Puerto Rico: Limited Federal Data Hinder Analysis of Economic Condition and DOL's 2016 Overtime Rule

Puerto Rico, the largest and most populous territory of the United States, is subject to congressional authority, although it has broad authority over matters of internal governance. After it defaulted on over $1.5 billion in public debt since 2015, Congress passed PROMESA to establish federal oversight of fiscal affairs. This debt crisis coincided with DOL finalizing the 2016 Overtime Rule, which was invalidated in federal court and is being appealed. PROMESA included a provision for GAO to assess the rule's impact on Puerto Rico and examine its economic condition.

This report (1) examines the economic conditions in Puerto Rico as of the end of 2016, and (2) assesses the potential effects of applying the 2016 Overtime Rule to Puerto Rico. GAO analyzed 1990-2016 economic data and replicated DOL's impact analysis of the 2016 Overtime Rule using 2015 ACS data, the same year used by DOL in its analysis. GAO also reviewed federal laws, regulations, court documents, agency guidance, and criteria related to the federal overtime rule; facilitated group discussions with employers in Puerto Rico from industries most likely to be impacted by the rule; and interviewed relevant stakeholders and labor groups.

Unreliable economic and limited labor data make conditions in Puerto Rico difficult to evaluate.

Puerto Rico Planning Board data show that from 2005 to 2016 Puerto Rico's gross domestic product (GDP), a principal economic indicator, decreased by over 9 percent, after adjusting for inflation, and the devastation brought by Hurricane Maria in 2017 has worsened economic conditions. While the overall downward trend is reliable, GAO found that the Planning Board uses outdated methods to calculate GDP, which results in unreliable data from year to year and can make it difficult for policymakers to fully analyze specific economic needs and develop long-range plans. The Bureau of Economic Analysis (BEA), within the U.S. Department of Commerce (Commerce), does not calculate GDP for Puerto Rico, as it does for the other U.S. territories. For 6 years, BEA has provided technical support to the Planning Board to update its methods and Planning Board officials described plans to do so, but its methods remain outdated. A 2016 Congressional Task Force recommended that BEA calculate Puerto Rico's GDP, and BEA considers it a long-term goal; however, BEA has not taken steps to do so.

Further, Puert Rico has limited labor statistics because it is not included in the Current Population Survey (CPS), which is produced by Commerce's Census Bureau (Census) and Department of Labor's (DOL) Bureau of Labor Statistics (BLS). CPS provides detailed information about employment, such as hours of work and earnings. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) suggested that Census conduct a study to determine the feasibility of expanding data collection to include Puerto Rico. Census officials said that they estimated the cost of such a study but have not yet conducted it. Census officials also cited concerns with data collection burdens. However, without CPS data on Puerto Rico, policymakers are limited in estimating the full economic impact of different policy changes. For example, DOL did not have the data needed to include Puerto Rico in its assessment of the economic impact of DOL's 2016 Overtime Rule. Conducting such a study would help policymakers consider the tradeoffs of including Puerto Rico in the CPS.

GAO used a different dataset—American Community Survey (ACS)—to assess the potential effects of applying the 2016 Overtime Rule, which would have increased the salary level threshold from $23,660 to $47,476 at which executive, administrative, and professional workers would not be eligible for overtime pay. GAO estimated that about 47,250 of 1.06 million workers in Puerto Rico would be affected—that is, they would become eligible for overtime pay. In response to a salary level threshold increase, employers from selected industries in Puerto Rico told GAO that they might increase certain workers' salaries, but cut overtime hours for other workers, and adjust the number of staff. An economist and a labor group official said that employers could respond by adjusting the number of staff or their hours, but the impacts to employers may be limited and the workforce could benefit. In 2017, a federal district court invalidated the 2016 Overtime Rule and the overtime salary threshold remains at $23,660, but that decision is currently on appeal.

GAO recommends that BEA include Puerto Rico in its reporting on GDP and that Census and BLS study the feasibility of including Puerto Rico in the CPS. Commerce agreed with our recommendations and DOL did not have any comments on the report.

Puerto Rico—the largest and most populous territory of the United  States—has a relationship with the federal government that is in some  ways similar to the states and in other ways distinct. As a territory,  Puerto Rico is subject to congressional authority, although it has been  granted broad authority over matters of internal governance. However,  since 2015, Puerto Rico has defaulted on over $1.5 billion in debt  payments. In June 2016, the Puerto Rico Oversight, Management, and  Economic Stability Act (PROMESA) was enacted. The law established a  structure for oversight of Puerto Rico’s fiscal affairs and a process for the  territory to restructure its debts. Puerto Rico’s fiscal decline coincided with  the Department of Labor’s (DOL) publication of a final rule that increased  the salary threshold for overtime pay among executive, administrative, or  professional (EAP) employees in the states and Puerto Rico.

PROMESA included a provision for GAO to conduct an assessment and  issue a report to examine the economic conditions of Puerto Rico as well  as the impact of applying the regulation to Puerto Rico. Prior to its  effective date, during the course of our work, the Federal District Court of  the Eastern District of Texas found the rule to be unlawful. This report (1)  examines the economic conditions in Puerto Rico as of the end of 2016,  and (2) assesses the potential effects of applying the 2016 Overtime Rule  to Puerto Rico.

To address our objectives, we collected data from fiscal years 1990  through 2016, the most recent data available, on Puerto Rico’s gross  domestic product (GDP) from the Puerto Rico Planning Board. We also  collected monthly data from 2016 and 2017 on the flow of passengers on  one-way flights to and from Puerto Rico from the Bureau of  Transportation Statistics (BTS). Additionally, we collected data on  individual earnings from the 2015 5-year American Community Survey  (ACS) because DOL used 2015 data in its analysis of the impact of the  2016 Overtime Rule on the states. We assessed the reliability of the ACS  data by reviewing data documentation and interviewing officials at the  Department of Commerce’s Census Bureau (Census) who use and  maintain the dataset. We determined that the data from these sources  were reliable for the purposes of our report.

For both objectives, we also reviewed relevant federal laws, regulations,  court documents, and agency guidance related to the 2016 Overtime  Rule. In addition, we reviewed federal laws and regulations related to  labor in Puerto Rico, as well as agency guidance related to statistical  measures for Puerto Rico. We also reviewed federal internal control  standards related to management’s use of quality information to achieve  objectives. We interviewed DOL and Department of Commerce officials at  the national level and Puerto Rican government officials. We also  interviewed representatives of national and Puerto Rican employer and  labor organizations and conducted 10 facilitated group discussions in  Puerto Rico with employers in the restaurant, hotel, hospital,  manufacturing, and professional service industries. These are some of  the industries that employ the largest number of people in Puerto Rico  and are among the most likely to be impacted by any changes to the  overtime regulations. We interviewed several economists, identified from  prior work and interviews with agency officials, industry groups, and labor  groups as having expertise relating to the 2016 Overtime Rule or the  Puerto Rico economy, regarding the economic conditions of Puerto Rico  and the potential economic impacts of the 2016 Overtime Rule.

To examine Puerto Rico’s economic condition, we reviewed related GAO  reports concerning Puerto Rico and its economy. To assesses the  potential effects of applying the 2016 Overtime Rule to Puerto Rico, we  used a methodology similar to the one used by DOL in its final economic  impact analysis of the 2016 Overtime Rule in the United States.  Specifically, DOL estimated the number of people who would be directly  affected by the rule because their salary level would make them no longer  exempt from overtime pay. However, while DOL used Census’s Current  Population Survey (CPS) data, which does not include Puerto Rico, we  used ACS data, which does. For more information on our scope and  methodology, see appendix I.

We conducted this performance audit from September 2016 to June 2018  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

Puerto Rico’s Territorial Status and Residents’ Status

Puerto Rico is the most populous U.S. territory with approximately 3.3  million residents. Puerto Rico and its residents are generally subject to  the same federal laws as the states and their residents, except in cases  where specific exemptions have been made, such as with certain federal  programs. Individuals born in Puerto Rico are U.S. citizens and can  migrate freely to the states.

On September 20, 2017, Hurricane Maria, a category 4 storm, devastated  Puerto Rico and left nearly all its residents without potable running water  and electricity. In addition, the existing infrastructure for cellular and  wireless service was rendered virtually useless, hampering  communication. Four months after Hurricane Maria, more than a third of  Puerto Rico’s energy customers remained without power. The lack of  power and communication impeded residents’ ability to return to work.  According to the Federal Emergency Management Agency (FEMA),  rebuilding will take years.

Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA)

PROMESA established a Financial Oversight and Management Board for  Puerto Rico (Oversight Board), and granted it broad powers of fiscal and  budgetary control over Puerto Rico. The Oversight Board is comprised of  seven members appointed by the President of the United States from a  list of recommendations from House and Senate Leadership and one ex- officio member designated by the Governor of Puerto Rico. PROMESA  also established a mechanism through which the Oversight Board could  petition U.S. courts on Puerto Rico’s behalf to restructure debt.

Government Assessment of Puerto Rico’s Economic Condition

Under Puerto Rico law, the Puerto Rico Planning Board (Planning Board)  has the legal responsibility of developing an economic outlook and a  detailed analysis of the economy, including gross domestic product  (GDP), and producing an annual Economic Report to the governor and to  the legislature. The Planning Board Chairperson releases GDP  measures only after approval from the governor’s office, according to  Planning Board officials.

The Department of Commerce’s Bureau of Economic Analysis (BEA)  produces economic accounts statistics that enable government and  business decision-makers, researchers, and the American public to follow  and understand the performance of the nation’s economy. To do this,  BEA collects source data, conducts research and analysis, develops and  implements estimation methodologies, and disseminates statistics to the  public. BEA calculates GDP for the United States, including for the  territories of American Samoa, Guam, the U.S. Virgin Islands and the  Commonwealth of the Northern Mariana Islands. Since 2009 the  Department of the Interior’s Office of Insular Affairs has reimbursed BEA  for estimating and publishing GDP for these territories. This office carries  out the administrative responsibilities of the Secretary of the Interior and  the Assistant Secretary for Insular Areas by coordinating federal policy for  these territories, but does not for Puerto Rico.

Census in cooperation with the Department of Labor’s Bureau of Labor  Statistics (BLS) produces the Current Population Survey (CPS), which  provides statistics on work, earnings, and education. CPS is one of the  oldest, largest, and most well-recognized surveys in the United States,  according to Census. In addition to being the primary source of monthly  labor force statistics, the CPS is used to collect data for a variety of other  studies that provide information on economic and social well-being  factors. The CPS does not collect or report data for Puerto Rico or any of  the other U.S. territories.

Census also produces the American Community Survey (ACS). It is an  ongoing survey that provides national information on a yearly basis that  includes information for the States, as well as for Puerto Rico. The ACS  includes data on jobs and occupations, educational attainment, veterans,  whether people own or rent their homes, and other topics. Information  from the survey generates data that help determine how more than $675  billion in federal and state funds are distributed each year.

DOL’s Wage and Hour Division (WHD) administers the wage, hour, and  child labor provisions of the Fair Labor Standards Act of 1938 (as  amended) that sets the minimum wage and overtime pay standards  applicable to most U.S. workers. The Fair Labor Standards Act (FLSA)  requires employers to compensate employees who are covered by the  act and not specifically exempt from its provisions, at least federal  minimum wage (currently $7.25 per hour) and with premium pay (at one- and-one-half the regular rate) for overtime hours worked in excess of 40  hours in a workweek. There are a number of exemptions from the  requirements of the FLSA. For example, employees working in a “bona  fide executive, administrative, or professional capacity” (EAP) are not  entitled to premium pay for overtime.

The FLSA was enacted to address problems associated with substandard  working conditions by, in part, establishing a floor on wages and a ceiling  on hours, beyond which the employer is required to pay extra wages.  With a requirement for overtime pay, employers would either have to hire  more workers or assume extra wage costs in order to achieve the same  amount of work. Employees would be assured additional pay to  compensate them for the burden of a workweek in excess of 40 hours.  The Minimum Wage Study Commission of 1981 justified the EAP  exemption in part because these employees are associated with higher  base pay, higher promotion potential, and greater job security than most  of the U.S. labor force.

For employers and employees, the practical effects of the exempt  employee classification can be important. An exempt employee may be  required to work as many hours as it takes to complete a task. Although  this may be more than 40 hours per week, the employee will not be  entitled to overtime pay. Thus, an exempt financial manager may be  required to work 60 hours a week and be paid a set weekly salary. On the  other hand, a nonexempt bookkeeper may be required to work 60 hours  per week, but must be paid for 20 hours of overtime, in addition to a set  weekly salary.

The FLSA authorizes DOL to define EAP exemptions. Balancing the  competing interests of expanding exemptions and restricting them, DOL  regulations establish specific tests that must be met before an employee  may be classified as an EAP and exempt from overtime. In general, there  are three tests:

Salary Basis Test. The employee must be paid on a salary basis,  rather than an hourly basis. This means that the employee must be  paid at least the guaranteed amount, regardless of the number of  hours actually worked and the quality or quantity of worked  performed.

Salary Level Test. The employee must meet a minimum salary level  that indicates managerial or professional status.

Duties Test. The employee must have duties and responsibilities  associated with an exempt EAP position.

In 2003, DOL reviewed the regulations for EAP exemptions in response  to a GAO recommendation. Based on its review, in 2004 DOL increased  the minimum “salary level” threshold for an employee to be exempt from  receiving overtime pay to $23,660. In May 2016, DOL again updated  minimum the salary level threshold for EAP employees to be exempt from  receiving overtime pay to $47,476 in the 2016 Overtime Rule (see fig. 1).

In July 2015, DOL proposed updating the overtime regulations relating to  the EAP exemption, and published a notice of proposed rulemaking.  After receiving approximately 294,000 comments, the Secretary of Labor  published the final rule on May 23, 2016 (2016 Overtime Rule). The major  changes included increasing the salary level threshold from $455 per  week ($23,660 annually) to $913 per week ($47,476 annually) and  providing an automatic update to the salary level every 3 years. DOL  estimated that about 4.2 million EAP employees in the states would  become newly entitled to overtime pay under the revised salary level  threshold. At the time of publication, the 2016 Overtime Rule would have  applied to Puerto Rico; however, on June 30, 2016, prior to the rule’s  effective date of December 1, 2016, PROMESA was enacted which, in  part, delayed the applicability of this rule to Puerto Rico.

Prior to the 2016 Overtime Rule going into effect, several states and  various business groups challenged the rule in the Federal District Court  of the Eastern District of Texas. On November 22, 2016, this court issued  a nationwide preliminary injunction preventing DOL from implementing  and enforcing the 2016 Overtime Rule for the duration of the case. In  the interim, the 2004 Overtime Rule salary level threshold for EAP  employees of $23,660 remained in effect. In July 2017, DOL published a  Request for Information to gather additional information to begin the  rulemaking process to replace and update the overtime regulations. In  August 2017, the district court determined that the 2016 Overtime Rule  was unlawful and ordered it invalidated. In October 2017, DOL filed a motion to appeal that ruling with the Fifth Circuit Court of Appeals. In  November 2017, DOL filed a motion to stay the appeal pending the  outcome of its rulemaking, and the Fifth Circuit granted this motion.  DOL’s comment period for the Request for Information ended on  September 25, 2017, and the agency currently is reviewing submissions.  DOL plans to publish a Notice of Proposed Rulemaking on the salary  level threshold for EAP employees in October 2018. Meanwhile, the  2004 Overtime Rule continues to remain in effect as of today, while the  appeal and rulemaking are pending.

In addition to FLSA, workers and employers in Puerto Rico may be  subject to various other federal, Puerto Rican, and local labor laws or  regulations depending on eligibility, exemptions, and other limitations. In  some cases, including sick leave, vacation leave, mandatory meal period,  weekly day of rest, and maternity leave, these laws may be more  generous to workers than federal law, according to Puerto Rico  Department of Labor officials.

Sick leave. Non-exempt employees in Puerto Rico are entitled to  accrue at least 1 day of paid sick leave after working at least 130  hours per month.

Vacation leave. Non-exempt employees in Puerto Rico are entitled to  accrue paid vacation after working at least 130 hours per month. Non- exempt employees hired before January 26, 2017, are entitled to a  minimum monthly vacation leave accrual rate of one-and-a-quarter  days. Non-exempt employees hired on or after January 26, 2017, are  entitled to a minimum monthly vacation leave accrual rate of a half- day during the first year of service; three-quarters of a day after the  first year of service up to the fifth year of service; 1 day after the fifth  year of service up to the fifteenth year of service; and one-and-a- quarter days after the fifteenth year of service. However, in the case  of Puerto Rico resident employers who have less than 12 employees,  the minimum monthly vacation leave accrual rate is a half-day.

