Post-Mortem on the Fiscal Control Board: “Make Puerto Rico Great Again”

The phrase “The show must go on” originated in 19th-century circuses, where performances continued despite setbacks. Similarly, Puerto Rico’s Fiscal Control Board (known locally as “la Junta”) is attempting to carry on its ‘show’ despite the removal of six of its seven members.

On Wednesday, August 6, a day after confirming the first five dismissals by President Donald Trump, the entity created by the federal PROMESA Act in 2016 announced that Andrew Biggs and John Nixon, the only two members remaining in their positions, would ensure continuity for the operations of the Oversight Board.” A week later, Trump also dismissed Biggs, leaving Nixon as the sole active member, which raises significant questions about the Board’s viability and authority.

Since the dismissals, the Board has approved several budget requests, including disbursements to municipalities for a housekeeping program for the elderly, pushed for changes to an employee classification plan at the Cardiovascular Center of Puerto Rico and the Caribbean, and raised questions about a newly signed law that separates the Police Bureau from the Department of Public Safety. It also updated its website, removing information about Arthur González, Betty Rosa, Juan Sabater, Luis Ubiñas, Cameron MacKenzie, and Biggs, the six ousted members. Two of them had been appointed by Trump during his first term in the White House.

“The operations of the Oversight Board continue following its mandate under PROMESA,” the entity told the Centro de Periodismo Investigativo (CPI). It added that it “expects the incorporation of new members before the certification of the next budget and fiscal plans” and that it “is firmly committed to continuing its work.”

The Board is undergoing a political earthquake — an unprecedented moment. For the first time, a president has removed members before their terms expired. Trump dismissed six, five of them at once, in an email sent on a Friday afternoon. He did so without consulting Governor Jenniffer González, which he is not required to do. Nor would he need to consult her when choosing replacements, although Gabriela Boffelli, director of the Puerto Rico Federal Affairs Administration in Washington, told news website Metro that the Trump administration has consulted them about the new appointments.

The reshaping of the Board represents a significant shift, with implications across multiple fronts, from the bankruptcy of the Puerto Rico Electric Power Authority (PREPA) and the reconstruction of the power grid to the daily functioning of the government.

According to the process established by PROMESA for the selection of new members, Republican Senator John Thune, as Senate Majority Leader, would recommend names for two vacancies. Republican Representative Mike Johnson, as Speaker of the House, would also recommend two candidates, although one of those seats is already occupied by Nixon. Additionally, Johnson must recommend a Puerto Rican, which is the minimum quota included in PROMESA.

On the Democratic side, House Minority Leader Hakeem Jeffries would have a vacancy to recommend. In the case of Senate Minority Leader, Democratic Senator Chuck Schumer would have the right to suggest names for a seat, following Biggs’ departure, who had been nominated last year by Senator Mitch McConnell when Republicans were in the minority.

Finally, Trump can directly fill one of the vacancies. This assumes that the rules are not changed, or that the president does not make appointments outside of Congress’s recommendations, in which case they would need Senate confirmation.

The new ideological balance of the Board would give an absolute majority to Trump’s appointments, something that has never happened in the nearly nine years it has been in effect.

MAGA Voices Join the Debate

Since PROMESA requires that early dismissals be for just cause, the Trump administration justified its move by citing excessive spending on lawyers and consultants, the failure of PREPA’s bankruptcy process, and a lack of investment in the energy system, according to White House statements.

Although the announcement was surprising, there were signs.

Justin Peterson, a former Board member appointed by Trump, called for the dismissal of its members in April. Peterson has been an advocate for PREPA bondholders who are in dispute with the Board over debt cuts that this entity is pushing in the bankruptcy case. He resigned from the Board in 2023 and has since criticized its management and spending on consultants and lawyers. These expenses are paid with money from the General Fund of the Government of Puerto Rico.

“By firing the Board, President Trump has taken the first steps to make Puerto Rico great again. His plan for U.S. energy dominance is crucial to this,” reads a column by Peterson published on August 10.

In his writing, Peterson proposes fully privatizing the energy system, betting on natural gas and nuclear energy, and putting the President’s Energy Dominance Council and the Federal Energy Department in charge of the process. He also says that the Puerto Rican government should pay PREPA bondholders from the General Fund and, once and for all, end PREPA’s bankruptcy process. Once this occurs, the Board should cease operations and return control to the Puerto Rican government, according to him.

Roger Stone, one of Trump’s closest political advisers, circulated Peterson’s column on his social media: “Donald Trump is liberating DC, and he will make Puerto Rico great again too. His former appointee to the Board overseeing the island’s finances [Peterson] makes a great case for how to go about it here.” 

