The newspaper’s front-page headline reads: “Exit Route for the Fiscal Board Set for 2028.” This refers to an interview published on December 1 with the outgoing director of the Financial Advisory Authority and Fiscal Agency (AAFAF, in Spanish), Omar Marrero, who claimed that if Governor Jenniffer González Colón’s team carries on with his work plan, the Fiscal Control Board could leave Puerto Rico in three years.
Four days later, the Board’s executive director, Robert Mujica, made it clear that this was not true. He warned that several things must happen before they leave, such as the approval of four balanced budgets without the Board’s intervention, the approval of fiscal plans covering at least five years, and a legal prohibition on passing legislative measures that entail spending outside the approved budget.
The U.S. government imposed the Board on Puerto Rico in 2016 through the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) to control the island’s fiscal management and restore access to financial markets.
The current Fiscal Plan, which is the instrument through which the Board imposes the fiscal and structural “reforms” it wishes to promote on the government, identifies 50 actions that must occur for this federally created entity to leave Puerto Rico. These 50 actions are the fiscal entity’s interpretation of four brief paragraphs in section 209 of PROMESA, which require, to end the Board, four consecutive balanced budgets and access to capital markets at reasonable interest rates.
However, the Puerto Rican government has a different perspective on what needs to happen for the Board to leave.
“We believe we have complied [with PROMESA]. If you look at the Board, they extend and expand those requirements, which is our philosophical difference. We have communicated this, and that is the situation the incoming administration will face, where it not only has to legally comply with PROMESA’s requirements but also make a political argument or present its case at the congressional level,” Marrero said in an interview with the Centro de Periodismo Investigativo (CPI) before leaving his position at AAFAF.
In Congress, and specifically in the House Natural Resources Committee, which has jurisdiction over Puerto Rico and PROMESA, achieving changes to the law that facilitates the Board’s exit is “very unlikely” under Republican control, according to New York Democratic Congresswoman Nydia Velázquez. The lobbying industry’s influence over PROMESA in Puerto Rico, New York, and Washington, D.C. has repeatedly delayed and opposed efforts to reform the law,” she told the CPI.
Republican Congressman Bruce Westerman, who chairs the House Natural Resources Committee, did not respond to the CPI’s questions about the Board’s future.
Far from paving its exit, in eight years, the Board has built an operation with more than 80 employees on payroll — 99% of whom are Puerto Rican, according to the entity — and hundreds of consultants and lawyers under contract at a cost exceeding $30 million annually, half of its annual budget. It has working groups ranging from municipal affairs and “fiscal transformation” to infrastructure, revenue and “legislative review.”
Its website has a job section, recruiting positions such as “Senior Fiscal Transformation Associate” and “Senior Budget Management Associate.” Since 2020, it has had a research and public policy department that organizes webinars on topics like public service reform and Puerto Rico’s demographic crisis. In the summer of 2023, it paid more than $720,000 in public funds for a survey of health plan companies to obtain data on the number of health professionals on the island.
After five years and six months in charge of the relationship between the government and the Board, Marrero described the fiscal body as “a form of leviathan,” a monster that took on a life of its own, aiming to reform everything in the government and exercising “micromanagement” in various ways.
“I think Robert Mujica is clear that he is in the last phase of PROMESA. I think he has communicated it clearly. My concern is more about the Fiscal Plan [approved under Mujica’s direction in June 2024 and how it works, which is basically the foundation and the charter, with requirements that go far beyond what PROMESA establishes and what seems more like a [work of] creativity by consultants to move the finish line,” he said before leaving the government to return to his career as a corporate lawyer.
A Steeper Path for the Board’s Exit
Although the Board claims it has stabilized Puerto Rico’s finances, it stated in written declarations sent to the CPI that the government still needs to “accept and institute firm long-term fiscal management practices.”
“Fulfilling PROMESA’s mandate is not simply checking the box of consecutive balanced budgets. The government’s balanced budgets indicate fiscal responsibility. The requirements to achieve fiscal responsibility are in the hands of the government. Discipline, priorities, and planning are the key elements for complying with PROMESA’s mandate and for the Oversight Board to cease its duties,” the Board added.
The current Fiscal Plan, approved in the summer of 2024, discusses a new Enterprise Resource Planning (ERP) system that will connect the financial management of the entire government: payroll payment and human resources management, procurement processes, and each agency’s budgets. It is one of the 50 “actions needed to achieve fiscal responsibility and adequate access to credit markets” under the Fiscal Plan, although it has been part of the Board’s requirements since 2017.
