent.
The board was particularly critical of the payments to retirees, who account for more than a third of the money being doled out.
“While the Oversight Board shares in your desire to recognize public employees who have gone above and beyond in aiding recovery efforts across the island, to do so in a way that increases the liquidity strain on the commonwealth at this time puts the public at risk and demonstrates a lack of fiscal discipline,” the board said in its letter, signed by Chairman Jose B. Carrion.
Mr. Mentales countered that the board this year approved the 10-year fiscal plan and the yearly budget, both of which included the bonuses.
“The notion that the board had no clue about it or it was done without the purview of the board is not true. The board knew about it. It was something that was in the budget, and they had approved the budget,” he said.
Andrew G. Biggs, resident scholar at the American Enterprise Institute and a member of the oversight board, said there is probably nothing illegal about the payments. The board imposed certain liquidity requirements on the territorial government, and it met them.
But he said it would have been a sign of fiscal health if the government had changed its mind and withheld the bonuses.
“My view is that in extremely difficult times you have to make some changes to how you do bonuses, and this strikes me as an area where change is appropriate,” he said.
Mr. Biggs said Puerto Rico’s last debt payment was a year and a half ago and paying more than $90 million in bonuses at a time when the debt payments have been suspended sends the wrong signal to the very people the island is asking for help.
“I want to see federal assistance to Puerto Rico, especially in the short term to get the economy going again. My concern is the Christmas bonus may hurt their chances with Congress,” Mr. Biggs said.
Mr. McClintock said if Congress does end up approving a relief package, the money shouldn’t go to the island government, which he said has proved incapable of good fiscal management.
“I believe that any disaster funding should go to a federally appointed receiver who would disburse it in a responsible way instead of being handed directly to the local government that simply can’t help itself,” he said.
Whether that will happen remains to be seen, but for some key players the bonus issue is apparently too hot to handle.
The office of Jennifer Gonzalez-Colon, Puerto Rico’s nonvoting member of Congress, didn’t respond to five emails or phone calls seeking comment since Thursday.
The office of House Natural Resources Committee Chairman Rob Bishop, Utah Republican, also declined to comment on the bonuses, as did Mr. Carrion, chairman of the oversight board, whose spokesperson said the letter sent last week spoke for itself.
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