Laura Loomer, a far-right political activist and influencer and leader within the pro-Trump Make America Great Again (MAGA) movement, also sent signals. After the hearing held by the House Subcommittee on Indigenous and Insular Affairs on July 16 about the Board’s operations, Loomer criticized the entity’s spending on staff salaries and consultants. The activist, close to the Trump administration, promised to “dig deeper” into the issue of Puerto Rico’s bankruptcy and the Board’s operation.

Hours before the news of Biggs’ dismissal broke, Loomer posted a message stating that “Puerto Rico’s bankruptcy is the next USAID 2.0 scandal,” a reference to the U.S. agency that assisted countries worldwide and that Trump eliminated this year.

Meanwhile, during the July congressional hearing, Congresswomen Nydia Velázquez and Alexandria Ocasio-Cortez pointed to GoldenTree Asset Management, a New York–based hedge fund that holds more than $1 billion in PREPA bonds and is leading the opposition to the Board’s debt adjustment plan. The congresswomen argued that the fund has endangered the well-being of Puerto Ricans by seeking to recover the full $12 billion PREPA debt.

The Board’s latest restructuring offer for PREPA proposed paying them around $2.6 billion.

“The gap is too far apart and is unaffordable for the people of Puerto Rico,”  said the Board’s executive director, Robert Mujica, in response to Ocasio-Cortez’s questions.

Trump’s changes to the Board come amid a deadlock in the bankruptcy process taking place in federal court. Fifty-six percent of PREPA bondholders oppose the plan presented by the Board and demand more money in exchange for an agreement to end this bankruptcy, the only one still pending.

On August 8, Judge Laura Taylor Swain, who oversees Puerto Rico’s bankruptcy cases in federal court, suspended the case’s schedule and asked the Board for a report by August 25 detailing the effects, if any, of recent events.

New Fortress Energy is also in the picture. The company, owned by billionaire Wes Edens, faces potential bankruptcy due to financial problems and has pinned its hopes on maintaining and growing the multimillion-dollar natural gas supply business in Puerto Rico.

Last July, the Board rejected a new contract between the Puerto Rican government and New Fortress to supply natural gas for 15 years at $20 billion, arguing that the selection process was not competitive and that the proposed arrangement would be monopolistic.

The company reacted positively to the announcement of the Board’s dismissals, telling Bloomberg it was “grateful that President Trump and the federal government have focused on this issue and are providing leadership in Puerto Rico.”

“New Fortress Energy’s stock went up 20% in those days [of Trump’s dismissal announcement]. Prepa bonds didn’t go up for a week. Now they’re going up,” Matt Fabian of Municipal Market Analytics, a municipal bond market research firm, told CPI.

Fabian, who has been observing Puerto Rico’s debt for over 15 years, said that at the time of the dismissals, he paid attention to the behavior of capital markets, particularly PREPA’s debt.

“It’s an easy conspiracy theory. But we really don’t know,” Fabian admitted about the possibility that actors like New Fortress or GoldenTree are behind Trump’s moves.

Regarding potential appointments, Fabian anticipates that Trump will continue the same script he has followed in his second term as president. “If you look at the current Trump administration appointments and those of his first term, they’re [current appointments] less expert, more loyal. So, the new appointments [to the Board] could be less likely to be experts in the Puerto Rico situation and more likely to come in to fulfill whatever mandate they’re given, as quickly as possible,” he added.

It is not the first time U.S. interests have sought to intervene, through the Board, in PREPA’s bankruptcy and the reconstruction of the electric power system, for which there is still $17 billion in federal funds. In October 2017, just a month after Hurricane María, two Republican senators quietly promoted the privatization of PREPA, which had not been publicly discussed at the time, according to the CPI.

The Legacy of the Previous Board

President Barack Obama appointed the first seven members of the Board on August 30, 2016. The evaluation process followed at that time was informal, without defined selection criteria, involving Treasury, White House, and Congress officials. More than 115 people were considered during the first round of appointments, according to a CPI investigation.

Since then, three U.S. presidents have appointed 14 members, nine of them Puerto Rican, mostly representatives from the financial and business sectors. Ideologically, seven of the nominees came from the Democratic side, and seven from the Republican side.

Operationally, the Board employs about 80 people —99% of them Puerto Rican, according to the entity— who work out of its San Juan offices on two floors rented from the Office of Court Administration for nearly $36,000 a month in the World Plaza building in Hato Rey. The staff is organized into thematic teams covering areas from municipal affairs and “fiscal transformation” to infrastructure and “legislative and revenue review.” For its annual budget, the Board receives nearly $60 million from Puerto Rico’s General Fund.

