Members of the Puerto Rico Advisory Committee, thank you for today’s opportunity to testify on Puerto Rico’s inequitable access to some of the most important economic and health security programs in the United States. My name is Javier Balmaceda. I am a Senior Policy Analyst on Puerto Rico on the federal fiscal policy team at the Center on Budget and Policy Priorities (CBPP). CBPP is a nonprofit, nonpartisan policy institute located in Washington, D.C. For over 40 years, CBPP has conducted research and analysis on a range of federal, state, and territorial issues affecting low- and moderate-income families. CBPP’s work on Puerto Rico has expanded significantly since the 2017 hurricanes and focuses primarily on securing equitable treatment for the territory under five key economic and health security programs: Medicaid, the Earned Income Tax Credit (EITC), the Child Tax Credit, the Supplemental Nutrition Assistance Program (SNAP), and the Supplemental Security Income (SSI). I have spent a little over six years at CBPP leading our Puerto Rico work alongside many of my colleagues, and I previously covered many of these policy themes through journalism and human rights work.
While residents of Puerto Rico are U.S. citizens, federal law treats them far less favorably than residents of the states when it comes to numerous federal programs and basic democratic rights. This discrimination weighs heavily on Puerto Rico, where need is far greater than most other parts of the country. Puerto Rico’s acute poverty level of nearly 40 percent is more than double Louisiana’s 19 percent, the highest of any state, and almost four times the national rate of 11 percent.[1] Puerto Rico, too, has experienced a devastating series of natural and manmade disasters over the past 20 years or so that have greatly exacerbated hardship in the territory, including a prolonged economic recession, massive outmigration, bankruptcy, hurricanes, earthquakes, and the COVID-19 pandemic.
Considering this daunting context, we have called on the federal government to — at the very least — provide Puerto Rico with equitable access to many of the country’s foundational economic and health security programs. Puerto Rico, and all other U.S. Territories for that matter, are most in need of these supports, yet the federal government historically has imposed arbitrary caps and other funding constraints that have severely restricted the reach of critical federal programs.
Take for instance Medicaid, the program that provides health coverage to low-income families and individuals, including children, parents, pregnant people, seniors, and people with disabilities. States receive open-ended federal funds that match a specified percentage of their expenditures for Medicaid-covered health services provided to enrollees. This means funds are available when need increases due to a recession, pandemic, or natural disaster. Puerto Rico, in contrast, receives only fixed block grant funding each year, which does not come close to covering the costs of health care for its Medicaid enrollees and puts it at even greater risk when need increases.[2] Once the block grant funding is exhausted, Puerto Rico is expected to pay the entire remaining cost of Medicaid health care services using its own funds, which is untenable given its already stretched financial resources.[3] Through the Affordable Care Act and other legislation, like the Consolidated Appropriations Acts of 2020 and 2023, the federal government has provided supplemental funding to help expand Puerto Rico’s Medicaid program. However, the amount of funding provided has been far below what would be needed for Puerto Rico to operate a Medicaid program like states. Moreover, supplemental funding has only been provided on a temporary basis, making it very difficult for the territory to plan health care coverage in the long term.
The limitations for other programs like SNAP and SSI are similar. Puerto Rico receives a block grant with a fixed amount of federal funding to provide basic household food assistance through the Nutrition Assistance Program (NAP, or PAN for its name in Spanish, Programa de Asistencia Nutricional).[4] And for SSI, which provides monthly cash assistance to people who are at least age 65 or are disabled and have little income and few assets, the federal government again provides Puerto Rico with a block grant called Aid to the Aged, Blind, and Disabled (AABD).[5] Both NAP and AABD provide far lower benefits and have more restrictive eligibility criteria than their federal counterparts, SNAP and SSI, respectively.
Puerto Rico’s truncated access to these programs lays bare two realities. One is that the policies that engender this discrimination disproportionately impact families who are most vulnerable; the other is that these policies are very much a choice made by the federal government, as evidenced by their arbitrary application across territories and time. The federal government has chosen to afford Guam and the U.S. Virgin Islands with full participation in SNAP, just as it has opted to provide full SSI benefits in the Northern Mariana Islands. It was also a policy choice to have Puerto Rico participate in SNAP’s predecessor, the Food Stamp Program, from 1974 to 1982, and later eject the territory from the program when it was transformed into SNAP.[6] The federal government has chosen to marginalize Puerto Rico from these programs, yet it has also authorized the territory to operate a multitude of federal programs like any other state, such as Section 8 Project-Based Rental Assistance, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), and child nutrition programs including school meals programs.
