GAO Studying Fiscal Aspects of Puerto Rico Statehood

The United States Government Accountability Office (GAO) is researching the fiscal effects of Puerto Rico becoming a state of the United States now that residents of the island territory have voted to join the Union.

In a November 21, 2012 Request for Information (RFI), the GAO explained that it is seeking information from parties who can estimate the likely enrollment levels in Puerto Rico in several federal programs if Puerto Rico should become a state.  The RFI specifically requested predictions on the likely enrollment levels in Social Security’s Supplemental Security Income (SSI) Program, Medicaid, the Children’s Health Insurance Program (CHIP) and the Supplemental Nutrition Assistance Program (SNAP) upon the granting of statehood.  The GAO is also seeking estimates on the total amount of benefits for which program enrollees would be eligible under SSI and SNAP.

As previously reported in Caribbean Business, these estimates are needed to respond to a congressional request from members of the U.S. House Natural Resources Committee, which covers Puerto Rico issues. The House Committee is chaired by Rep. Doc Hastings (R-WA).  Puerto Rican Resident Commissioner Pedro Pierluisi is a member.

This would not be the first report from the GAO about Puerto Rico.  A 1981 GAO report gathered and organized economic information about Puerto Rico, but explicitly refused to speculate on the fiscal effects of the various status options then being discussed because they were not asked to do so.

This has not stopped others from speculating.

The Lexington Institute, a political think tank, imagined a future in which, because Puerto Rico is primarily Spanish speaking, the United States would have to transform itself into an entirely new nationwide system of “official bilingualism.”  Their projection came up with a $25.661 billion price tag if that were to take place.

Many online reports claim that a Congressional Budget Office (CBO) report from July 28, 2009 estimated a $9.4 billion price tag for making Puerto Rico the 51st state. A CBO report issued on that date actually gives the federal cost of holding a plebescite, reporting that it would have ”no significant impact on the federal budget.”

The New York Times also referenced the $9.4 billion figure in an editorial in 1990, apparently referring to a CBO report from April of 1990 which was explicitly limited to two considerations: (1) the reductions in the supply side of the economy stemming from a loss of Section 936 capital, and (2) changes in aggregate demand.  Section 936, a federal tax policy that provided incentives for U.S. based companies to move to Puerto Rico,  has since been repealed.

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