This figure excludes spending on hundreds of lawyers and consultants that the Board and the elected government hire, working on bankruptcy cases under PROMESA and billing through the federal court-ordered process. This account, also paid with Puerto Rican public funds, has already exceeded $2 billion since 2017, according to Espacios Abiertos, a Puerto Rico–based nonprofit that promotes transparency in public finances.

In 2017, the CPI sued the Board to obtain documents and communications between the entity, the federal government, and the Puerto Rican government. Arguing that it enjoyed sovereign immunity similar to a state government, “la Junta” claimed it was not subject to a claim like the CPI’s under the right to access information. The controversy reached the highest U.S. forum, which decided 8-1 in favor of the Board.

This decision left the Board in a legal limbo where it is not subject to the Federal Freedom of Information Act, nor to the local access to information laws.

Despite this, through four different access to information lawsuits at the local and federal levels, the CPI has obtained thousands of documents and emails showing how the Board began operations.

These communications, which extend through 2022, reveal how the Board has become embedded in the daily operation of Puerto Rican government agencies such as Health, Education, the Office of Management and Budget, and Treasury. Each day, these agencies must navigate administrative processes imposed by the Board — whether to reallocate budgeted funds, sign contracts, report progress on policy implementation, adopt regulations and orders, authorize financial transactions, or access emergency funds.

In a press conference on August 7, Treasury Secretary Ángel Pantoja and Orlando Rivera, director of Puerto Rico’s Office of Management and Budget (OGP), expressed concern about the possibility that Trump’s dismissals on the Board could affect government operations.

“There are many decisions, many procedures that depend on both the Treasury and OGP, but also on the Board. That decision-making is what cannot be affected,” said Pantoja, who could not specify if the Board had this authority with only two active members at that time.

More than 80 Fiscal Plans

One of the Board’s priorities is the Fiscal Plan, a document with dozens of pages of economic projections, graphs, and action plans that dictate the path to achieving “fiscal responsibility.”

Since 2017, the Board has approved 11 different fiscal plans for the central government(in 2018, it approved three versions). Additionally, it has certified 72 additional fiscal plans, tailored for public entities such as PREPA, the Puerto Rico Aqueduct and Sewer Authority (PRASA), the Highway and Transportation Authority (HTA), and the University of Puerto Rico (UPR).

The latest Government Fiscal Plan, approved last June, includes measures aimed at creating a new 10-year capital plan, changing the way funds are transferred to municipalities based on their performance, transforming the Department of Education’s budget into a student-based one, and working on an action plan for UPR financing starting in 2027. It also insists on implementing an Enterprise Resource Planning or ERP technology system that integrates budget management, human resources, and the acquisition of goods and services in one place.

Although the ERP project began in 2018, the government has barely been able to implement it, despite spending between $80 million and $100 million in public funds to do so.

No Balanced Budget

One of PROMESA’s explicit requirements is to achieve four balanced budgets for the government of Puerto Rico following modified accrual accounting rules, which imply that the government records its revenues when “they become available and can be accounted for,” and expenses “when incurred.”

To achieve this, the Board assumed budget control and, since 2018, removed the governor’s authority to use money from previous years for other purposes. It created a “reprogramming” process under which each agency must request approval before touching any money, outside the budget, regardless of the need it seeks to address.

Since 2021, the Board has annually reviewed between 500 and 700 budget reprogramming requests, according to its 2024 annual report. During that period, the Board authorized the reprogramming of $47.1 billion in public funds.

Although it controlled every stage of the General Fund budget’s creation and approved its version in seven of the eight years it has been in effect, the Board claims that none of the budgets remained balanced, as PROMESA requires.

Eight Contracts Rejected

The Board also has a specialized staff that evaluates and authorizes government contracts. The general rule is that if the added value exceeds $10 million, the agency must seek Board approval before signing.

As of August 7, the Board had reviewed more than 2,300 government contracts, according to a CPI analysis.

It has rejected eight contracts, as far as is known: three at the Puerto Rico Electric Power Authority (PUMA, Tidal Basin, and Esmeralda Solar Farm); two at the Department of Education (Camera Mundi and Luis Rivera Siaca); one at Puerto Rico’s State Insurance Fund Corporation (MCS); and two at the Roosevelt Roads Redevelopment Authority (Loopland Development and IBD Energy, LLC-PRIP RR, LLC).

The Board “has rejected contracts that are inconsistent with competitive bidding processes and do not promote market competition,” according to its latest annual report.

