The Subcommittee on Insular and Indian Affairs of the US. House of Representatives Committee on Natural Resources held a hearing today to assess the progress made by the Financial Oversight and Management Board (FOMB) since the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) established it in 2016.
The board was able to restructure debt and reduce it, but attendees pointed out that the progress has been slow and that the process has created some hardship. Subcommittee Chairman Jeff Hurd (R-CO) congratulated the government of Puerto Rico for making progress in fiscal responsibility and collaboration with the FOMB. Governor Gonzalez-Colon has signed the first balanced budget of the four required to dissolve the FOMB.
The Subcommittee’s lead Democrat, Rep. Teresa Leger Fernandez (D-NM), acknowledged the progress made by the FOMB, but also said, “We must recognize that the people of Puerto Rico continue to face financial hardship.” She mentioned the higher poverty rate and the fact that Puerto Rico residents pay 60% more for electric power while also coping with regular blackouts. “Puerto Ricans deserve affordable electricity and a reliable electric system.”
Background
A background memo provided by the committee lists the key points:
KEY MESSAGES
- The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) is succeeding in reducing the Commonwealth of Puerto Rico’s debt, but sustained oversight is still needed to ensure long-term economic recovery.
- The passage of a balanced budget in June 2025 was a major milestone for Puerto Rico. However, Puerto Rico must deliver three more consecutive balanced budgets and meet additional statutory benchmarks before the Financial Oversight and Management Board (FOMB) can conclude its mandate.
- The unresolved Puerto Rico Electric Power Authority (PREPA) debt restructuring remains a major obstacle to Puerto Rico’s fiscal recovery and poses financial and political risks should it not come to an acceptable resolution.
- Although Puerto Rico’s government has made some recent progress, the U.S. Government Accountability Office (GAO) has identified persistent transparency and capacity shortfalls.
- Congress must continue exercising oversight to ensure that Puerto Rico implements effective internal controls, produces timely audits, and institutionalizes reforms.
Following this overview, the memo offers a history of Puerto Rico’s financial collapse. The government got in the habit of using debt to meet basic expenses, they explain, and in 2016 then-Governor Alejandro García Padilla declared the debt “not payable.” The territorial government defaulted on many of its obligations and would have declared bankruptcy had that been an option.
“The Commonwealth faced over $118 billion in liabilities, which included more than $70 billion in public debt and $40 billion in unfunded pension obligations,” the report sums it up. “Underlying the fiscal collapse were longstanding issues, including chronically low labor force participation, high outmigration, underperforming government institutions, structural deficits, and a declining industrial base.” Congress, they conclude, had to act ubiquitous response to the fiscal crisis, and PROMESA was the action they took.
The report then recognizes that the FOMB had mandates in addition to restructuring the debt. They were supposed to support the territorial government in reorganizing some governmental issues, including heavy reliance on government rather than private sector jobs, increasing workforce participation, and solving the energy problems that plague the territory. Little progress has been made in these areas. “Outmigration, an aging population, and a fragile electric grid remain serious long-term risks to economic stability,” the report acknowledges.
PREPA
One of the major topics of the hearing was the remaining debt Puerto Rico is facing: billions of dollars owed to shareholders in the Island’s electric company, PREPA. Speakers complained that the shareholders — many of whom bought greatly discounted stock after the crisis, fully aware of the risks — insist on having full payment of the debt with interest. This, speakers agreed, is unrealistic for Puerto Rico. With nearly half of the residents of the Island living under the poverty line, PREPA’s customers simply can’t pay more than the high rates they already pay.
Rep. Nydia Velzaquez (D-NY) pointed out that the rates would have to be raised even further for 50 years. Rep. Alexandria Ocasio-Cortez(D-NY) entered documents into the record showing the strategic “vulture capitalism” nature of the investments made by the shareholders in question. Rep. Ritchie Torres (D-NY) suggested that a push to end the Board could facilitate “a back-room deal” favoring the vulture investors.
The board’s Executive Director Robert Mujica, following some strong language about the vulture investors, said that he couldn’t speak to their motivation, but that he was confident of a resolution, whether through mediation or by a court order. He also said that the FOMB is working with the territorial government to try to solve the problems with the electrical grid.
Going forward
Michelle Sager, a director of the GAO, said that Puerto Rico’s financial condition has improved, but that the territory needs to continue focusing on financial management. She mentioned at one point that she believes Puerto Rico is showing “a culture change” toward greater responsibility and transparency which bodes well for Puerto Rico’s future financial stability.
Mujica agreed, emphasizing his intention to make sure that “the bankruptcy in Puerto Rico never happens again.”
Puerto Rico’s Resident Commissioner, Rep. Hernandez (D-PR) objected. “This hearing feels like a celebration of PROMESA,” he said. “PROMESA is a tragedy. It is a tragedy for Puerto Rico, it is a tragedy for the United States and for the values that this nation is supposed to stand for.” He expressed his belief that the Board “has imposed austerity and enriched consultants” and asked for an accounting of the amount of money the Board had spent and the length of time .
Mujica agreed that the Board had lasted much longer than intended, but said that one reason was the recalcitrance of the territorial government. He said that they had spent $1.4 billion for the restructuring, but also that they had saved Puerto Rico $60 billion. Mujica also predicted that the Board could be finished in four additional years.
“Nine years. Zero balanced budgets. That is a big failure,” responded Hernandez.
Following some discussion on economic development, Westerman pointed out that companies can’t be expected to invest in factories in a place without reliable energy. A solution to the energy problem should therefore be a priority, he said.
Watch the hearing in its entirety in the video at the top of this post.
