The Supreme Court just ruled that the antidemocratic board overseeing Puerto Rico’s debt repayment and dictating its budget can continue to operate in secrecy. After 2019’s popular revolt, the board’s existence likely depends on it.
A protester holds a sign against the Puerto Rico Financial Oversight and Management Board during a demonstration in New York on September 30, 2016. (John Taggart / Bloomberg via Getty Images)
The US territory of Puerto Rico has been bankrupt since 2016 and subject to the antidemocratic Financial Oversight and Management Board (FOMB) put in place by Barack Obama’s administration. Touted during the 1950s and ’60s as a beacon of democracy and economic success whose inalterable “compact” with the United States had vanquished colonialism, the island is today largely governed by a few mainland board members and a New York federal judge who control Puerto Rico’s local government.
Still, many Puerto Ricans thought that they at least had a right to get information about what the FOMB was up to. Everyone loves transparency, after all — everyone, apparently, except the US Supreme Court. In its May 11 decision in Financial Oversight and Management Board for Puerto Rico v. Centro de Periodismo Investigativo, Inc., the court held that Puerto Ricans do not have the basic right to view the board’s records. It did so in an opinion written and joined by its liberal wing, including Justice Sonia Sotomayor and recent appointee Ketanji Brown Jackson.
Broken Promesas
Access to information about the FOMB is crucial for holding it accountable and resisting the neoliberal tide in Puerto Rico. The board was created in a bizarre law — known cynically as PROMESA, or “promise” — that allowed Congress to tell the president whom to appoint through candidate short lists.
Current members include corporate lawyers David A. Skeel, Jr and Arthur J. González, American Enterprise Institute resident scholar Andrew G. Biggs, New York education commissioner and University of the State of New York president Betty A. Rosa, and business executives Antonio Medina and Justin Peterson, the latter of whom is described indecorously on the board’s webpage as having “worked as a Republican political operative.” Its executive director is Robert F. Mujica Jr, known in New York as former governor Andrew Cuomo’s “budget guru,” who has a long history of working with and for Republicans.
None of these folks are from Puerto Rico or have significant professional links to the island, except Mr Medina. While these card-carrying members of the New York and DC establishment run Puerto Rico, the island’s elected governor remains a nonvoting member of the board.
In theory, the FOMB is supposed to represent Puerto Rico in its bankruptcy process before New York federal judge Laura Taylor Swain, which includes preparing a debt repayment plan and ensuring that Puerto Rico complies with it. But given the board members’ professional backgrounds and how they were appointed, many question whether they can really represent Puerto Rico.
Instead of urging Congress and Wall Street to invest in Puerto Rico’s economy so that it can eventually pay its debts, and rather than pursuing an aggressive litigation strategy that would include, for example, a legal audit of the debt, the board has pursued a program of privatization, pension-cutting, utility hikes, university budget pruning, and public union busting. This neoliberal strategy runs the risk of leading eventually to a second bankruptcy if Puerto Rico’s economy continues to see slow or negative growth.
Meanwhile, there’s the matter of the board’s exorbitant spending on salaries, legal fees, and contracts. Take Mujica. His salary went from roughly $216,186 as New York budget chief to $625,000 as FOMB’s executive director, a difference that, as a so-called budget guru, he can surely appreciate. Puerto Rico’s 2022–2023 budget puts the board’s cost at $59.5 million. That is over 10 percent of the $551.6 million allocation of the University of Puerto Rico, which had eleven campuses and almost fifty thousand students during the 2020–2021 academic year.
Further, because Puerto Rico’s government has to duplicate much of the FOMB’s work — for example, it has to prepare economic and budget analyses and hire lawyers and lobbyists — the actual cost of this bankruptcy process is much higher. In fact, the FOMB’s 2023 fiscal plan estimates the total costs from 2018 to 2026 at $1.6 billion, which is about $200 million per year. This means that each year of the bankruptcy process costs over a third of the island’s investment in higher education. Since Puerto Ricans pay these expenses, why are they not entitled to view the FOMB’s public records?
Anyone familiar with Puerto Rican politics will remember that access to information about public officials has been a matter of recent significance. In 2019, a mass protest movement drove Governor Ricardo Rosselló from office after a leaked chat showed the governor and his allies insulting just about everyone and plotting ruthlessly against their critics. So if anything might plausibly trigger a similar mass movement against the board, the disclosure of embarrassing information in its records would be high on that list.
