Puerto Rican factor: Greener pastures in Florida

In the mid-1990s, manufacturing firms in Puerto Rico employed more than 170,000 people, accounting for 16% of all jobs in the U.S. territory. One reason the sector had grown so large was a set of economic incentives the U.S. used to stimulate development there — including provisions of the U.S. tax code.

Section 936 of the IRS code, for example, exempted American companies from paying taxes on income earned in Puerto Rico, prompting many manufacturing firms to set up subsidiaries. During the administration of President Bill Clinton, however, Section 936 fell victim to perceptions that it amounted to corporate welfare, and Congress passed a law that phased out the tax benefit over a 10-year period.

Since 2006, when Section 936 was fully repealed, Puerto Rico’s economy has contracted in all but one year, and the number of manufacturing jobs has dropped to about 80,000. Among the firms that closed or curtailed operations on the island were pharmaceutical companies that had become a backbone of the manufacturing sector, including Teva Pharmaceutical Industries, GlaxoSmith- Kline, Schering-Plough, Watson Pharmaceuticals and Bristol-Myers Squibb.

Today, nearly half of the island’s population lives below the poverty line, and the unemployment rate is north of 11%.

As the economy tanked, Puerto Rico’s government responded to the crisis by borrowing. Between 2000 and 2015, according to the Tax Foundation, debt rose from about 60% of gross national product to 100% of GNP. The island now owes more than $72 billion.

To try to make payments on its bonds, Puerto Rico cut back on health care and public transportation services, raised taxes, slashed thousands of government jobs and closed more than 100 schools. Crime soared, and some hospitals, forced to lower expenses, shut down floors. With conditions on the island deteriorating, many Puerto Ricans began looking for better opportunities — particularly in central Florida.

An employment pipeline of sorts had already existed between the island and Florida, created as Puerto Ricans came to fill jobs at Disney World after it debuted in 1971.

The island’s economic crisis opened the floodgates, however. Between 2006 and 2014, some 19,500 Puerto Ricans on average moved to the state each year. Today, more than 1 million Puerto Ricans call Florida home, nearly matching the number of Puerto Ricans living in New York.

“The growth of Florida’s Puerto Rican population has been spectacular, from slightly more than 2% of all U.S. Puerto Ricans in 1960 to over 19% in 2014,” says Hispanic migration expert and Florida International University professor Jorge Duany. More than 320,000 Puerto Ricans now live in the greater Orlando area. Only the New York City metro area has a bigger Puerto Rican population.

In the process, Puerto Ricans have displaced Cubans as the main driver of Florida’s Latino population growth. (Unlike other immigrant groups, Puerto Ricans are U.S. citizens at birth, enabling them to move to and from the mainland without restrictions.)

The influx is most visible in Osceola County, where Puerto Ricans make up nearly a third of the population and 60% of all Hispanics. Yard signs tout Puerto Rican candidates for local races, and new restaurants serve mofongo and to stones, popular dishes on the island.

Abigail Campos-Maldonado left Puerto Rico last year to join her husband in Kissimmee, where he had found work in construction after being laid off from a government job on the island. They live in a four-bedroom apartment with their three children.

“This is the first time we’ve had to live in an apartment. In Puerto Rico, we have a house. But it’s OK,” Campos- Maldonado says. “Maybe in two years, it’ll be better for us here.”

Campos-Maldonado, a former probation officer in Puerto Rico, says one of the hardest adjustments has been learning to speak English like an American. To improve her chances of landing a professional job, she’s taking intensive English classes at Valencia College.

On a recent weekday morning, she stood in front of a group of students at Valencia’s Kissimmee campus. Her assignment: Talk for two minutes in English about her favorite appliance. She chose as her topic a trip to Best Buy to pick out Tvs for her children. She ended up talking twice as long as required, struggling only once to find the right words, and earned an “A.”

In addition to language barriers, the new arrivals often face different licensing and certification standards.Re-establishing a career in medicine, education and other professions can take time.