Most of the time, the Board approved the contract with observations or imposed some condition in exchange for its approval.

On multiple occasions, the government has signed contracts without submitting them for Board review, which is usually accompanied by a letter from the entity requesting documents and warning that it reserves the right to go to court to annul the arrangement.

“The current practices around procurement and lack of transparency create significant risks of favoritism, corruption, and inefficiency and stifle competition and innovation,”

 says the 2024 annual report.

Even so, the Board claimed as an achievement having reviewed more than 840 “large” government contracts related to highway maintenance and operation, the energy system and PREPA, and the repair of public schools.

PROMESA also allows the Board to invalidate any law passed by the government that has a fiscal impact, as determined by the entity. Under this power, the entity claims to have reviewed more than 150 bills before being signed. In 2024 alone, the Board stopped four laws for being “in violation of the Fiscal Plan,” according to its annual report.

Debt Restructuring

Despite the failure of PREPA’s debt adjustment plan, the Board claims its greatest achievement in restructuring Puerto Rico’s debt.

Despite all the control it exerts over the budgetary process, the past Board leaves without having achieved one of the four consecutive balanced budgets needed to end its functions under PROMESA. It also does not have a clear timeline for when it will certify that Puerto Rico has returned to the bond market on “reasonable terms,” another requirement demanded by the law.

Moreover, PROMESA’s Title V, to accelerate critical infrastructure projects, never met expectations as a tool for economic development. Although it had two different revitalization coordinators on its payroll, first Noel Zamot, and since August 2023, José Pérez Riera, the Board has barely used this section of the law, which would have allowed it to expedite permit approvals for critical projects.

In its latest annual report, the Board blames the failure of Title V on a local law, Act 76 of 2000, which imposes “significant delays” by requiring the intervention of multiple government agencies in decision-making.

“These delays reduce the effectiveness of the Title V Critical Project process and may discourage potential Project Sponsors from proposing critical infrastructure projects,”

 the Board said.

Then there is the Puerto Rico Electric Power Authority. If Puerto Rico’s fiscal crisis were an epidemic, PREPA would be patient zero. The debt crisis began there in 2014 when the public corporation stopped maintaining and purchasing equipment, when it had no money to buy fuel, nor to pay its debt.

In 2016, the Puerto Rican government and PREPA bondholders reached an initial agreement, but it fell apart with the arrival of the Board, which filed for bankruptcy in the summer of 2017. Then, in 2022, a second agreement pushed by the Board failed when Pedro Pierluisi’s administration withdrew its support. Later that year, another agreement, the first Debt Adjustment Plan presented by the Board, was thwarted when it failed to gain enough bondholder support. In 2023, the Board presented a new adjustment plan, which also failed to gain support.

Since then, negotiations in court between the Board and a group of PREPA creditors have been at an impasse.

Another major frustration for the entity has been its inability to change the government’s behavior, according to a source close to the Board.

Through the Fiscal Plan, the Board unsuccessfully attempted to impose changes such as consolidating government agencies, eliminating some of the 78 municipalities and 11 UPR campuses, cutting pensions, creating a new central office of Chief Financial Officer, increasing property taxes, and reducing government payroll, among other austerity measures.

For this, it paid hundreds of millions of dollars to renowned consulting firms like McKinsey & Co., Ernst & Young, and the law firm Proskauer Rose to devise solutions to Puerto Rico’s fiscal problems, but in nearly nine years, it never managed to get the government to implement them.

It tried to force its agenda through rigid budget control. Sometimes it used tricks like offering money as an “incentive” to an agency that could only receive it if it completed a “milestone” imposed by the Board. An example of this occurred last fiscal year at the University of Puerto Rico, when it had more than $100 million conditioned on making academic changes and fiscal adjustments, such as consolidating administrative services, required by the Board.

On nine occasions, the Board went further, to federal court, seeking a judicial order to force the government to comply with its directives. The first time this happened was in the summer of 2017, when it sued Ricardo Rosselló’s administration to force a reduction in public employee work hours and eliminate the Christmas bonus. Two weeks later, Hurricane Maria struck, and the Board withdrew its lawsuit before the court decided on the controversy.

Far from giving the government space in the emergency, the Board returned to court a month later, in October 2017, when it attempted to take control of PREPA through a new figure called the Chief Transformation Officer, a person appointed by the Board who would have absolute powers to manage the public corporation and the recovery process.

A month later, Judge Swain halted the move, believing that the Board had exceeded its powers.

This translation was generated with the assistance of AI and reviewed by our editorial team to ensure accuracy and clarity.