If anything might plausibly trigger a mass movement against the FOMB, the disclosure of embarrassing information in its records would be high on that list.
At the very least, access to the board’s public records could confirm that the US government’s role has been larger and less pristine than we have been led to believe. In 2018, for example, it was revealed that the consulting firm McKinsey & Company worked extensively for the FOMB while one of its subsidiaries owned Puerto Rican government bonds — a slight problem since the board and bondholders are supposedly adverse parties.
It is also clear that some Republican senators and federal officials pushed to privatize Puerto Rico’s power company, which had the added benefit of destroying one of the island’s most militant and democratic labor unions. Just this March, the board and New York judge struck down an extremely modest labor law approved by the local legislature because, according to neoliberal ideology, any improvement at all in workers’ legal rights is bound to hurt the economy. Access to the FOMB’s public records would shed light on these issues.
Those records aren’t necessary, however, to recognize that the FOMB’s results over the past six years have been less than stellar. According to its own 2023 fiscal plan, if temporary federal funds are taken out of the equation, Puerto Rico’s inflation-adjusted GNP growth figures for 2017–2022 are dismal, even allowing for 2017’s Hurricane Maria and the COVID pandemic. Puerto Rico’s population in 2010 was 3.7 million; in 2022 it was estimated at 3.2 million — a decline of roughly 502,000 persons or 13.5 percent.
On the bright side, a law exempting newcomers from capital gains taxes has produced an influx of wealthy “Americans” who buy up real estate and often displace local residents. In February, Forbes magazine enthused about Puerto Rico’s most expensive real estate listing, a $45 million beachfront home with a modest (for the price) 5,611 square feet of construction. It would take a secretary at the University of Puerto Rico, who earns about $16,000 per year, 2,812 years to pay off a loan for this property, provided that it was interest-free and that they spent no money on food, clothes, health care, or anything else.
Sovereign or Not, Here They Come
It is in this context that the Supreme Court voted eight to one to shield the board from public scrutiny. In 2016, Puerto Rico’s Investigative Journalism Center (Centro de Periodismo Investigativo, or CPI) asked the board for a range of public documents, including contracts, member financial disclosures, and member communications with federal and local officials. CPI based its request on a provision in Puerto Rico’s constitution that requires access to public records. The board refused many of the documents. CPI sued and won its case in two federal courts.
But the Supreme Court came to the board’s rescue. In an opinion authored by Justice Elena Kagan and joined by Justices Sotomayor and Jackson along with the conservatives (save for Clarence Thomas), the court decided that no one may sue the board to obtain access to its public records. From now on, the board can not only do what it wants — it can do so in secret.
From now on, the board can not only do what it wants — it can do so in secret.
The court’s decision was remarkable for its lack of legal basis. The FOMB responded to the CPI’s lawsuit seeking public records by arguing that the board was protected under the doctrine of sovereign immunity. The FOMB is part of Puerto Rico’s local government according to the PROMESA law, and the Supreme Court held that Puerto Rico has no sovereignty in a case about the double-jeopardy rule in 2016. Since the board is part of a non-sovereign Puerto Rico, how can it claim the immunity of a sovereign? In other words, is a burger with no cheese a cheeseburger? This was the central question before the Supreme Court. The answer? Justice Kagan wrote that “we assume without deciding that Puerto Rico is immune from suit in federal district court, and that the Board partakes of that immunity.” That assumption provided the basis for the court to do what it wanted.
But it gets worse. The court’s rule-by-assumption move is not only flawed; it’s also one that Justice Kagan herself probably does not believe in. During the case’s oral argument in January, she described it as “a funny kind of posture” and “quite weird to me,” because “the assumption will essentially determine the disposition of the case.” Justice Neil Gorsuch added a technical but telling reason why it was “a particularly odd circumstance to assume” that the board enjoyed sovereign immunity: it’s a defense that the FOMB had the burden of proving. Yet he joined the majority opinion that Kagan wrote. On this matter, if not others, the only consistent justice was Clarence Thomas, the sole dissenter, who wrote that “because I would . . . hold that [the Board] lacks the only immunity it has ever asserted, I respectfully dissent.”
Not that one should have expected the Supreme Court in 2023 to be a friendly place for arguments about holding elites to public scrutiny. Justice Thomas has been embarrassed by too many recent scandals to recount. Justice John Roberts’s wife is an elite legal recruiter who has solicited and placed clients with law firms working before the court. Justice Neil Gorsuch failed to disclose that the person to whom he sold a property nine days after his confirmation was the CEO of such a law firm.
