The House passed legislation Thursday authorizing up to $4.9 billion in new disaster loans to Puerto Rico, but those most of those "loans" will probably end as a permanent subsidy that won't be repaid.
The House bill provides for new loans under the Community Disaster Loans program, which is run by the Federal Emergency Management Agency and the Treasury Department. The loans are used to ensure governments hit by disasters have the cash flow to maintain basic services.
Puerto Rico is likely to use up most of the loans. This week, the island's governor, Ricardo Rossello, asked Congress for another $4.6 billion in order to avoid a "massive liquidity crisis" caused by the destruction of most businesses during Hurricane Maria.
The GOP aide said the bill passed Thursday by the House would allow more of these loans to be made, up to $4.9 billion, and that some of them could be made to help the U.S. Virgin Islands, Texas or Florida, although most was expected to be used for Puerto Rico.
But while it's called a disaster loan, most of the loans under the program are never repaid. A senior Republican aide told the Washington Examiner on Thursday that in recent years, about 90 percent of the loans made under the program turn into permanent subsidies, since the communities that use the loans to stay afloat aren't in a position to pay it back.
And while the U.S. wants to be repaid, conditions in disaster areas that desperately need the loans are often not able to pay it back. "In some cases, it's been a 100 percent subsidy," this aide said.
A Congressional Research Service report from July said that under current law, disaster areas that don't see regular revenues recover after three years do not have to pay back the loan.
"The statute provides that the repayment requirement is cancelled if local government revenues are not sufficient to meet operations expenses during a three fiscal year period after a disaster," CRS wrote.
Puerto Rico continues to struggle after being hit by two huge hurricanes over the course of two weeks. Officials said this week that only about 16 percent of the island has power, and a massive rebuilding effort will be needed because so much of the island's infrastructure was old.
The U.S. territory is also carrying a $72 billion debt, and its inability to pay prompted Congress to create a commission to investigate and make recommendations about how to handle the island's debt burden.