Massive Safety Net Loopholes Hurt Poor Puerto Rican Residents
On November 9, the Supreme Court heard oral arguments as to whether residents of Puerto Rico are eligible to receive Supplemental Security Income (SSI) payments. SSI is a federal program which aids low-income seniors and adults with disabilities, especially those with meager Social Security benefits. It also supports children with disabilities, thereby providing a crucial lifeline to three vulnerable groups.
Although the case is specific to SSI, it raises a broader question about Puerto Rico’s exclusion from the federal safety net. Residents of the island receive normal Social Security benefits, but otherwise, the safety net often treats Puerto Rican residents differently from those residing in the states. Moreover, Puerto Ricans are actually in greater need of safety net benefits than people on the mainland, given that the island’s poverty rate of 43.5 percent is nearly four times the national average. Fortunately, the Build Back Better Act would make Puerto Rican residents eligible for many of the same benefits available to all other U.S. citizens, thus boosting the material well-being of many low-income people on the island.*
Residents of Puerto Rico often receive diminished safety net benefits
Residents of Puerto Rico are not denied all benefits. Rather, federal law often contains odd carveouts for people on the island. For example, until earlier this year, Puerto Rican families were only eligible for the child tax credit (CTC) if they had three or more children. Before 2021, a poor mainland family with two children could receive up to $2,800 of CTC benefits, while similar Puerto Rican families received nothing.
In other instances, Puerto Rico is given block grants that substitute for normal safety net programs. For example, in place of SSI, Puerto Rico receives the Aid to the Aged, Blind, and Disabled (AABD) block grant. And in place of the Supplemental Nutrition Assistance Program (SNAP), Puerto Rico receives the Nutrition Assistance Program (NAP) block grant. While in theory these block grants could provide Puerto Rico with the same funding as under normal guidelines, in practice, they have resulted in severe cuts to programs for the poor.
In 2014, the Government Accountability Office (GAO) examined how Puerto Rico’s unique setup affects its safety net funding.** Using data from 2010 and 2011, the GAO found that annual spending would be about $4 billion higher if Puerto Rican residents were eligible for normal benefits. Four key programs were responsible for more than 94 percent of that spending gap: SSI, Medicaid, Medicare, and the (refundable portion of) the Earned Income Tax Credit (EITC). If residents of Puerto Rico received normal benefits, spending would also increase for SNAP, the CTC, and the American Opportunity Tax Credit (AOTC). Figure 1 depicts the GAO’s results; it uses 2011 data for SSI, Medicaid, CHIP, and SNAP, and 2010 data for Medicare as well as the three tax credits.
It’s unclear whether this $4 billion gap increased or decreased during the 2010s.*** Yet one fact will almost certainly have remained the same: In Puerto Rico, the AABD block grant—which substitutes for SSI—is by far the most underfunded program. According to the GAO, had residents of Puerto Rico been eligible for SSI, the program would have spent an additional $1.5 billion to $1.8 billion in 2011. Instead, the AABD block grant totaled just $24 million, or 1.5 percent of normal funding. As a result, roughly 9 out of 10 potential SSI beneficiaries received no AABD support, and the remaining beneficiaries were given just $58 per month. This funding disparity has grown significantly over time—according to the Center for a New Economy, Puerto Rican residents would have claimed nearly $2.6 billion of benefits had they been eligible for SSI in 2018. By contrast, the block grant hasn’t grown even in nominal terms, with the federal government devoting just $24 million to AABD in 2020. For an island where both disabilities and agedness are far more common than on the mainland, such drastic cuts for the elderly and the disabled are especially harmful.