The court has also been increasingly using its shadow docket — the power to issue emergency or procedural rulings without arguments, opinions, or clear votes — to decide important matters. It stands to reason that a court acting increasingly in the shadows, yet beset by one public scandal after another, would look unfavorably upon a small Puerto Rican outfit trying to hold the mighty FOMB — stacked with executives, corporate lawyers, and politicos from New York and DC — accountable.
On Puerto Rico, the Supreme Court Consistently Dissents
What does not stand to reason is the batch of Supreme Court decisions that have undermined Puerto Rican self-government — such as it was — since its bankruptcy began.
It all started in 2014, when Puerto Rico approved its own public bankruptcy law. Then, in 2016, the court said in Puerto Rico v. Sanchez Valle that Puerto Rico had no sovereignty, because “back of the Puerto Rican people and their Constitution, the ‘ultimate’ source of prosecutorial power remains the US Congress, just as back of a city’s charter lies a state government.” That helped explain its decision a few days later that Puerto Rico could not approve its own bankruptcy law (Puerto Rico v. Franklin California Tax-Free Trust). Then, in 2022, US v. Vaello Madero gave its blessing to the Obama administration’s defense of a cruel lawsuit against a newly arrived New Yorker to take back his Social Security disability benefits.
But the first bee in the legal bonnet came in 2020, when the Supreme Court had to explain why the seven FOMB members appointed by Congress to govern Puerto Rico did not require Senate confirmation, which even Puerto Rico’s governors used to require. In response, the court came up with a theory about how federally appointed officers whose jobs are sufficiently local rather than federal do not need Senate confirmation (FOMB for Puerto Rico v. Aurelius Investment). Then the bees really began to sting when the CPI’s case made it clear that, if Puerto Rico lacks sovereignty and is somehow not federal, then the FOMB’s records should be public and not protected by sovereign immunity. Presumably unable to agree on how to square this circle, the court just said, “Let’s assume it’s a square.”
Also telling is the fact that in three of these decisions, the Supreme Court stepped in to correct what the lower courts had done. FOMB members did in fact require Senate confirmation, according to the appeals court in the Aurelius Investment case. All the judges who heard Vaello Madero’s case said that he did not have to give back his benefits. All the lower courts in the CPI’s case said that it was entitled to the public records. If the Supreme Court was not keenly interested in protecting the FOMB, and if it had succeeded in clearly stating what the law is, then these constant interventions would have been unnecessary.
Of course, anyone can flex their lawyer chops by explaining the Supreme Court’s twists and turns with a just-so story about how specific laws or precedents required the result in each case. But a simpler explanation is available. The court has been making sure that Puerto Rico’s bankruptcy is handled not by Puerto Rican judges under Puerto Rican law but by a specially chosen board and federal judge who wield complete power and are geographically and ideologically closer to Wall Street than Old San Juan.
Old Problems, New Opportunities
The fact that Puerto Ricans now lack any legal means of gaining access to the board’s public records is a serious blow to the fight against colonialism and neoliberalism. It is also a lesson in how liberal and progressive politicians and jurists often have no real solidarity with colonized people or commitment to democratic principles, but simply invoke them to suit their own ends. This is not a new lesson for Puerto Rico. During the 1930s, for example, it was Franklin D. Roosevelt’s administration that repressed Puerto Rico’s nationalist movement with excessive and unscrupulous force. Today, liberal members of the US political and legal establishment lend their support to a secretive dictatorship.
The May decision also reaffirms the futility of looking to the Supreme Court for social change. When elite institutions, powerful economic interests, or statist legal doctrines like “sovereign immunity” come under fire, the court will do everything in its power to put down the threat.
Yet things may be changing in Puerto Rico. For eighty years, two political parties dominated the island’s politics: the Partido Popular Democrático and the Partido Nuevo Progresista. Both are centrist parties committed to neoliberal policies and beset by constant corruption scandals. Until 2020, their candidates for governor often split around 95 percent of the vote. In the 2020 elections, however, they split 65 percent of the vote. The difference went to a new progressive political party, the Movimiento Victoria Ciudadana; to Puerto Rico’s historic pro-independence party, the Partido Independentista Puertorriqueño; and to a right-wing party, Proyecto Dignidad. Hence the FOMB may be helping to provoke a political realignment with real opportunities — but also dangers — for Puerto Rico in the years to come.