H.R. 5278 would create a legal framework for the federal government to oversee the fiscal and budgetary affairs of certain U.S. territories. In particular, the bill would outline procedures under which the governments of such territories and their instrumentalities could establish an oversight board and thus restructure their public debt. The bill would immediately establish such a board for the Commonwealth of Puerto Rico.
In CBO’s view, and in keeping with guidance specified by the 1967 President’s Commission on Budget Concepts, a control board established under H.R. 5278 should be considered a federal entity largely because of the extent of federal control involved in its establishment and operations. Because it would be a federal entity, all cash flows related to the board’s administrative costs should be recorded in the federal budget. On that basis, over the 2017-2026 period, CBO estimates that enacting H.R. 5278 would:
Increase direct spending by $370 million for the board’s administrative costs;
Increase revenues—from amounts transferred to the oversight board by the government of Puerto Rico to cover the board’s expenses—by $370 million; and
Have no significant net effect on the federal deficit.
In addition, CBO estimates that completing various reports and administrative requirements specified by the bill would cost about $1 million in 2017; such spending would be subject to the availability of appropriated funds.
Pay-as-you-go procedures apply because enacting the legislation would affect direct spending and revenues. CBO estimates that enacting the legislation would not increase net direct spending or on-budget deficits in any of the four consecutive 10-year periods beginning in 2027.
H.R. 5278 contains intergovernmental and private-sector mandates as defined in the Unfunded Mandates Reform Act (UMRA). CBO estimates that the aggregate costs of the mandates on public entities would exceed the annual threshold established in UMRA for intergovernmental mandates ($77 million in 2016, adjusted annually for inflation). Because CBO is uncertain about how claims by creditors would be affected and the amount of losses that would occur as a result of the bill, CBO cannot determine whether the aggregate cost of the mandates on private entities would exceed the annual threshold established in UMRA for private-sector mandates ($154 million in 2016, adjusted annually for inflation).