On Wednesday, the United States Government Accountability Office (GAO) published the following report to congressional committees, titled “PUERTO RICO: Factors Contributing to the Debt Crisis and Potential Federal Actions to Address Them.”
According to the GAO’s Fast Facts section about this report, here are the three major takeaways:
- Puerto Rico has roughly $70 billion in outstanding debt, and since August 2015 has defaulted on over $1.5 billion in debt.
- One factor contributing to Puerto Rico’s debt levels is the Puerto Rico government’s persistent annual deficits, where expenses exceeded revenues. Puerto Rico’s government has borrowed money to finance its operations, rather than cutting spending, raising taxes, or both.
- We identified various potential federal actions that could help address factors contributing to the debt crisis. These include altering the tax-exempt status of Puerto Rico municipal debt, and applying federal investor protection laws to Puerto Rico.
The report’s site also included a HIGHLIGHTS section that placed direct blame on the Puerto Rican government over the years. It also featured this chart:In response the to report, House Committee on Natural Resources Chairman Rob Bishop (R-Utah) issued the following statement:
From highlighting the stifling debt, to identifying the systemic financial malpractice of the Puerto Rico government over the past half century, the GAO report reiterates why Congress passed PROMESA two years ago. The island will recover as leaders take to heart the seriousness of these problems. Reform is possible as the governor and legislature work alongside the Oversight Board to achieve structural and financial reformation. The people of Puerto Rico deserve as much. While I remain committed to ensure full disaster recovery and all steps necessary to long-term economic stability, the government of Puerto Rico must fulfill its responsibility to provide all requested information and commit to working with the Oversight Board on the path to economic recovery. The findings of the GAO report will help inform this process.
A House Committee on Natural Resources media release also stated this: “According to the report, financial mismanagement, inadequate internal controls, politically motivated policy decisions, inconsistent and politically motivated tax and revenue collection, excessive borrowing and prolonged economic contraction led to Puerto Rico’s persistent deficits.”
The GAO report also stated that “GAO is not making recommendations based on the federal actions identified because policymakers would need to consider challenges and tradeoffs related to implementation”