Not Yet a State, Puerto Rico Practices Good Governance
Puerto Rico, which will vote on whether to become a state this summer, has reduced its spending by 20 percent in just two years with the help of public-private partnerships.
Sun, sand and 80-degree temperatures distract most winter visitors to this U.S. island territory from the visible signs of aging at the 57-year-old Luis Muñoz Marín International Airport, a critical hub to the Caribbean, but increasingly expensive to run and maintain.
That’s not good enough for Kenneth McClintock, the secretary of state for Puerto Rico, who says the airport is about to undergo world-class upgrades made possible through a long-term lease with a private company that will finance, design, build and operate the facility.
“It’s a showcase project that will generate hundreds of millions of dollars in new revenues,” says McClintock, who’s been a key player in the island’s aggressive use of public-private partnerships (P3) to modernize public infrastructure. Act No. 29, passed by the Legislature in 2009, created the Public-Private Partnerships Authority that, in consultation with investment banking firm Macquarie Capital, developed the commonwealth’s ambitious P3 program. So far, the growing portfolio includes 100 K-12 schools, road improvements and public transit.
The authority’s five-member board of directors includes two members suggested by the Legislature. “They are in on day one for everything,” says McClintock, and they decide on behalf of the Legislature, which means individual deals don’t return to the Legislature for ratification.
“In that way, they have managed to insulate P3s from the political process,” says Sean Slone, senior transportation policy analyst with The Council of State Governments (CSG). He says Puerto Rico’s independent P3 authority is unique among the 31 states with legislation that allows them to enter into P3s.
The P3 strategy is part of larger government reforms that include agency consolidations in education, corrections and labor. Gov. Luis Fortuño’s administration has reduced government spending by 20 percent in the two years since taking office. Public employees have shouldered much of the budget cuts: 23,000 jobs have been eliminated and remaining salaries are frozen for two years. These and other measures seem to be working. In 2009, Puerto Rico’s deficit was the highest proportionately when compared to the 50 states. Today, by the same measure, the commonwealth ranks 20th and would be 15th under provisions of its 2012 budget. Meanwhile, its bond ratings have risen from junk to AAA.
There’s a sense that Puerto Rico is preparing to emerge as an equal to states, not an appendage, dependent on the republic. The territory, with a land mass and population roughly equal to Connecticut and three times that of Rhode Island, is getting increased attention on the mainland. “Puerto Rico is a full member and an equal participant among states about ideas and best practices for governing well,” says John Mountjoy, CSG’s director of policy and research. “They’re not at the kids’ table.”
Fortuño, a Republican, and McClintock, a Democrat, are both intent on pushing away from the kids’ table once and for all, setting aside mainland party labels in favor of a common desire for statehood. Fortuño has put the question of political status back on the ballot through a two-step nonbinding plebiscite. It will be the fourth time since 1967. On Aug. 12, voters will be asked if they prefer the status quo or change. If change wins, they’ll vote again on general election day among choices that range from statehood to all-out independence.
“Puerto Ricans have been part of this great nation since 1898 and citizens since 1917,” says McClintock. He adds that the vote may “create a crisis that will then lead to the United States government realizing that they have to get off the pot and help resolve a 114-year-old dilemma.”