In response to the CPI’s questions, Mujica explained that, although the ERP’s implementation is not a requirement of PROMESA’s Section 209, it is “an ingredient” of what needs to happen to comply with the federal law, part of the financial management agenda that the Puerto Rican government must adopt.
“You need to have an accounting system that actually works, which the government doesn’t have. Financial markets look for that. And the reason the Board exists is that there wasn’t an accounting system that actually functioned, and it resulted in bankruptcy. So, the system needs to be put in place,” said the Board’s director.
In addition to the ERP, the list of “actions needed” includes implementing new rules for government accounting (with the Board’s approval), establishing a new office dedicated exclusively to managing federal funds, and publishing audited financial statements on or before six months after the end of each fiscal year. The government took more than a year and a half to publish the audited statements for fiscal year 2022 and has yet to publish those for fiscal year 2023, which should have been issued over a year ago to meet the Board’s demands.
A new capital plan covering 10 years and including a financing plan is also pending. The way funds are transferred to municipalities must change to a system based on the performance of the municipalities, according to the goals and conditions imposed. According to the Fiscal Plan, the Department of Education’s budget must be transformed into a student-based one, which will require “significant time and resources over several years to plan, pilot, and implement,” according to the Fiscal Plan.
In the economic realm, the Board requires four reforms: one of the education system, another of the labor sector, a tax reform, and an energy reform. It also requires a new integrated economic development plan, which the Board has said it will create alongside the government and other stakeholders.
Additionally, the government must prepare the four balanced budgets required by PROMESA without the Board’s intervention (the current budget and the previous ones came from the fiscal entity, except for fiscal year 2022) and comply with modified accrual accounting standards, or “modified accrual basis,” in which the government records its revenues when “they become available and can be accounted for,” and expenses “when incurred,” as defined by PROMESA. The Fiscal Plan requires legislation to limit the practice of approving legislative measures that add unforeseen expenses to the budget.
In November 2016, as part of the first Fiscal Plan it imposed, the Board established a principle of exiting Puerto Rico within 10 years, provided the government met the requirements of PROMESA’s Section 209. By comparison, Washington D.C.’s Fiscal Control Board operated for six years, while Detroit’s emergency manager remained in place for just under two years.
A report by the Citizen Commission for the Audit of Public Credit published in January 2025 assures that the Board, which will turn eight in September, will not leave Puerto Rico until at least 2030.
Complicated Return to Financial Markets
Another of PROMESA’s requirements to end the Board is Puerto Rico’s return to capital markets, where debt is issued. According to the Fiscal Plan, the Board concludes that Puerto Rico must regain its investment grade from the major Wall Street credit rating agencies. These institutions grant investment grade when they conclude there is little risk of default for bondholders, such as not receiving debt service payments as agreed. This is determined through a credit rating system, in which a rating higher than Baa3 from Moody’s, or BBB- in the case of Standard & Poor’s (S&P) and Fitch Ratings, is considered investment grade. A lower rating is considered speculative or junk, with a high risk of default.
Ten years ago, in 2014, Puerto Rico’s debt lost its investment grade and was rated as junk until it entered the bankruptcy process under PROMESA. Since then, the institutions have suspended Puerto Rico’s credit evaluation.
According to Matt Fabian, a financial analyst at Municipal Market Analytics, today, few investors in the municipal bond market see Puerto Rico’s debt as a viable option.
“Most municipal bonds investors are not thinking about Puerto Rico at all. So there are the investors who own [Puerto Rico bonds], but there are very few people beyond that that are thinking about Puerto Rico or covering it or wondering what’s their security. In order to get back to where the Commonwealth was, let’s say 20 years ago with respect to market access, there would need to be a full reboot of [Puerto Rico’s] marketing to Wall Street,” Fabian said in an interview with the CPI.
Moreover, far from contemplating any debt transaction to finance infrastructure and capital improvement projects, as was done before the bankruptcy, and managing Puerto Rico’s return to financial markets, Fabian said the Board and the government are betting on federal funds for this.
“The Board hasn’t geared the Commonwealth’s financial plan toward restoring capital market access in a scalable way because they feel they don’t need it. They’re going to be relying on federal funds instead. That has its own issues, obviously, that have gotten even more complicated,” Fabian said, referring to the new Donald Trump administration and its intention to review federal government spending, which could affect allocations made to Puerto Rico.