If the standard for program inclusion or exclusion is ultimately a choice, it is our firm belief that policymakers should opt to ensure that Puerto Rico has full and equitable access to all federal programs designed to support low- and moderate-income families. Research consistently shows that carefully crafted expansions of these programs can be truly transformational for families across the country, and particularly in Puerto Rico, where need is so high. Perhaps the best example is the American Rescue Plan Act of 2021, which ushered in unprecedented expansions of the Child Tax Credit and Earned Income Tax Credit (EITC) across the United States and made permanent improvements for the territories within these programs.[7] The Child Tax Credit is a powerful tool that helps families manage the cost of raising children, and the EITC is a federal tax credit that boosts the income of workers with low and moderate incomes by helping offset federal payroll and income taxes.
For Puerto Rico, the Rescue Plan permanently fixed a long-standing flaw that limited the Child Tax Credit to families with three or more children. The permanent expansion for families with one and two children made roughly 89 percent of families with children in Puerto Rico newly eligible.[8] Puerto Rico also benefited in 2021 from the temporary expansion of the Child Tax Credit that the Rescue Plan made available across the country. Among other improvements to the credit, the law boosted the maximum credit amounts from $2,000 per child to $3,600 for children under age 6 and to $3,000 for older children, and made the full credit available to families with low or no earnings in a year. The combination of the permanent and temporary expansions of the Child Tax Credit drastically reduced Puerto Rico’s child poverty rate from 55 percent to 39 percent in 2021.[9]
Furthermore, the Rescue Plan permanently extended to Puerto Rico an annual federal supplement of $600 million that is adjusted for inflation to bolster its local EITC. This represents the first-ever federal EITC dollars flowing to Puerto Rico since the federal credit’s creation nearly half a century ago. The federal supplement has allowed the territory to roughly quadruple its EITC, making it more comparable in size to the federal credit. The expansion of the EITC alone has helped reduce poverty in the territory by an estimated 3.7 percentage points, lifting more than 125,000 people above the federal poverty line.[10]
Over the last five years, policymakers have also elected to make substantial improvements to Puerto Rico’s Medicaid program that have positively impacted enrollees and medical providers. Most notably, the Consolidated Appropriations Act of 2023 (CAA) provided Puerto Rico with a five-year funding package through fiscal year 2027 that features the highest-ever annual allotments awarded to the territory. The law also increased to 76 percent Puerto Rico’s share of matching funds it must contribute to draw down those allotments (otherwise known as the federal medical assistance percentage or FMAP).[11] These measures combined have afforded enough resources for Puerto Rico’s Medicaid program to provide Hepatitis C drug coverage, increase reimbursement rates to specialty and primary care providers and hospitals, and increase coverage by expanding Medicaid eligibility in the territory.[12] However, because this latest financing is only temporary, Puerto Rico’s Medicaid program faces potential deep cuts and rollbacks beyond October 2027 if Congress fails to legislate additional funding.[13]
Examples such as these show that treating Puerto Rico more equitably under these programs has a measurable and positive impact. But much more remains to be done, and here, too, lies a policy choice. Despite the great improvements described above, there are still major barriers preventing families in Puerto Rico from accessing the Child Tax Credit and EITC on equal terms as states.
For the Child Tax Credit, families in Puerto Rico are still limited to a smaller credit than families on the mainland with comparable incomes because most families in Puerto Rico only receive the refundable portion of the credit, otherwise known as the Additional Child Tax Credit. In Puerto Rico, the refundable portion phases in at about half the rate — 7.65 percent[14] — than it does for children on the mainland, whose credit currently phases in at 15 percent. Moreover, a separate issue that affects both children in Puerto Rico and on the mainland: through the end of 2025 the refundable portion of the Child Tax Credit is capped at a substantially lower amount than the maximum credit. In 2023, the credit was capped at $1,600, whereas the maximum credit amount is $2,000, meaning families in Puerto Rico who received only the refundable portion of the credit were only eligible for 80 percent of the full credit. Families in Puerto Rico generally do not owe federal income tax so are bound by the refundability cap. Making the credit fully refundable is good policy for the whole country and would resolve both the phase-in rate and refundability cap issues in Puerto Rico. Absent a fully refundable Child Tax Credit, we recommend making the changes to the credit in Puerto Rico so that families there can receive the same benefits as families in the states.