Mandatory meal period. Non-exempt employees in Puerto Rico are  entitled to a mandatory meal period between the third and sixth  consecutive hour of work. In general, any employer that employs or  allows an employee to work during the meal period is required to pay  said period or fraction thereof at a pay rate equal to twice or one and  one-half times the regular pay rate, as applicable.

Weekly day of rest. Non-exempt employees in Puerto Rico are  entitled to a mandatory weekly day of rest for every six consecutive  days of work. Work performed during the day of rest is considered  overtime and requires extraordinary compensation, regardless of the  total number of hours that the non-exempt employee worked in the  preceding 6 days.

Maternity leave. Pregnant women in Puerto Rico are entitled to paid  maternity leave 4 weeks before and 4 weeks after childbirth. Working  mothers may opt to take only 1 week of pre-natal leave and extend  post-natal leave up to 7 weeks. Women who adopt a child 5 years old  or younger are entitled to 8 weeks of maternity leave.

The Tax Reform Act of 1976 created the possessions tax credit to assist  Puerto Rico and other insular areas in obtaining employment-producing  investments. The credit effectively reduced federal taxes on income  earned by qualifying U.S. corporations from operations in U.S. insular  areas. However, the credit was repealed in 1996, but existing claimants  were allowed to continue to use the credit during a 10-year phaseout  period ending in 2006. In 2006, we reported that U.S. corporations  claiming the credit dominated Puerto Rico’s manufacturing sector in the  late 1990s and that after the tax credit began to phase out in 1996, the  activities of these corporations decreased significantly.

Unreliable Economic Data Make Conditions in Puerto Rico Difficult to Evaluate

Prior to Hurricane Maria, Puerto Rico Had Already Experienced Prolonged Economic Decline

Puerto Rico Planning Board (Planning Board) data show that Puerto Rico  has been in an economic decline for more than a decade. From 2005 to  2016, Puerto Rico’s GDP decreased by over 9 percent, after adjusting for  inflation. Beginning in 2006, Puerto Rico’s economy experienced declines  in real output in 9 of the next 11 years, as measured by real GDP (see fig.  2). While we have concerns about the precision of the Planning Board’s real GDP measure from year to year, as discussed later, we are confident  in the downward direction of growth.

Puerto Rico officials described the economic contraction as a downward  spiral, where negative economic growth spurred outmigration by skilled  workers, leading to decreased tax revenue and thereby increasing public  debt per capita. This, in turn, they said decreases new investment and the  cycle repeats.

Five Main Factors that Contributed to  Puerto Rico’s Economic Condition  In May 2018, GAO reported on five main  factors it identified through discussions with  officials and experts and a review of literature.  The factors were:  Outmigration and diminished labor force.  Some experts tied Puerto Rico’s negative  economic growth to a steady decline in its  population and labor force since 2005.  According to Census data, Puerto Rico’s  aging population means there are  proportionally fewer individuals of working  age.   Regulatory challenges of doing business  in Puerto Rico. Some experts cited the high  cost to businesses of complying with Puerto  Rico’s regulations, such as the permitting  process for new businesses, and federal laws,  such as the minimum wage law.  High cost of importing goods and energy.  Many of the goods used by businesses in  Puerto Rico must be imported, significantly  increasing their costs and in turn the cost of  doing business. Petroleum, the main source  of electronical energy generation, is a good  whose high cost was particularly  consequential to Puerto Rico’s economic  struggles, according to Puerto Rico  government officials, experts, and a literature  reviews.  Phaseout of the possessions tax credit.  The loss of the tax credit was been cited by  some as a potential cause of Puerto Rico’s  economic decline since 2006; however, there  was no consensus as to the magnitude.  Banking and housing struggles. Puerto  Rico’s banks have struggled and several have  closed. Puerto Rico’s housing prices peaked  in 2009, but fell 25 percent by January 2017,  according to Federal Housing Finance Agency  data.

In our May 2018 report examining the Puerto Rico debt crises, we spoke  with officials and experts, and conducted a literature review, and identified  five main factors contributing to Puerto Rico’s current economic condition:  outmigration and a diminished labor force; regulatory challenges of doing  business in Puerto Rico; the high cost of importing goods and energy; the  phaseout of the possessions tax credit; and banking and housing  struggles (see sidebar).

Puerto Rico was already experiencing a long economic contraction when  Hurricane Maria made landfall in September 2017. Previous U.S. natural  disasters, such as Hurricane Katrina in the Gulf Coast, have had  significant adverse impacts on the economies of the affected regions,  including significant outmigration. Immediately following Hurricane  Katrina, the Gulf Coast experienced a number of challenges to its  economy including a rise in unemployment; an increase in outmigration  and decrease in housing units; a decline in state tax revenue; and a  decline in imports and exports. Puerto Rico may experience similar  challenges. For example, a February 2018 Federal Reserve Bank of New  York press briefing on the impact of Hurricanes Maria and Irma  characterized the 4 percent local job losses in Puerto Rico as  substantial. Further, the briefing indicated that the true economic cost  may be understated because some workers who are still employed likely  suffered a drop in income, there may be unmeasured effects on the  informal economy, and the value people place on quality of life issues are  not measured.

The substantial damage to the territory also accelerated outmigration and  will likely worsen its economic condition. A January 2018 report from the  Puerto Rico government identified the 2017 hurricanes as having a  significant impact on the economy and projected that the population will  decline by 10 percent over the next 2 years and could decline by nearly  20 percent over the next 5 years as people leave the island due to poor  economic conditions. Initial data from the U.S. Bureau of Transportation  Statistics show that 92,284 more people flew out of Puerto Rico with one- way tickets than flew into Puerto Rico in October 2017, the first full month  after Hurricane Maria. That number represents a 255 percent increase  over similar statistics in August 2017 and a 1,195 percent increase over  October 2016 (see fig. 3). By December 2017, 17,281 more people flew  out of Puerto Rico with one-way tickets than flew into Puerto Rico. This is  149 percent increase over similar statistics for December 2016. While the  extent to which citizens of Puerto Rico may return to the territory is  unclear, the initial outmigration could prolong negative economic growth.

Methods Currently Used To Measure Puerto Rico’s Economy Are Outdated and Lead to Unreliable Measures

Outdated methods for measuring GDP make it difficult for the Puerto Rico  government to fully analyze specific economic needs and develop long- range plans. There is no federal statistical measure of Puerto Rico’s  GDP. The U.S. Census’ Economic Census of Island Areas provides  some limited insights into Puerto Rico’s economic performance by  industry, including revenue, payroll, employee count, and inventories.  The Economic Census of Island Areas is updated every 5 years, but does  not include total GDP. Instead, each year, BEA calculates GDP for four  other territories and is reimbursed by the Department of the Interior’s  Office of Insular Affairs for the estimation and publication of this  information.

In contrast, Puerto Rico’s Planning Board calculates GDP, but its  methods are outdated and therefore unreliable, as they do not provide a  precise measure of economic activity. Specifically, a 2011 White House  Task Force Report examining Puerto Rico’s economic challenges found  the Planning Board’s methods were outdated because they did not follow  the same standards used for the rest of the United States. The Task  Force also found that the methodology was not in line with modern  statistical techniques, resulting in a less precise measure of Puerto Rico’s  economic activity. Accurately calculating GDP is necessary to  adequately measure total output of goods and services in Puerto Rico.  GDP is also useful in measuring productivity and conducting monetary  policy, and may be used to develop and apply appropriate policies for  promoting economic growth. For example, a reliable and timely measure  of GDP helps government officials calculate more accurate projections of  tax revenue.

The Planning Board’s method for calculating GDP does not effectively  adjust for inflation because, the methodology uses a fixed-weighted index  method that assumes the structure of the economy—what is being  produced and prices of what is being produced relative to each other—is  roughly constant over time. Further, the Planning Board is using this  method to report inflation adjusted GDP based on the prices in a 1978  “market basket”—a fixed set of goods and services that people buy for  day-to-day living. The Planning Board then uses 1954 as the reference  year in its inflation adjustment to report GDP based on the price of goods  and services. Consequently, the Planning Board’s real GDP measure  may not be accurately adjusted to reflect current purchasing patterns and  inflation in the prices of purchased products.