The American Rescue Plan partially normalized the safety net for residents of Puerto Rico—and the Build Back Better Act moves even closer toward full inclusion
Fortunately, the federal government broke from these exclusionary practices during the COVID-19 crisis. As part of the American Rescue Plan (ARP), Puerto Rican residents were made eligible for the same temporary benefits extended to all other citizens. These benefits included a boost to the nutrition block grant, increased child care funding, enhanced unemployment insurance, and improved housing supports. Puerto Rico also benefitted from increased state and local grants—and it didn’t sit idly on that money as the coronavirus raged. Rather, public officials mounted an aggressive, nonpartisan vaccination campaign that has resulted in an exceptionally low COVID-19 death rate as well as the highest vaccination rate in the country. In fact, the vaccination rate among seniors there is 99.9 percent, showing that investing in Puerto Rico is money well-spent.
But the ARP went beyond just the short-term crisis. Most notably, the ARP permanently increased both the CTC and the EITC for people on the island. Puerto Rican families were made permanently eligible for normal CTC benefits (though not advanced monthly payments), a change that will significantly boost the incomes of all families with children. And while residents of Puerto Rico are not yet eligible for federal EITC benefits, the ARP set aside $600 million per year to subsidize the island’s local EITC.
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Those changes marked a positive, humane break from how the federal government traditionally treated Puerto Rico. But it turns out that was just the beginning of change: The pending Build Back Better (BBB) Act sews up the two most gaping holes in the island’s federal safety net, thereby tremendously improving the lives of impoverished residents.
First, starting in 2024, the BBB Act would extend SSI benefits to residents of Puerto Rico, Guam, American Samoa, and the Virgin Islands. This change will single-handedly restore more than 40 percent of Puerto Rican residents’ foregone federal safety net benefits, thereby reducing both the frequency and depth of poverty on the island.
Second, the BBB Act would boost Medicaid funding for Puerto Rico and the other territories. Medicaid is a joint federal-state program, with the federal government providing a higher share of funding in low-income states than in high-income states. Puerto Rico, which has lower per-capita income than any state in the country, should therefore receive an exceptionally high rate of funding. Instead, Medicaid’s previous funding scheme set the federal share for Puerto Rico and other territories at 55 percent—a lower rate than in 30 mainland states—while also capping the maximum amount of funds through a fixed block grant. As a result, the federal government provided just 15 percent of the island’s Medicaid funding between 2012 and 2019. The BBB Act would raise the funding caps and increase the federal government’s statutory share of Medicaid funding to 76 percent in 2022 and 83 percent starting in 2023. The new rates would provide fairer funding and better reflect Puerto Rico’s status as a low-income area.
Puerto Rico is mired in far deeper poverty than any state on the mainland. If we want that to change, the federal safety net doesn’t need to give Puerto Rican residents special carveouts or preferential treatment—it just needs to start treating them like all other U.S. citizens. Before 2021, the federal government dramatically underfunded many safety net programs in Puerto Rico. The ARP significantly expanded the CTC and the EITC, and the Build Back Better Act would do the same for Medicaid and SSI—the two most underfunded anti-poverty programs on the island. While these changes do not normalize benefits for all safety net programs, they make far more progress than mere incrementalism. They close the majority of the island’s current funding gap, thereby eliminating most of the safety net exclusions currently facing poor residents of Puerto Rico.
* This column refers to “all other U.S. citizens” for the sake of verbal clarity, though in some cases the residents of American Samoa, Guam, the American Virgin Islands, and the Northern Mariana Islands are also ineligible for normal safety net benefits.
** The GAO study analyzed the effects of statehood, but the effects would be the same if Puerto Rico were made eligible for the federal safety net notwithstanding statehood. The Center for American Progress supports political self-determination for Puerto Rico.
*** On the one hand, the rapid decline in the island’s population should have pushed the overall gap down. On the other hand, inflation would pull the gap in the other direction. Moreover, some of the major coverage expansions from the Affordable Care Act (ACA) weren’t implemented until 2014—changes that would affect the current amount of foregone health spending. The ACA increased Puerto Rico’s Medicaid funding but did not set up a health insurance marketplace or offer premium tax credits for people to purchase coverage on the island.
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Policy Analyst, Tax and Budget Policy