Puerto Rico’s fiscal leadership delivered detailed public briefings on the island’s economic performance, budget challenges, and the status of long-term reforms required under PROMESA.
Across a little more than an hour of presentations, officials from the Financial Oversight and Management Board (FOMB) and Governor Jenniffer González described an economy showing signs of resilience, a government navigating structural constraints, and an oversight process increasingly focused on the transition to post-PROMESA governance.
Taken together, the presentations painted a picture of an island making measurable progress—higher revenues, stronger employment, improved permitting, and modernized financial systems—while still confronting structural challenges in education, Medicaid, pensions, procurement, and energy reliability.
Both the board and the governor signaled alignment on the need for durable fiscal safeguards and a disciplined transition toward the eventual end of federal oversight.
FOMB Executive Director Robert Mujica emphasized that Puerto Rico’s current budget, certified without a deficit, was prepared under a new “co-leadership model” in which the governor’s budget, rather than the board’s, became the official fiscal blueprint.
“The budget you, the board members, certified, is the governor’s budget, not the oversight board’s budget,” he said, underscoring the gradual transfer of responsibility back to the elected government.
Governor González built on this theme, reporting that fiscal year 2026 revenues closed at $13.9 billion, 6.7 percent above Treasury’s forecast.
“This marks another year of general fund revenue growth,” she said, citing strong sales-and-use tax collections and rising employment. Non-farm payrolls reached 958,800 in August, while labor force participation climbed to 45.9 percent.
But certifying a balanced budget is only the first step. Mujica warned that “living within it is another,” pointing to persistent concerns about the Department of Education, which has yet to produce an operational plan aligned with its budget. The expiration of pandemic-era federal funds, combined with a 40 percent drop in student enrollment since 2016, has left the agency facing a structural mismatch between resources and obligations.
“I have taken notes of the board’s concerns, and I welcome them,” said Governor Jenniffer González.
Financial Systems and Administrative Progress
González highlighted modernized financial management infrastructure. A major milestone was the launch of Integra PR, the government’s new Oracle-based enterprise resource planning system.
“Puerto Rico has not replaced its central financial system since 1998,” González noted. The ERP now integrates nearly 60 agencies and more than 12,000 users, enabling real-time financial visibility and supporting modified accrual accounting. Agencies have already paid nearly 10,000 suppliers through the system, disbursing more than $2 billion.
The governor also pointed to improvements in the permitting system, which processed 92,000 filings between January and August—34 percent more than the previous year—and reduced average wait times from 115 days to 18 days.
González highlighted $2.62 billion in new private investment commitments across 20 municipalities, driven largely by manufacturing reshoring. Fiscal Transformation Director Juan Carlos Blanco framed Puerto Rico’s reforms as essential to preventing a return to pre-PROMESA failures, emphasizing the need for statutory budgeting rules, long-term planning, and modern financial management.
Medicaid’s Looming Cliff and Pension Pressures
Both officials acknowledged pressing federal funding threats. Mujica highlighted looming risks in Medicaid financing.
Puerto Rico’s enhanced federal match expires next year, and maintaining current benefits without congressional action could cost the island up to $3.8 billion annually beginning in fiscal 2028.
“I too have made Congress aware of how critical this is,” he said, noting that both he and the governor have been lobbying federal officials for a long-term solution.
The chamber also heard from Budget Management Director Elisa Guardiola on fiscal frameworks. González reaffirmed her commitment to permanent fiscal safeguards, including a budget stabilization fund, a capital projects fund, and a multi-year financial plan—legislation developed jointly with the board. She acknowledged vetoing earlier versions that diverged from the agreed framework but said the bills have been reintroduced and will be signed once aligned.
On pensions, Mujica devoted significant time to warning that 18 recently introduced bills would create long-term obligations without identified funding sources.
“Pension increases are promises… and promises that we make for decades,” he said, stressing that any new benefits must comply with the court-approved plan of adjustment. Two of the bills were vetoed by the governor last year.
González closed her remarks with a focus on retirees, noting that 55,000 pensioners receive less than $1,000 a month. The government has contributed $4.4 billion to the pension reserve trust, she said, and is evaluating responsible ways to improve conditions for the lowest-income retirees.
“I have taken notes of the board’s concerns, and I welcome them,” she added.
“We need the generation. If we have to be more involved in that process, we will do it,” said Mujica.
The Power Expectations Failure: A Cautionary Tale
The most forceful portion of both officials’ remarks centered on the failed Power Expectations contract, which Mujica described as riddled with omissions, misrepresentations, and failures. The FOMB revoked its approval for the first time in its history.
Mujica walked board members through the timeline. The Energy Bureau in 2025 directed PREPA to address an anticipated shortfall of up to 850 megawatts. Puerto Rico needed temporary generation quickly, and the board began reviewing the proposed $5.9 billion, 10-year contract in January 2026.