BEA provides Puerto Rico’s Planning Board with some support in its  calculation of GDP, but does not verify the accuracy of the calculation. In  response to the 2011 White House Task Force findings, BEA began  providing technical assistance and support to the Planning Board in  updating its methods to adjust GDP for inflation and developed a report  with recommendations for updating economic accounts. BEA found that  the Planning Board’s methods did not comply with the internationally  agreed upon standards for compiling measures of economic activity.  Officials said that BEA was helping the Planning Board update its  methods; however, a change in the level of communication slowed the  update from 2013 through 2014. As a result, the Planning Board  continued to use the same outdated methods.

In January 2017, the Planning Board and BEA signed an agreement to  modernize Puerto Rico’s economic accounts and align them with  international guidelines. The agreement also tasked the Planning Board  with providing deliverables in regular intervals beginning in spring 2017,  including publication of alternative estimates of GDP that implement steps  towards modernization. BEA officials told us that they are providing  support to the Planning Board, and Planning Board officials told us they  are working on updating the methodology. However, as of March 2018,  the Planning Board had not yet produced all of the agreement  deliverables, including publication of alternative GDP estimates.

Given the impact of Hurricane Maria, it may be challenging for Puerto  Rico to modernize its GDP measures. Planning Board officials told us in  August 2017 that they were working to update their GDP methodology, so  that it is similar to the one used by BEA, and that they would be updating  to a 2007 “market basket.” Board officials said the new GDP figures  were expected to be completed in December 2017. Their release was  delayed in the aftermath of Hurricane Maria, but officials said they now  expect to release GDP measures using the new methodology in summer  2018. Officials added that they plan to continue publishing GDP  measures using the old methodology along with the new one for trend  comparisons. The Planning Board and BEA estimated the cost to the  Puerto Rico government to modernize its GDP measure is $2 million — including staff time and computing infrastructure.

A 2016 bi-partisan Congressional Task Force on Economic Growth in  Puerto Rico (2016 Congressional Task Force) recommended BEA  calculate GDP for Puerto Rico as it does for the states and other  territories, and BEA’s long-term goals include this objective. Further, in  February 2018, the Financial Oversight and Management Board for  Puerto Rico recommended that the Governor of Puerto Rico support  efforts to implement the Congressional Task Force recommendation. BEA  officials told us one of the agency’s long-term goals is calculating GDP for  Puerto Rico and they have discussed including Puerto Rico in its  reporting of GDP. Officials noted that including Puerto Rico in GDP  reporting would require additional funds similar to reimbursements it  received for the other four territories’ calculations.

BEA’s mission is to promote a better understanding of the entire U.S.  economy by providing the most timely, relevant, and accurate economic  accounts data in an objective and cost-effective manner. BEA has  provided technical assistance and support for 6 years; however the  Planning Board has not yet modernized its methods to report a reliable  GDP measure, and BEA has not included Puerto Rico in its reporting  efforts. Federal standards for internal control state that management  should use quality information to achieve the entity’s objectives. The  lack of a federal GDP measure for Puerto Rico makes it difficult to make  reasoned policy recommendations, adds uncertainty around issues  affecting Puerto Rico’s economy, and makes it more difficult to identify  fiscal and economic recovery plan priorities. Without modernized GDP  methods, it remains difficult to compare Puerto Rico’s GDP with the rest  of the United States and the other four territories for which BEA calculates  GDP. Finally, without such a measure of GDP, federal policy makers and  private investors must rely on various and sometimes unreliable data  sources to try to establish common facts about Puerto Rico’s economic  condition—an impediment in reaching consensus, engaging in meaningful  policy discourse, and investment.

U.S. Government Labor Statistics for Puerto Rico

Federal labor statistics for Puerto Rico are incomplete because the  Current Population Survey (CPS) does not include Puerto Rico and four  other U.S. territories, and the American Community Survey (ACS)  primarily provides data on population and housing, rather than labor.  PROMESA recognized this and recommended that Census consider the  feasibility of including Puerto Rico, and the other territories in the CPS.  Specifically, PROMESA suggested that Census conduct a study to  determine the feasibility of expanding data collection to include Puerto  Rico and the other four U.S. territories in the CPS and if necessary,  request the funding required to conduct this feasibility study as part of its  budget submission to Congress for fiscal year 2018. Census officials  told us they estimate a feasibility study including all of the U.S. territories  will cost $1.1 million in fiscal year 2018, but did not request funding. The  2016 Congressional Task Force also recommended that BLS and Census  take reasonable steps to include the territories.

Federal standards for internal control state that management should use  quality information to achieve the entity’s objectives. CPS data are  intended to provide a comprehensive body of labor data that can be used  to keep the nation informed about the economic and social well-being of  its people, but Census and BLS are unable to report on the economic and  social well-being of a segment of the nation and its people. Census  officials told us they are concerned about unduly burdening Puerto Rico  citizens with data collection efforts that would provide state level  estimates. However, Census has not studied the feasibility of including  Puerto Rico in the CPS, which would inform officials’ decision on whether  to include Puerto Rico and the other territories in the CPS. By conducting  such a study, Census would better understand the tradeoffs of including  or continuing to omit Puerto Rico from CPS, including the extent to which  it can be considered in public policy decisions, such as the 2016 Overtime  Rule.

Increasing the Overtime Threshold Would Affect a Small Percentage of Workers in Puerto Rico and Could Affect Employment Conditions

The 2016 Overtime Threshold Increase Would Likely Affect Less Than 5 Percent of the Workforce in Puerto Rico

Our estimates suggest that a larger percentage (about 4.5 percent) of  Puerto Rico’s total workforce would have been affected by the Overtime  Rule than the states (about 2.6 percent), based on our analysis of ACS  data and DOL’s analysis of CPS data. Specifically, DOL’s analysis  estimated that of 159.9 million wage and salary workers in the states,  about 4.2 million (or about 2.6 percent) might be directly affected by the  2016 Overtime Rule. In our analysis of the Overtime Rule for Puerto  Rico, we estimated that about 47,250 (about 4.5 percent) of 1.06 million  wage and salary workers in Puerto Rico would have been directly  affected (see fig. 4).

The lack of data from CPS on Puerto Rico and the effects of Hurricane  Maria hinder our ability to fully assess the potential effect of the 2016  Overtime Rule on Puerto Rico. Instead, we used data from the 2015 5- year ACS to estimate the impact of the Overtime Rule on Puerto Rico.  The ACS employment data lack multiple variables available in the CPS;  hence, we were limited in what we could estimate. For example, DOL’s  estimate for the states included the wealth transfer from employers to  employees, which is important for understanding the economic effects of  the 2016 Overtime Rule. We do not provide similar insights because of the difference in variables in the ACS and CPS. (See table 2 in appendix I  for the differences between our analysis and that of DOL.) Additionally,  DOL estimated the effect the Overtime Rule would have on the probability  that a worker had multiple jobs, but the limitations of the data we used  kept us from performing this analysis.

Our analysis estimates that the impact of the 2016 Overtime Rule in  Puerto Rico would have been largely concentrated in four industries:  education and health services, wholesale and retail trade, public  administration, and financial activities. We estimated that in these four  industries about 76 percent (about 36,000) of our approximate 47,250  total workers would have been directly affected (see table 1). The largest  directly affected industry, education and health services, makes up about  43 percent (about 20,000) of this total.

Raising the Overtime Threshold Could Increase Wages for Some, but Reduce Overall Hours and Employment in Certain Industries

Depending on how employers respond to an increase in the overtime  threshold, the effect of amending the overtime regulations could vary  across employees. Similar to employers in the states, employers in  Puerto Rico could respond to changes in the overtime regulations based  on the current employee’s salary and work schedule by: 1) making no  changes, 2) paying overtime, 3) raising salaries, or 4) adjusting hours  worked (see fig. 5). In its analysis of the impact of the 2016 Overtime  Rule in the states, DOL estimated the largest impact would be an  aggregate transfer of income from employers to employees, which would  be seen as a positive for some employees (e.g., increased pay, fewer  hours for same pay, or new hires) and a negative for others (e.g.,  employers in our facilitated discussion groups said they would have  layoffs, move employees from salaried to hourly, or lower benefit  amounts).