For the EITC, the federal supplement that was approved in 2021 currently covers a much smaller portion of program costs than originally expected. The Rescue Plan had established that for every dollar Puerto Rico contributed to its EITC, the federal government would contribute up to three dollars. Based on estimates at the time, Puerto Rico’s contribution was assumed to be $200 million in 2021. The Rescue Plan used that estimate to effectively set the maximum contribution for the federal government at $600 million in 2021 and indexed for inflation in subsequent years. But the federally-mandated Financial Oversight and Management Board for Puerto Rico has forecast that total program costs will amount to approximately $1.32 billion in 2023, of which the federal government will cover $664 million and Puerto Rico the remaining $659 million — or roughly three times more than what was originally estimated to be Puerto Rico’s contribution. In light of Puerto Rico’s ongoing fiscal constraints and bankruptcy, the Oversight Board has already warned that the territory will need to consider reducing the size of the program to rein in costs.[15] To prevent these cuts and continue supporting the EITC’s transformational impact on the economic security of hundreds of thousands of families in Puerto Rico,[16] we recommend that the federal government increase supplemental funding to a level equivalent to the funding that would be required to operate the federal EITC (with federal EITC parameters) in Puerto Rico.[17] This is a more equitable approach that would give Puerto Rico an amount that is more consistent with what its residents would receive if it were a state.
We further recommend that the federal government pursue gradual transitions to permanent, open-ended funding for Puerto Rico in Medicaid, SNAP, and SSI. As mentioned previously, the block grants that finance these programs in the territory fall far short from what is needed to provide adequate benefits and eligibility criteria.
Due to funding constraints, Puerto Rico’s Medicaid program cannot, for instance, cover care in nursing homes, home health services, or the full range of benefits for children that are guaranteed by Medicaid’s Early and Periodic Screening, Diagnostic, and Treatment benefit.[18] NAP, meanwhile, has drastically lower net income limits and benefits. A single-person household in Puerto Rico must have a monthly net income under $691 to receive benefits, compared to $1,251 under SNAP in the states, and the maximum benefit level for a single-person household in Puerto Rico is $183 versus $291 in the states.[19] As it relates to AABD, the program offers just a fraction of the benefits provided under SSI (itself a very modest cash-assistance program).[20] Puerto Rico’s cap is roughly $36 million for adult assistance, foster care, adoption assistance, and AABD, a figure that has not been indexed to inflation and hasn’t changed since fiscal year 1997. Average monthly benefits under AABD are only $75 compared to over $750 for an SSI recipient.[21]
As with other federal programs that operate in Puerto Rico like any other state, the federal government should choose to do the same for Medicaid, SNAP, and SSI. And it should do so sooner rather than later, considering the many years it would take to integrate Puerto Rico fully into these programs. Even after Congressional authorization, a gradual, multi-year integration process would follow, including important steps such as statutory changes, regulation development, program design, planning phases, training for administrative staff, testing, and rollouts. A comprehensive study from the U.S. Department of Agriculture published in 2022 estimated that it would take 10 years to fully implement SNAP in Puerto Rico.[22] Transitioning Puerto Rico into Medicaid may require an even longer timeline because it would need to gradually develop a large amount of physical infrastructure to provide mandatory Medicaid services, such as long-term care, that are currently unavailable due to federal funding constraints. In addition, the federal government will also need to take steps to prepare itself to incorporate Puerto Rico into these economic and health security programs.
The federal government has a choice in all these matters, and we believe it should opt to treat Puerto Rico equitably. For far too long, discriminatory federal policies have truncated Puerto Rico’s access to key economic security programs. These policies have unjustly marginalized and punished Puerto Rico’s population of 3.2 million American citizens, the 33rd largest population of any state, who should have equal access to the federal resources needed to thrive.