From the outset, he said, the board’s infrastructure team had “serious questions” about the procurement, and the Public-Private Partnerships Office (3PPO) repeatedly provided partial answers while challenging the board’s authority to ask them.
On May 8, the board conditionally approved the contract, adding safeguards including strict milestones, liquidated damages, termination rights, and a performance bond exceeding $1 billion. Final approval followed on June 2, but soon after, the board learned that the contract had materially changed without disclosure. Enchanted Rock, the company meant to supply the generation equipment, was no longer part of the agreement.
“Replacing Enchanted Rock with Flotek Industries was a material change that was never brought to the oversight board for review as PROMESA requires,” Mujica said.
Then came a cascade of alarming revelations. The required performance bond was never delivered. Enchanted Rock informed 3PPO that its signature on the contract had been forged. Flotek disclosed in regulatory filings that it had only agreed to deliver 40 megawatts, not the 400 megawatts required. And 66 days after execution, “nothing had been built, shipped, or delivered,” Mujica said.
Through all of this, he added, 3PPO continued to provide incomplete information and insisted the board had “no business asking the questions” it was asking. On August 14, the board revoked its approval.
“It was unavoidable, and it was in the best interest of the people of Puerto Rico,” Mujica said. “We now know that this contract was never going to deliver the power that Puerto Rico’s families and businesses need.”
Procurement Reform as Post-PROMESA Priority
He warned that the episode exposed deep weaknesses in Puerto Rico’s procurement system. PROMESA requires contracts to promote competition and comply with the fiscal plan, but the board relies on government agencies to vet their counterparties.
“That is exactly what did not happen here,” he said, calling for urgent legislative reforms on lobbying, contingent fees, and contract extensions.
Mujica pushed back strongly against claims that the board delayed the temporary generation contract. “Facts matter,” he said. “The board didn’t receive the contract until January of 2026. We approved the contract in May with conditions. January to May is not 10 months.”
He added that the review took months because the board asked questions the procurement office refused to answer. “And now we know why,” he said.
He challenged critics directly: “Do you think that we should be part of the process or not? Do you think we should have asked the questions or not? Do you think we should have added the safeguards to the contract that we did or not? I think the answer is clear.”
Mujica cited a previous generation contract where the board’s oversight added safeguards, saving Puerto Rico more than $4 billion. “That is what the board does,” he said. PROMESA, he added, explicitly states that the board’s contract review is designed to instill trust in the contracting process. “Unfortunately, events like this erode that confidence,” he said, arguing that permanent procurement reforms, not just contract-by-contract oversight, are needed before the board exits.
He urged the legislature to regulate lobbying and ban contingency fees tied to contract awards, noting that Puerto Rico is an outlier among U.S. jurisdictions.
“The people have the right to know who is lobbying who for what,” he said. “These reforms usually happen around crises. This is the opportunity for Puerto Rico to do that as well.”
Energy and the Path Forward
Despite the Power Expectations failure, González announced her election as chair of the Southern States Energy Board for 2026–2027, calling it recognition of Puerto Rico’s progress in stabilizing generation. She cited more than 1,900 megawatts added through repairs, peaker units, and battery storage, and ongoing work to rehabilitate major units at Aguirre and San Juan.
Temporary generation procurement remains active, she said, despite the failed Power Expectations contract. “My administration is moving expeditiously on the remaining alternatives… without unnecessarily starting over the entire process.”
When asked at a news conference whether the board should take over the evaluation and recommendation process for a new temporary generation provider, Mujica said the board would intervene more directly if necessary. The 3PPO has reportedly said it wants to withdraw from the process.
“We need the generation,” he said. “And we will continue to work with the government on a process, whoever is doing it—whether it’s the P3, whether it’s the 3PPO, whether it’s PREPA—and ensure that a process that works, because we don’t want a repeat of this. If we have to be more involved in that process, we will do it.”
He noted that another procurement for 3,000 megawatts of long-term generation is underway, but the board has not been given full visibility into that process either.
“We don’t know all of the details of that process,” he said, adding that the board’s questions are not arbitrary. “We don’t want this to happen again.”
Water and Resilience Planning
The governor also provided an update on the summer drought, describing July as the driest month since 1899. The government declared an emergency, implemented rationing, and used the emergency reserve for water distribution and temporary systems. Conditions have improved, but NOAA forecasts below-normal rainfall through early 2027.
“We are working to strengthen the resiliency of our water supply before the next dry season,” she said.
Procurement Issues Beyond Power
Beyond the Power Expectations case, Mujica highlighted a broader concern that emerged during the board’s review of Act 215 of 2024, which would have raised thresholds for no-bid and non-competitive contracting. The board uncovered a concerning pattern: 22 municipalities impose higher construction excise taxes on government-funded projects than on private ones, with 15 charging a 10 percent rate.
“We are unaware of any jurisdiction that sets a different rate based on the source of the funding,” Mujica said, warning that the practice could be deemed discriminatory under federal cost principles and jeopardize recovery funds.
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