While we were unable to conduct a full impact analysis identical to DOL’s  because of data limitations, we held facilitated discussion groups, to gain  insight into how employers would have responded if the 2016 Overtime  Rule was implemented in Puerto Rico. Views reported by participants in  these groups may not be representative of all Puerto Rico employers, but  they provide illustrative examples of the types of steps employers might  have taken if the 2016 Overtime Rule were implemented. Employers in 2  of our 10 discussion groups said they would make staff adjustments by  increasing the salary of some employees while, in some cases,  minimizing the role of others. However, employers in 9 of our 10 of our  discussion groups said they might also need to convert the remaining  employees to part-time or hourly work, reduce their hours, or lay them off. “We have 125 exempt employees. The rule  change would impact our labor costs a lot. We  would need to minimize employees/hours to  reduce the labor costs. We may adjust our  contribution to medical plans to make up for  the increased labor costs.”  “With the new rule, half  would  need to be paid overtime or increase salary.  This would leave us not enough flexibility to  cover the hours or operation.”  “We have a total of 850 employees. About 8  would be affected by the change. Of those 8,  3 we would boost their salary; the others will  be switched to hourly. This may affect their  benefits.”

Through these facilitated discussion groups, we also learned that  employer responses to the 2016 Overtime Rule may differ by industry.  Employers in 3 of 10 industry discussion groups said they would be able  to absorb some of the higher costs associated with an increase in the  Overtime Rule threshold. For example, some manufacturers told us it  would not be difficult for their businesses to absorb these additional costs,  particularly if the salary threshold was at a somewhat lower level.  Similarly, some hotel employers told us they would be able to absorb  costs associated with the change across their many hotel locations, but  others said they may not be able to assimilate the threshold increase.  Hospital employers who participated in our facilitated discussion groups  told us they have lower margins and face threats of closure even without  the threshold increase. Some restaurant and hotel employers who  participated in our facilitated discussion groups said they may be unable  to pass associated increased labor costs to consumers; some would have  to require exempt workers to work longer hours and reduce the number of  full time employees or hours (see sidebar).

Employers could respond by adjusting staff if the 2016 Overtime Rule  goes into effect, but the impacts to employers may be limited and the  workforce could benefit from the 2016 Overtime Rule change according to  our interviews with 1 economist and 1 labor group official. One   economist suggested that instead of having two employees who work 60  hours each, an employer might hire a third employee so that each works  40 hours. Additionally, this economist said an increase to the threshold  would not be as burdensome to business, because employee wages  have risen above the current overtime salary threshold. One labor group  representative suggested that the 2016 Overtime Rule would have a  minimal impact because very few workers in Puerto Rico earn enough to  meet the 2004 salary threshold. Further, one economist said that under  the current threshold, workers work excessive hours and do not have the  same bargaining power. An increased overtime threshold would improve  these dire working conditions. Specifically, this economist said that  implementing the 2016 Overtime Rule would encourage firms to hire  more workers, provide employees with more bargaining power, and help  prevent worker exploitation.

One economist said implementing the 2016 Overtime Rule only in the  states could increase the wage differential between Puerto Rico and in  turn increase outmigration from Puerto Rico. One member of the Puerto  Rico Economic Administration said that if Puerto Rico were to have a  lower threshold than the U.S. mainland the effects might be worse than  those caused by the increased labor costs of implementing the higher  threshold. Another economist said that while hours may be adjusted or  layoffs may occur immediately following implementation of the Overtime  Rule, these impacts would not be a major concern within 3 to 4 years.

Puerto Rico has long been experiencing severe economic challenges and  its default on over a billion dollars of debt payments since 2015 has  focused the need for attention to this territory. As Puerto Rico officials  were in the process of taking action to update their methodology for  reporting inflation-adjusted GDP, Hurricane Maria exacerbated the  territory’s economic challenges. FEMA estimates that it may take years  for Puerto Rico to recover. The lack of accurate economic and  comprehensive labor data hinders policymaking, including a  determination of the potential impact of changes to the overtime  regulations. To help address Puerto Rico’s economic challenges now and  in the future, the federal government and investors need updated and  reliable data. Going forward, having BEA include Puerto Rico in its  calculation of GDP would provide federal and local authorities, as well as  businesses and investors, with reliable data on Puerto Rico’s economic  condition that can be directly compared with the United States and other  territories. BEA’s long-term goals include measuring Puerto Rico’s GDP,  but having reliable data now would help address significant economic  challenges in the short term. Likewise, studying whether including Puerto  Rico in the Current Population Survey is feasible would allow DOL and  other policymakers to be better positioned to fully consider the cost of  including the territory against the implications of exclusion.

We are making a total of three recommendations, including two to  Commerce and one to DOL. Specifically:  The Secretary of Commerce should ensure that the Bureau of Economic  Analysis includes Puerto Rico in its reporting on gross domestic product,  as it does for four other U.S. territories. (Recommendation 1)

The Secretary of Commerce, in cooperation with DOL’s Bureau of Labor  Statistics, should conduct a study on the feasibility of including Puerto  Rico in its reporting of the Current Population Survey. (Recommendation  2)

The Secretary of Labor, in cooperation with the Commerce’s Census  Bureau, should conduct a study on the feasibility of including Puerto Rico  in its reporting of the Current Population Survey. (Recommendation 3)

We provided a draft of the report to the Government of Puerto Rico, the  Department of Commerce (Commerce), and the Department of Labor  (DOL) for review and comment. In written comments that are reproduced  in appendix IV, Commerce agreed with the recommendations made to it.  In an email, DOL’s Deputy Assistant Secretary for Policy stated that the  agency did not have any comments on the report. In addition, Commerce  and the Government of Puerto Rico provided technical comments, which  we incorporated into the report as appropriate.

We are sending copies of this report to the appropriate congressional  committees, the Government of Puerto Rico, the Secretary of the  Department of Commerce, the Secretary of the Department of Labor, and  other interested parties. In addition, this report is available at no charge  on the GAO website at http://gao.gov.

If you or your staff have any questions about this report, please contact  Cindy Brown Barnes at (202) 512-7215 or Oliver Richard at (202) 512-  8424.You may also reach us by e-mail at brownbarnesc@gao.gov or  richardo@gao.gov. Contact points for our Offices of Congressional  Relations and Public Affairs may be found on the last page of this report.  GAO staff who made key contributions to this report are listed in appendix  V.

Appendix I: Objectives, Scope, and Methodology

Our review addressed: (1) the economic conditions in Puerto Rico as of  the end of 2016; and (2) the potential effects of implementing the 2016  Overtime Rule on Puerto Rico’s economy.

To evaluate the current economic conditions in Puerto Rico quantitatively,  we analyzed (1) data from the Puerto Rico Planning Board’s (Planning  Board) Statistical Appendix for the Governor that includes data on Puerto  Rico’s gross domestic product (GDP) from 1990 through 2016 and (2)  passenger data for Puerto Rican airports for years 2016 and 2017 from  the Bureau of Transportation Statistics (BTS).

To analyze the real GDP of Puerto Rico from 1990 through 2016 and  Puerto Rico GDP by industry for 2016, we relied on data from the  Planning Board’s Statistical Appendix for the Governor. We interviewed  Planning Board officials responsible for producing the annual GDP  estimates to understand how the data were prepared and any limitations  to the data, and concluded that the while we have concerns over the  precision of real GDP data, they were sufficiently reliable for our purposes  of determining the direction of growth.

To analyze the flow of passengers through Puerto Rican airports before  and after Hurricane Maria, we relied on the BTS’ monthly passenger data  for 2016 and 2017 as accessed through Diio Mi: Market Intelligence for  the Aviation Industry. Diio Mi is a private contractor that provides online  access to U.S. airline financial, operation, and passenger data. We  reviewed the relevant documentation of the dataset and previous GAO  reports and found the dataset sufficiently reliable for our purposes.

To assess the potential effects of the 2016 Overtime Rule on Puerto Rico  quantitatively, we analyzed and reported data from the American  Community Survey (ACS) for calendar year 2015, because DOL used  2015 data in its impact analysis of the Overtime Rule on the states. The  ACS is a national survey designed and administered by the Census  Bureau (Census), and it contains data on individual earnings. Since 2005,  the ACS has also included the Puerto Rico Community Survey (PRCS)  which extends the survey through Puerto Rico. Our data set selection  process included interviews with current and former agency officials as  well as review of dataset documentation such as data handbooks, data  dictionaries, and guidance on the different versions of data available. The  ACS is conducted annually with estimates based on 1-year and 5-year  data with benefits and drawbacks for each version. The 1-year ACS is  updated the earliest and gives the most current data; however, according  to Census’ guidance on the different ACS samples, it also contains the  smallest sample size and is more appropriate for analyzing large  populations than small ones. The 5-year ACS is the most reliable data,  according to Census’ ACS guidance, as it includes the largest population  size, which can be used to analyze small populations; however, the 5- year ACS is the least current version of the data. Additionally, while the  2015 5-year ACS data were not the most recent available, we used them  because the Department of Labor (DOL) used 2015 data in its impact  analysis of the 2016 Overtime Rule for the states. Based on these  benefits and limitations, we chose to use the 2015 ACS 5-year  estimates. Estimates produced from ACS data are subject to sampling  error. For all of our estimates we weighted observations based on the  individual weight. We compared our estimates of values derived from our  weighting procedures to those published by the DOL and found them to  be consistent. In addition to estimates, we generated standard errors or  the margin of error for the 95 percent confidence interval, and report them  with estimates in figures and tables. Based on our data checks, reviews  of documentation and interviews with agency officials, we found the ACS  data to be sufficiently reliable for our purposes.