For Fabian, the Puerto Rican government, in theory, could borrow right now, but it would be from investors who, in search of higher returns, tolerate more risk in their investments than the traditional bondholder.
In another section of the Fiscal Plan, the Board explains that it will follow the same methodology used by credit rating agencies to evaluate Puerto Rico’s fiscal performance as part of its process to “complete the Board’s mandate under PROMESA.”
In addition to having an investment grade, Marrero said the Board also requires new debt transactions to meet the requirement of returning to the market.
But to comply with PROMESA’s Section 209, Marrero assured that the government only needs four consecutive audited statements certifying that during those years, revenues exceeded expenses and stressed that no debt transaction in capital markets is needed for the Board to leave. The Board did not respond to the CPI if this is a requirement to fulfill its mandate under PROMESA.
“If I don’t need it right now, because much of my capital work will be financed with federal reconstruction funds, don’t come and tell me now that because I have these federal funds and I don’t have to borrow, it means I don’t have access [to the markets]. That doesn’t make any freaking sense unless you want to stay,” Marrero said.
Many Measures Behind Schedule or Not Initiated
Many of the measures the Board has defined as requirements before leaving are delayed or not underway on the government’s side.
The project required by the Board to centralize financial, procurement, and human resources systems, called ERP, began in 2018 and has barely been implemented, despite a disbursement of between $80 million and $100 million in public funds, according to outgoing Treasury Secretary Nelson Pérez during a transition hearing in December.
The system’s implementation has taken more time and resources than projected, said Pérez, admitting that “there is room for improvement” on the part of the project’s implementer, consulting firm Deloitte. In December, the Board approved a new amendment to Deloitte’s contract for the ERP implementation, now totaling $73 million and extending the work schedule until at least April 2026.
Among the project’s challenges, Pérez said that Treasury resources working on the ERP have other duties, including issuing audited financial statements and civil service reform (CSR), which includes evaluating government positions, redesigning organizational structures in agencies, salary adjustments, and recruitment. In 2023, the Board and the government celebrated that, after two years, they completed the first phase of this reform, impacting more than 20,000 public servants.
However, a second phase of the CSR, which would cover about 22,500 government employees, remains pending, as revealed in the transition hearings last December. The reform is also unfinished in the Department of Education, which works individually and whose transformation plan was supposed to be completed by the end of 2024.
In November 2020, during a public meeting, the Board discussed for the first time what needed to happen to end its oversight in Puerto Rico. At that time, then-director Natalie Jaresko identified around 30 requirements related to PROMESA’s Section 209. Although the list of requirements has changed over the nearly eight years the Board has been in place, some initiatives like the ERP, timely publication of audited statements, and implementation of modified accounting standards have been on the list since the first version of the Fiscal Plan. Others no longer appear on the list, such as the creation of a Chief Financial Officer’s Office.
Fiscal Board’s Tight Control Raises Concerns
Former Senator Juan Zaragoza, who served as chairman of the Treasury, Federal Affairs, and Fiscal Oversight Board Committee and was a member of the governor’s transition committee, recalled receiving a letter from the Board objecting to budget items as small as $1,500 — something he viewed as “micromanagement.”
“And worst of all, which I told [director] Mujica the other day, over time, instead of phasing out, [the Board] is phasing in. They have taken on a [high] level of micromanagement,” he said.
When questioned by the CPI about this matter, Mujica first rejected that the entity micromanages the government and then recalled that during the past fiscal year, the Legislature approved more than $1 billion in expenses not contemplated in the budget, prompting the Board’s intervention.
“Last year, we agreed with the Governor on a budget we thought was balanced and responsible. And then the Legislature, including the person you just mentioned [Juan Zaragoza], voted for more than $1 billion in unbudgeted expenses after agreeing on a budget. So, I don’t think that’s micromanagement. It’s called prudent and responsible financial management,” Mujica said.
It is not the first time the government has denounced micromanagement by the Board. Former Governor Ricardo Rosselló Nevares raised it during a congressional hearing in May 2019. Marrero also did it in another congressional hearing in June 2020, as did former Governor Pedro Pierluisi at the public meeting where the current Fiscal Plan was approved.
Photo by Gabriel López Albarrán | Centro de Periodismo Investigativo
“To reprogram $1,500 in the budget, you have to make a statement that first goes through the OGP and then has to go to the Board. Sometimes it takes a month to move the money to buy paper because now you want to buy pencils,” said the outgoing director of the Office of Management and Budget (OGP, in Spanish), Juan Carlos Blanco, at the transition hearing.
