Abstract
Puerto Ricos heavy public-sector debt burden is the unintended consequence of a series of policy decisions extending back to the US takeover of the island in 1898. Rather than placing Puerto Rico on a path to statehood, Congress imposed a series of unique governing structures on the island. Today, the Commonwealth of Puerto Rico stands in stark contrast to most American states because it has no meaningful constitutional limits on central government deficits and debt accumulation, while at the same time it operates a number of public corporations that have unsustainable debt loads. Relative to American states, Puerto Ricos government has poor fiscal transparency, low levels of public employee pension funding, and excess government staffing. To address these longstanding problems, Puerto Rico will require a federal control board, debt adjustment, constitutional reform, and privatization of state enterprises.
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