In addition to the quantitative data collected, we reviewed relevant federal  laws, regulations, court documents, agency guidance, and internal  controls related to the 2016 Overtime Rule, labor in Puerto Rico, and  federal statistical measures for Puerto Rico. Additionally, we reviewed  previous GAO reports on Puerto Rico and its economy. We interviewed  DOL and Commerce officials at the national level. We interviewed Puerto  Rican government officials to better understand current economic  conditions and the statistical measure used to reflect the economic  conditions. We interviewed representatives of national and Puerto Rican  employer and labor organizations to gain their perspectives on the impact  of the 2016 Overtime Rule and the condition of the economy. We  conducted 10 facilitated group discussions with Puerto Rican employers  in the manufacturing, restaurant, hotel, hospital, and professional services  industries.  These are some of the industries that employ the largest  number of people in Puerto Rico and are among the most likely to be  impacted by the 2016 Overtime Rule. Employers were selected to  represent both large and small business perspectives in each industry.  Views reported by participants in these groups are not representative of  those of all Puerto Rico employers and for that reason are not  generalizable. We also interviewed four economists, identified from prior  work and interviews with agency officials, industry groups, and labor  groups as having expertise relating to the 2016 Overtime Rule or the  Puerto Rico economy, regarding the economic conditions of Puerto Rico  and the potential economic impacts of the 2016 Overtime Rule.

Analysis of American Community Survey Data

For our analysis of the effects of the 2016 Overtime Rule on Puerto Rico,  we mirrored the analysis conducted by DOL for the impacts of the rule on  the United States. While the methodologies are similar, the DOL analysis  used the Current Population Survey (CPS) data that do not include  Puerto Rico. The ACS data we use serves a similar role; however, we  made a few adjustments to the analysis in light of available data.  Specifically, in the ACS, there is no variable identifying whether the  individual works an hourly job. In order to simulate the removal of hourly  workers from the sample, we randomly assign hourly worker designation  to the same proportion of the population that are classified as hourly  workers in DOL’s analysis (41.01 percent). A few assumptions are  associated with this manipulation: 1) We are assuming that the proportion  of the population that works an hourly job in Puerto Rico is similar to that  of the 50 states, and 2) when we perform industry and region analyses,  we assume the same hourly worker proportion across all industries and  regions. Additionally, in its final rule, DOL analyzes the impact of the 2016  Overtime Rule on individual worker’s propensity to work multiple jobs; the  ACS does not identify workers employed in multiple jobs and we could  not perform this analysis. Also, the CPS data contain several variables on  the number of hours worked that allowed DOL to analyze who likely  works overtime on a regular basis. While the ACS includes a variable  indicating the usual number of hours worked per week over the past year,  we found it does not capture the schedule fluctuations as accurately as  the CPS variables. As such, we do not calculate the dollar amount  transfers from employers to employees and dead weight losses, or the  loss in economic efficiency from the rule that DOL shows in its analyses.  To the extent possible, we used DOL’s methodology to determine the  potential effect of the 2016 Overtime Rule in Puerto Rico. However, due  to data limitations there were some ways in which our approach differed  from the approach used by DOL.

In DOL’s analysis, the sample includes only the workers covered by its  regulation. We adapt the sample to match the DOL’s analysis as follows:  1) remove military personnel, unpaid volunteers, self-employed  individuals, clergy and other religious workers, and federal employees, 2)  remove blue-collar workers and workers paid hourly; and 3) remove  workers who are categorized under occupation and industry codes that  are generally exempt under other exemptions.

For consistency, our analysis makes the same adjustments to our sample  that DOL makes in its analysis. Since we use the 2015, 5-year ACS data,  we first put all wages into 2015 levels using ACS defined variables. Next,  we inflate from 2015 to 2017 levels using the calendar year consumer  price index (CPI-U). Just as in DOL’s analysis, we do not know whether  any specific worker satisfies the duties test of the 2016 Overtime Rule, so  we follow the same steps DOL took in its final rule. These steps include  using DOL’s probabilities that specific job codes meet the duties test and  assigning the probability to individual workers using the gamma  distribution with the shape parameter alpha was set to the squared  quotient of the sample mean divided by the sample standard deviation,  and the scale parameter beta was set to the sample variance divided by  the sample mean. Additionally, DOL explicitly removes certain industries  and occupations from the sample and we follow its methodology exactly  to remove these. Finally, to estimate the population that would have been  affected by the 2016 Overtime Rule, we limit the sample to only those  above the 2004 overtime salary threshold ($23,660) and below the 2016  salary threshold ($47,476) just as DOL did in its analysis.

DOL’s estimates for industries and regions use different groupings than  those provided in the ACS; however, since the ACS variables use the  same coding but, a finer level, we can recreate the variables used in  DOL’s analysis. For example, we used Census guidance on converting  2012 industry codes to create a major industry variable from the ACS  industry codes. Similarly, to compare our estimates to DOL estimates by  region, we take the ACS data, which is reported state-by-state, and put it  into larger regions, such as “Northeast.”

Appendix II: Effects of Implementing Alternative Overtime Rule Thresholds on Puerto Rico

Table 3 shows how different populations of workers would be affected by  applying alternative overtime thresholds in Puerto Rico. For our analysis,  in order to more closely replicate Department of Labor’s (DOL) design, we  use the same alternative salary thresholds DOL analyzed in its final rule,  which are defined as follows:

Alternative 1: Inflate the 2004 Level - takes the 2004 overtime  threshold and inflates it to fiscal year 2015 dollars using the consumer  price index. This method leads to an overtime threshold of $570 per  week or $29,640 per year.

Alternative 2: 2004 Methodology - uses the 2004 final rule and  updates it with data from the third quarter of 2015. This method leads  to an overtime threshold of $596 per week or $31,015 per year.

Alternative 3: Kantor Long Test - is based on a 1958 Report and  Recommendations on Proposed Revision of Regulations, Part 541, by  Harry S. Kantor. This methodology uses data collected on actual  salaries paid to executive, administrative, or professional (EAP)  employees grouped by geographic region, industry group, number of  employees, and city size. DOL then used the long-duties test such  that no more than about 10 percent of exempt EAP employees in the  lowest-wage region, lowest-wage industry, smallest establishment  group, or smallest city group will fail to meet the test. This method  leads to a threshold of $684 per week or $35,568 per year.

Alternative 4: 40th Percentile of Full-time Salaried Workers  (Nationally) - takes all full-time salaried workers in the United States  and calculates the 40th percentile of their wages. This method leads  to a threshold of $972 per week or $50,544 per year.

Alternative 5: Kantor Short Test - is also based on the Kantor method  described in the third alternative, but uses the methodology  associated with the short-duties test instead of the long-duties test. To  do this, DOL took the $684 per week of the Kantor Long Test and  inflated it by the average percent wage difference between the long  and short test from 1949 through 1975 (149 percent). Multiplying $684 per week by 149 percent yields a Kantor Short Test threshold of  $1,019 per week or $52,984 per year.

Alternative 6: Inflate 1975 Short Test Level - takes the 1975 short- duties test salary level and inflates it to fiscal year 2015 dollars. This  leads to a threshold level of $1,100 per week or $57,205 per year.

Appendix III: Data Checks for American Community Survey

The following tables show how the Department of Labor’s (DOL) analysis  of the 2016 Overtime Rule in the United States using the analysis of  Current Population Survey (CPS) data compares to our analysis using the  American Community Survey (ACS) data. This analysis was conducted  to support using ACS data as an alternative to CPS data. The  methodologies used in our analysis and the DOL analysis are similar, but  some adjustments were made to our analysis to attempt to replicate the  DOL’s analysis of CPS data because variables were missing from the  ACS data. Between the slightly different methodologies and different data  sets, we expect the estimates to be of similar magnitudes, but not  necessarily identical. The results indicate that our adjustments to the  methodology and use of a different data yield similar results and add  validity to our estimates for Puerto Rico.