Unemployment among the most recent Puerto Rican arrivals in Florida is twice as high as the statewide average, and some 40% live in poverty (compared with about 22% for other Hispanics and 17% for the state’s population overall, according to the National Council of La Raza, a Hispanic public policy group based in Washington, D.C.).

The Puerto Rican influx has created challenges for local officials. Largely because of the migration, Osceola County’s school district enrollment has grown 10% since 2013. Plans call for three new public schools, including a 3,000-student high school. County voters will decide in November on a halfcent sales tax for schools. (Two-thirds of Puerto Ricans leaving the island are under 45; many are young families with school-age children.)

Nevertheless, most new residents appear to be making the transition to life on the mainland. “Many start off in an occupation that’s not related to what they did in Puerto Rico, but they get the services they need to move up into better jobs,” says Myriam Travieso, a manager at Career Source Central Florida. “We see a lot of success stories.”

And last November, Moody’s Investors Service published a report saying the influx of new Puerto Rican residents was boosting economic growth, especially in Orange County. Over the past five years, the county’s employed Puerto Rican population rose nearly 18%, fueling demand for goods and services and contributing to a turnaround in the local housing market.

The report, titled “Puerto Rico’s Pain is Orange County’s Gain,” also notes the county can manage the growth without cutting into government services because the new residents tend to be of prime working age.

Meanwhile, the island’s financial troubles show no signs of a quick resolution. Last June, as Puerto Rico faced a major debt payment of nearly $2 billion, Congress passed a financial rescue bill, called PROMESA. The new law creates a federal oversight board with authority to restructure Puerto Rico’s debts but provides no bailout for the island. (It also temporarily shields Puerto Rico from being sued for missing debt payments and includes a provision that could lower the island’s minimum wage for workers 25 and younger to less than $7.25 an hour.)

PROMESA’s critics say it does nothing to promote sustained economic growth and won’t reverse Puerto Rico’s decade-long recession or population declines. Proponents acknowledge that rebuilding Puerto Rico’s fiscal health is a long process. Both sides agree things may get worse before they get better.

Duany, the FIU professor, says the exodus from Puerto Rico will continue. “Not only are more people leaving the island, but also fewer people are going back,” he says. “They know economic conditions on the island are not good.”

Campos-Maldonado says she and her family have no plans to return to Puerto Rico. Given the island’s job situation and high cost of living, making ends meet in Puerto Rico is “too difficult,” she says. “Here, with less money, we can do more things.”

» Swing Voters?

Puerto Ricans are U.S. citizens, but as long as they live on the island, their votes have no impact in U.S. presidential elections. If they move to Florida or another U.S. state and register to vote, however, their votes are considered part of that state’s tally. According to the Pew Research Center, Puerto Ricans make up 27% of eligible Hispanic voters in Florida, rivaling the 31% of eligible Hispanics who are Cuban- Americans. Expecting that Puerto Ricans won’t vote for Donald Trump, the presidential campaign of Hillary Clinton has mounted an effort to register Puerto Rican voters in Florida.

» Puerto Rican Concentrations

Puerto Ricans comprised 5% of Florida’s population in 2014. Nearly one in three Osceola County residents is Puerto Rican.

» Florida’s Hispanic Population, 2014

“Should current trends continue, Florida’s Puerto Rican population will surpass that of New York” by 2020, says Jorge Duany, a professor at Florida International University.

» Puerto Ricans in Florida

32.2 – Median age

20.9% – Percent of those 5 years and over who speak English less than “very well”

81.9% – Percent of those 25 years and over who finished high school

17.9% – Percent of those 25 years and over with a bachelor’s degree or higher

$40,465 – Median household income in 2013

71,625 – Number of Puerto Rican-owned businesses in 2012

Sources: U.S. Census Bureau 2014 American Community Survey One-Year Estimates, Center for Puerto Rican Studies at Hunter College; Florida International University professor Jorge Duany