This is why, according to Marrero, it is time for the elected government to regain some level of control over government finances.
“It doesn’t have to be sudden, but since there is no need for so many controls at the central government level, I think the extreme granularity of having to go to the Board, and the full Board, to reprogram $1,000 or $2,000 [from the budget] could be avoided,” he said.
Marrero considered it a form of “micromanagement” that the government must submit public employee classification plans and economic development and public housing projects financed with private and federal funds for Board approval. The Tourism Company, he said, has been waiting for the Board’s approval of its employee classification plan since summer.
Governor González Colón appointed her campaign director, lawyer and lobbyist Francisco Domenech, as the new director of AAFAF.
The CPI requested an interview with Domenech to learn about his plans at the agency that plays the main coordination role with the Board, but it was not granted.
Domenech co-founded Politank, a lobbying firm that, during the fiscal crisis that led to PROMESA, represented groups of Puerto Rican government bondholders like GoldenTree Asset Management, a vulture fund leading the fight against the Puerto Rico Electric Power Authority (AEE, in Spanish) in its bankruptcy case. The case remains unresolved amid a highly contentious process that threatens to significantly increase the electricity bill to cover the public corporation’s debt payment.
Congressional Silence on Fiscal Board’s Future
In a scenario where the Board and the government have different interpretations of what PROMESA demands, who can really decide to remove the Board from Puerto Rico? Under what conditions would this process occur?
The answer lies in Washington, D.C., where little or nothing has been done to shed light on the matter. Considering political changes — a new Donald Trump administration — who decides today about the Board?
In 2022, shortly before taking control of the Natural Resources Committee, Arkansas Republican Congressman Bruce Westerman said in response to questions about the possibility of legislation to remove the fiscal control entity that “the work must be completed before dissolving the Board.”
Two years later, nothing has happened on this front. Additionally, Westerman has also conditioned the discussion of Puerto Rico’s political status on the Board fulfilling its mandate.
Chairman Westerman recently expressed that fiscal stability should be Puerto Rico’s top priority, signaling that he wouldn’t support amending PROMESA anytime soon,” Congresswoman Nydia Velázquez told the CPI.
Foto provided
She said the Natural Resources Committee, of which she is a member, has never discussed or interpreted the scope of PROMESA’s Section 209.
In January 2023, the Committee approved a work plan that included a section on Puerto Rico to oversee the implementation of PROMESA, the restructuring of public debt, and the Board’s actions. The proposed plan for this new term 2025-2026 has one sentence about Puerto Rico, under the “oversight of insular areas” section, to “continue overseeing the implementation” of PROMESA.
The Natural Resources Committee did not respond to the CPI’s questions about how it will oversee the Board, what actions it has taken to achieve this, and whether it has ever discussed PROMESA’s Section 209 and the process it establishes to eliminate the fiscal control entity.
In the case of the incoming Resident Commissioner, Pablo José Hernández, he was asked what action, if any, remained pending in the office he now occupies to advance the Board’s exit and what measures he will present in this regard.
Hernández responded evasively: “After almost a decade since PROMESA’s enactment, it is time to fully restore self-government and the island’s autonomy. The people of Puerto Rico expect their newly elected local representatives to fulfill their democratic duties by presenting balanced budgets and responsibly managing the Commonwealth’s finances on behalf of the Puerto Rican people.”
In 2022, Democratic Congressman Ritchie Torres introduced a bill to reduce the number of consecutive balanced budgets to two and eliminate the language about capital markets at reasonable prices. Among the bill’s signatories were Velázquez, then-Resident Commissioner Jenniffer González, and Democratic Congressmen Darren Soto and Raúl Grijalva. It was never brought to discussion or vote in the Committee.
“Democrats will sympathize with our argument that there is micromanagement, that public policy of the elected government is being replaced, to the point that they are stopping laws with almost unanimous support — this is not what was envisioned under PROMESA, it was an oversight board, not a control board. Unlike Republicans, who will sympathize with the argument that this government needs a trustee for the rest of its life,” Marrero said.
“Washington, at the end of the day, will say, ‘I gave you a tool, have you used it? Have you taken advantage of it? Have you done your job? Haven’t you?’ So, in that sense, to be able to say one day, ‘I’ve fulfilled it, it’s time to eliminate PROMESA,’ you have to convince all four corners of Congress,” he added.