Appendix IV: Comments from the Department of Commerce

Appendix V: GAO Contacts and Staff Acknowledgments

In addition to those named above, Kimberley Granger and Seyda  Wentworth, Assistant Directors; Amber Yancey-Carroll, Analyst-in- Charge; Pedro Almoguera and Michael Naretta made key contributions to  this report. Also contributing to this report were Jeffrey Arkin, David  Blanding, David Chrisinger, Sarah Gilliland, Robin Marion, Jonathan S.  McMurray, Sheila R. McCoy, Thomas Moscovitch, Dominic Nadarski,  Mimi Nguyen, Karissa Robie, Benjamin Sinoff, Almeta Spencer, Amy  Sweet, Anjali Tekchandani, Rosemary Torres Lerma, and Kathleen van  Gelder.

View Spanish version of Highlights (PDF, 1 page).

After Puerto Rico defaulted on $1.5 billion in debt payments, Congress established federal oversight of the U.S. territory's fiscal affairs. This debt crisis coincided with a new Labor Department rule that made more people eligible for overtime pay. A federal court invalidated the rule and that decision has been appealed.

Puerto Rico's GDP has been trending down since 2000

There is limited federal data on its economy

The 2016 Overtime Rule would have affected about 4.5% of its workforce, but limited data hindered full analysis

We recommended that agencies work to include Puerto Rico in more federal economic and labor data reporting.


Navy Readiness: Actions Needed to Address Persistent Maintenance, Training, and Other Challenges Facing the Fleet

Since January 2017, the Navy has suffered four significant mishaps at sea that resulted in serious damage to its ships and the loss of 17 sailors. Three of these incidents involved ships homeported in Japan. In response to these incidents, the Chief of Naval Operations ordered an operational pause for all fleets worldwide, and the Vice Chief of Naval Operations directed a comprehensive review of surface fleet operations, stating that these tragic incidents are not limited occurrences but part of a disturbing trend in mishaps involving U.S. ships.

This statement provides information on the effects of homeporting ships overseas, reducing crew size on ships, and not completing maintenance on time on the readiness of the Navy and summarizes GAO recommendations to address the Navy's maintenance, training, and other challenges.

In preparing this statement, GAO relied on previously published work since 2015 related to the readiness of ships homeported overseas, sailor training and workload issues, maintenance challenges, and other issues; GAO updated this information, as appropriate, based on Navy data.

GAO's prior work shows that the Navy has increased deployment lengths, shortened training periods, and reduced or deferred maintenance to meet high operational demands, which has resulted in declining ship conditions and a worsening trend in overall readiness. The Navy has stated that high demand for presence has put pressure on a fleet that is stretched thin across the globe. Some of the concerns that GAO has highlighted include:

Degraded readiness of ships homeported overseas : Since 2006, the Navy has doubled the number of ships based overseas. Overseas basing provides additional forward presence and rapid crisis response, but GAO found in May 2015 that there were no dedicated training periods built into the operational schedules of the cruisers and destroyers based in Japan. As a result, the crews of these ships did not have all of their needed training and certifications. Based on updated data, GAO found that, as of June 2017, 37 percent of the warfare certifications for cruiser and destroyer crews based in Japan—including certifications for seamanship—had expired. This represents more than a fivefold increase in the percentage of expired warfare certifications for these ships since GAO's May 2015 report. The Navy has made plans to revise operational schedules to provide dedicated training time for overseas-based ships, but this schedule has not yet been implemented.

Crew size reductions contribute to sailor overwork and safety risks: GAO found in May 2017 that reductions to crew sizes the Navy made in the early 2000s were not analytically supported and may now be creating safety risks. The Navy has reversed some of those changes but continues to use a workweek standard that does not reflect the actual time sailors spend working and does not account for in-port workload—both of which have contributed to some sailors working over 100 hours a week.

Inability to complete maintenance on time: Navy recovery from persistently low readiness levels is premised on adherence to maintenance schedules. However, in May 2016, GAO found that the Navy was having difficulty completing maintenance on time. Based on updated data, GAO found that, in fiscal years 2011 through 2016, maintenance overruns on 107 of 169 surface ships (63 percent) resulted in 6,603 lost operational days (i.e., the ships were not available for training and operations).

Looking to the future, the Navy wants to grow its fleet by as much as 30 percent but continues to face challenges with manning, training, and maintaining its existing fleet. These readiness problems need to be addressed and will require the Navy to implement GAO's recommendations—particularly in the areas of assessing the risks associated with overseas basing, reassessing sailor workload and the factors used to size ship crews, and applying sound planning and sustained management attention to its readiness rebuilding efforts. In addition, continued congressional oversight will be needed to ensure that the Navy demonstrates progress in addressing its maintenance, training, and other challenges.

GAO made 11 recommendations in prior work cited in this statement. The Department of Defense generally concurred with all of them but has implemented only 1. Continued attention is needed to ensure that these recommendations are addressed, such as the Navy assessing the risks associated with overseas basing and reassessing sailor workload and factors used in its manpower requirements process.

Thank you for the opportunity to be here today to discuss issues related  to Navy readiness in the wake of four significant mishaps at sea thus far  in 2017. The most recent of these occurred in August when an Arleigh  Burke class destroyer—the USS John S. McCain (DDG 56)—collided with  an oil tanker while underway near Singapore. This collision resulted in  serious damage to the ship, the loss of 10 sailors, and injury to five more.  It was the second collision involving the loss of life for Navy ships  underway in the last three months and the fourth significant at sea mishap  in the past year. In response to these incidents, the Chief of Naval  Operations ordered an operational pause for all fleets worldwide, and the  Vice Chief of Naval Operations directed a comprehensive review of  surface fleet operations, stating that these tragic incidents are not limited  occurrences but part of a disturbing trend of mishaps involving U.S.  warships.

While we await the Navy’s official findings on this matter, you asked us to  testify today on findings from our recent Navy readiness reviews. Before  we begin, however, it is important to set the context for the challenges the  Navy faces. In June 2017, we issued a report highlighting five key mission  challenges facing the Department of Defense (DOD). In that report, we  noted that the United States faces an extremely challenging national  security environment at the same time that it is grappling with addressing  an unsustainable fiscal situation in which DOD accounts for  approximately half of the federal government’s discretionary spending.  Within this environment, DOD is working to both rebuild the readiness of  its forces and modernize to meet future threats while facing constrained  budgets. Each of the military services today are generally smaller and  less combat ready than they have been in many years, and each military  service has been forced to cut critical needs in areas such as training,  maintenance, and modernization due to budgetary constraints. Put  simply, our work has shown that readiness challenges persist across a  number of areas including, but not limited to, the Navy.

This statement provides information on Navy readiness, including the  effects of homeporting ships overseas, reducing crew size on ships, and  not completing maintenance on time, and summarizes GAO  recommendations to address the Navy’s challenges. This statement is  based on our body of work issued between 2015 and 2017 examining the  readiness of ships homeported overseas, sailor training and workload  issues, maintenance challenges, and other readiness issues. To perform  our prior work, we analyzed Navy readiness, training, and maintenance  data, and interviewed cognizant Navy officials involved in fleet operations.  The reports cited throughout this statement contain more details on the  scope of the work and the methodology used to carry it out. This  statement also includes updates to information as of August 2017, as  appropriate, based on Navy documentation and discussions with Navy  officials.

The work on which this testimony is based was conducted in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.

Since January 2017, the Navy has suffered four significant mishaps at  sea that have resulted in serious damage to Navy ships and the loss of  17 sailors (see figure 1). Three of the four at sea mishaps that have  occurred—two collisions and one grounding—have involved ships  homeported overseas in Yokosuka, Japan. Appendix II provides a  summary of major mishaps for Navy ships at sea in fiscal years 2009  through 2017.

