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Gains And Losses On Federal Front In 2002

Island gets more funds for PAN, education; 956 effort withers; Army South pulls out


December 26, 2002
Copyright © 2002 CARIBBEAN BUSINESS. All Rights Reserved.

The year 2002 saw a mix of both substantial gains and dear losses in Puerto Rico’s federal affairs agenda.

Resident Commissioner Anibal Acevedo Vila characterized the year as an exceptionally productive one, pointing to such major achievements as the extension of the Nutritional Assistance Program (PAN by its Spanish acronym).

Upon approving legislation earlier in the year to extend PAN for the rest of the decade, Congress included funding increases of $10 million a year to the program, in addition to annual cost-of-living adjustments. As a result, according to projections, funding for PAN--which directly benefits 430,000 poor families on the island--will grow from just over $1.3 billion in fiscal year 2002 to more than $1.8 billion in fiscal year 2010.

Acevedo Vila also hailed congressional approval of an amendment he had proposed to the National School Lunch Act. The amendment expressly permits Puerto Rico, like Hawaii, to preferentially purchase homegrown agricultural products for its federally sponsored school lunch program.

The resident commissioner said this could help Puerto Rico’s school system more than double its purchases of locally produced agricultural products over the next three years, from the current $15 million to approximately $39 million.

Even more important, Puerto Rico began to benefit this year from achieving equal treatment with other states in the U.S. Department of Education’s Title I program, the single largest federal education program. Since its inclusion in President Bush’s "No Child Left Behind" educational reform, Puerto Rico saw its Title I funding increase by $83 million in fiscal year 2003 alone.

Other provisions of the Bush administration’s educational program also boosted funding for reading programs, teacher training, after-school programs, and educational technology. Puerto Rico has experienced its biggest gain in federal education funding in 20 years--from $1.15 billion in fiscal year 2001 to $1.39 billion in fiscal year 2002, a 20.9% gain.

Though it didn’t come up for consideration by the full House because of the shortened session this election year, a House committee also approved the resident commissioner’s initiative to secure $85 million in federal funding for the dredging of the Martin Peña Canal, which borders some of San Juan’s poorest communities.

Acevedo Vila said the legislation is expected to be taken up again early in 2003. U.S. Environmental Protection Agency Administrator Christie Whitman who visited the island in December, announced a $5 million grant for the project’s planning stages.

Homeland security

Puerto Rico also benefited from the federal government’s huge spending on homeland security. The year saw the federalization of security at the island’s airports, with the newly created U.S. Transportation Security Administration (TSA) recruiting and deploying a force of more than 500 new inspectors at the Isla Verde, Aguadilla, and Mayaguez airports.

The TSA also has an undisclosed number of air marshals based in Puerto Rico. Marlene Hunter,

the federal security director for Puerto Rico, told CARIBBEAN BUSINESS that the agency’s payroll exceeds $14 million and could surpass $20 million when the agency is fully staffed up for all of its security functions on the island.

The U.S. Customs Service, the Federal Emergency Management Agency (FEMA), the Federal Bureau of Investigation (FBI), and the Immigration & Naturalization Service (INS) are also among the federal agencies that have been enhancing their presence in Puerto Rico this year because of new homeland security-related mandates. Several of the above-referenced agencies are being administratively integrated within the newly created U.S. Department of Homeland Security.

Military base cutbacks

Though 2002 saw a massive escalation of defense spending at the national level, the Defense Department (DOD) was mostly in closure-and-cutback mode in Puerto Rico.

The 2,200-acre U.S. Navy Base at Sabana Seca, which employed 70 Navy personnel and 90 civilians, was closed. The Puerto Rico National Guard (PRNG) is currently in the process of applying for the use of a major portion of the base’s facilities. If the proposal is approved, the PRNG plans to move the armories it currently operates in Bayamon--and on prime land next to Plaza Las Americas--to Sabana Seca.

After only three years on the island, U.S. Army South (Usarso) also announced that it was pulling up stakes from Fort Buchanan and moving to Fort Sam Houston in Texas. The move, which is expected to be completed by June 2003, means the loss of more than 600 military and civilian employees who have an estimated local economic impact of more than $160 million annually.

Usarso’s move also means Fort Buchanan is no longer home to a major Army command, putting it in a more vulnerable position when Congress makes the next round of base closings and realignment decisions in 2005.

U.S. Naval Station Roosevelt Roads (NSRR) in Ceiba also appeared to be cutting back, as it prepared to end operations at its Vieques training range. A $13 million special operations command headquarters project and the construction of a new school at the base were stopped. According to a DOD report on procurement spending by municipality, DOD contracts in Ceiba during the first nine months of 2002 totaled only $11.4 million, down from $137.1 million during the same period in 2001.

Section 956 effort withers

The year also saw efforts by the Calderon administration to secure passage of amendments to Section 956 of the U.S. Internal Revenue Code wither. The amendments, designed to provide a new federal tax incentive for U.S.-controlled foreign corporations on the island, failed to receive the green light from committee chairmen with jurisdiction over tax matters.

Worse yet, it suffered a major setback when the Joint Committee on Taxation released a study showing that the cost of the proposed amendments would be more than three times what its proponents had initially claimed.

Pro-956 forces also lost an important ally as a result of the November elections, when the Democrats lost control of the Senate. Senate Majority Leader Tom Daschle (D-S.D.) had made statements in favor of Section 956.

They Said It This Year

The threat is to all U.S. economic interests, and after 9/11 nothing is impossible."--Marcelino Borges, U.S. Customs Caribbean area director

"President Bush has said that no child must be left behind. With this amendment, we have assurance that promise includes all the children of Puerto Rico."--Resident Commissioner Anibal Acevedo Vila

"From my many years in private practice representing stateside and foreign companies, I can tell you the reason why they’re confident when they invest here is because of the presence of the federal court."--Jaime Pieras of the U.S. District Court for Puerto Rico

"When I realize we are the targets of equal amounts of blue, red, and green criticism, I know the court is doing its job well, that we are right in the middle, not tipping the scale to one side or another."--Hector Laffitte, chief judge of the U.S. District Court for Puerto Rico

This Caribbean Business article appears courtesy of Casiano Communications.
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