Puerto Rico Gov. Ricardo Rossello Nevares 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 island government employees.
The governor’s aides say the bonuses are a longstanding tradition and part of the law, and were planned for in the budget approved last summer.
But that budget came well before Hurricanes Irma and Maria slammed into Puerto Rico, leaving much of the territory in ruin and leaving 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, called the payments “imprudent” and said the hurricanes should have forced the governor to rethink his decisions.
And the payments could dent Mr. Rossello Nevares’ efforts to get Capitol Hill to pony up for the recovery, where the $94 billion price tag the island has set is already meeting with shock.
“Puerto Rico has demonstrated time and time again that its government is incapable of responsibly handling its finances. This is yet another such instance,” Rep. Tom McClintock, who sits on the House committee with oversight over Puerto Rico, told The Washington Times in a statement after the bonuses were revealed.
The bonuses, which analysts said are not uncommon in Latin America, date back to the 1970s in Puerto Rico. But they’ve been controversial in recent years as the island has struggled with debt. The payments in 2015, of about $120 million, sparked a fierce debate.
This year the payments will total $113 million, the government told Bloomberg News. Some 250,000 people get bonuses, with current workers averaging $600 bonus and retirees getting about $200, Bloomberg reported.
For the majority of government employees who make between $20,000 and $40,000 it’s an important boost, said Carlos Mercader, who leads Puerto Rico’s office in Washington, D.C. He said the governor, in making the payments, is following the law.
And he said members of Congress who are pondering the territory’s massive relief request should be aware of how much the governor has already done to control the budget, 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. Mercader 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. Mercader countered that the board itself this year approved both 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’s probably nothing illegal about the payments. The board imposed certain liquidity requirements on the territorial government, and they 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.
Mr. McClintock said if Congress does end up approving a relief package, the money shouldn’t go to the island government itself, 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 House Natural Resources Committee Chairman Rob Bishop 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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