The Navy currently has 277 ships, a 17 percent reduction from the 333  ships it had in 1998. Over the past two decades, as the number of Navy  ships has decreased, the number of ships deployed overseas has  remained roughly constant at about 100 ships; consequently, each ship is  being deployed more to maintain the same level of presence. We  reported in September 2016 that the Navy, along with the other military  services, had been reporting persistently low readiness levels. The Navy  attributes these, in part, to the increased deployment lengths needed to  meet the continuing high demand for its aircraft carriers, cruisers,  destroyers, and amphibious ships. For example, the deployment lengths  for carrier strike groups had increased from an average of 6.4 months  during the period of 2008 through 2011 to a less sustainable 9 months for  three carrier strike groups that were deployed in 2015. In 2016, the Navy  extended the deployments of the Harry S Truman and Theodore  Roosevelt Carrier Strike Groups to 8 and 8.5 months, respectively. In  addition, the Navy has had to shorten, eliminate, or defer training and  maintenance periods to support these high deployment rates. These  decisions have resulted in declining ship conditions across the fleet and  have increased the amount of time required for the shipyards to complete  maintenance on these ships. Lengthened maintenance periods, in turn,  compress the time that ships are available for training and operations.

Ships Homeported Overseas Provide Increased Forward Presence but Train Less, Defer More Maintenance, Degrade Faster, and Cost More to Operate

As we previously reported, to help meet the operational demands using  its existing inventory of ships, the Navy has assigned more of its surface  combatants and amphibious ships to overseas homeports. Since 2006,  the Navy has doubled the percentage of the fleet assigned to overseas  homeports. In 2006, 20 ships were homeported overseas (7 percent of  the fleet); today, 40 ships are homeported overseas (14 percent of the  fleet) in Japan, Spain, Bahrain, and Italy; and an additional destroyer will  be homeported in Yokosuka, Japan in 2018 (see figure 2).

According to the Navy, homeporting ships overseas is an efficient method  for providing forward presence and rapid crisis response. Our prior work  confirms that having ships homeported overseas provides additional  presence, but it comes at a cost. For example, we found in May 2015 that  homeporting ships overseas results in higher operations and support  costs than homeporting ships in the United States. In addition, the  operational schedules the Navy uses for overseas-homeported ships limit  dedicated training and maintenance periods, resulting in difficulty keeping  crews fully trained and ships maintained. In fact, the primary reason that  Navy ships homeported overseas provide more deployed time than ships  homeported in the United States is that the Navy reduces their training  and maintenance periods in order to maximize their operational  availability. Ships homeported overseas do not operate within the  traditional fleet response plan cycles that apply to U.S.-based ships.  Since the ships are in permanent deployment status during their time  homeported overseas, they do not have designated ramp-up and ramp- down maintenance and training periods built into their operational  schedules (see figure 3). Navy officials told us that because the Navy  expects these ships to be operationally available for the maximum  amount of time, their intermediate and depot-level maintenance are  executed through more frequent, shorter maintenance periods or deferred  until after they return to a U.S. homeport—generally after 7 to 10 years  overseas.

In May 2015, we also found that high operational tempo for ships  homeported overseas limits the time for crew training when compared  with training time for ships homeported in the United States. Navy officials  told us that U.S.-based crews are completely qualified and certified prior  to deploying from their U.S. homeports, with few exceptions. In contrast,  the high operational tempo of ships homeported overseas had resulted in  what Navy personnel called a “train on the margins” approach, a  shorthand way to say there was no dedicated training time set aside for  the ships so crews trained while underway or in the limited time between  underway periods. We found that, at the time of our 2015 review, there  were no dedicated training periods built into the operational schedules of  the cruisers, destroyers, and amphibious ships homeported in Yokosuka  and Sasebo, Japan. As a result, these crews did not have all of their  needed training and certifications. We recommended that the Navy  develop and implement a sustainable operational schedule for all ships  homeported overseas. DOD concurred with this recommendation and  reported in 2015 that it had developed revised operational schedules for  all ships homeported overseas. However, when we contacted DOD to  obtain updated information for this testimony, U.S. Pacific Fleet officials  stated that the revised operational schedules for the cruisers and  destroyers homeported in Japan were still under review and had not been  employed. As of June 2017, 37 percent of the warfare certifications for  cruiser and destroyer crews homeported in Japan had expired, and over  two-thirds of the expired certifications—including mobility-seamanship  and air warfare—had been expired for 5 months or more. This represents  more than a fivefold increase in the percentage of expired warfare  certifications for these ships since our May 2015 report. The Navy’s  Surface Force Readiness Manual states that the high operational tempo  and frequent tasking of ships homeported overseas requires that these  ships always be prepared to execute complex operations and notes that  this demand for continuous readiness also means that ships homeported  overseas should maintain maximum training, material condition, and  manning readiness.

With respect to the material condition of the ships, we found in May 2015  that casualty reports—incidents of degraded or out-of-service equipment—nearly doubled over the 2009 through 2014 time frame, and  the condition of overseas-homeported ships decreased even faster than  that of U.S.-based ships (see figure 4). The Navy uses casualty reports to  provide information on the material condition of ships in order to  determine current readiness. For example, casualty report data provide  information on equipment or systems that are degraded or out of service,  the lack of which will affect a ship’s ability to support required mission  areas. In 2015, Navy officials acknowledged an increasing number of  casualty reports on Navy ships and a worsening trend in material ship  condition. They stated that equipment casualties require unscheduled  maintenance and have a negative effect on fleet operations, because  there is an associated capability or capacity loss.

In our May 2015 report, we recommended that the Navy develop a  comprehensive assessment of the long-term costs and risks to its fleet  associated with the Navy’s increasing reliance on overseas homeporting  to meet presence requirements; make any necessary adjustments to its  overseas presence based on this assessment; and reassess these risks  when making future overseas homeporting decisions. DOD concurred  with this recommendation, but, as of August 2017, it has not conducted  an assessment, even though it has continued to increase the number of  ships homeported overseas.

Size and Composition of Ship Crews May Contribute to Sailor Overwork and Create Readiness and Safety Risks

In the early 2000s, the Navy made several changes to its process for  determining the size and composition of ship crews that may contribute to  sailor overwork and create readiness and safety risks. These changes  were intended to drive down crew sizes in order to save on personnel  costs. However, as we reported in May 2017, these changes were not  substantiated with analysis and may be creating readiness and safety  risks. With fewer sailors operating and maintaining surface ships, the  material condition of the ships declined, and we found that this decline  ultimately contributed to an increase in operating and support costs that  outweighed any savings on personnel (see figure 5). The Navy eventually  reassessed and reversed some of the changes it had made during this  period—known as “optimal manning”—but it continued to use a workweek  standard that does not reflect the actual time sailors spend working and  does not account for in-port workload—both of which may be leading to  sailors being overworked. Additionally, we found that heavy workload  does not end after ships return to port. Crews typically operate with fewer  sailors while in port, so those crew members remaining must cover the  workload of multiple sailors, causing additional strain and potential  overwork.

In 2014, the Navy conducted a study of the standard workweek and  identified significant issues that could negatively affect a crew’s  capabilities to accomplish tasks and maintain the material readiness of  ships, as well as crew safety issues that might result if crews slept less to  accommodate workload that was not accounted for. The Navy study  found that sailors were on duty 108 hours a week, exceeding their weekly  on-duty allocation of 81 hours. This on-duty time included 90 hours of  productive work—20 hours per week more than the 70 hours that are  allotted in the standard workweek. This, in turn, reduced the time  available for rest and resulted in sailors spending less time sleeping than  was allotted, a situation that the study noted could encourage a poor  safety culture. Moving forward, the Navy will likely face manning  challenges, especially given its current difficulty in filling authorized  positions, as it seeks to increase the size of its fleet by as much as 30  percent over its current size. Navy officials stated that even with  manpower requirements that accurately capture all workload, the Navy  will be challenged to fund these positions and fill them with adequately  trained sailors at current personnel levels. Figure 6 shows the Navy’s  projected end strength and fleet size.

In our May 2017 report, we found that the Navy’s guidance does not  require that the factors it uses to calculate manpower requirements be  reassessed periodically or when conditions change, to ensure that these  factors remain valid and that crews are appropriately sized. We made  several recommendations to address this issue, including that the Navy  should (1) reassess the standard workweek, (2) require examination of in- port workload, (3) develop criteria to reassess the factors used in its  manpower requirements process, and (4) update its ship manpower  requirements. DOD concurred with our recommendations, stating that it is  committed to ensuring that the Navy’s manpower requirements are  current and analytically based and will meet the needs of the existing and  future surface fleet. As of August 2017, DOD had not yet taken any  actions to implement these recommendations. We believe that, until the  Navy makes the needed changes, its ships may not have the right  number and skill mix of sailors to maintain readiness and prevent  overworking its sailors.

The Navy’s Inability to Complete Ship Maintenance on Time Hampers Its Efforts to Rebuild Readiness

To address its persistently low readiness levels, the Navy began  implementing a revised operational schedule in November 2014, which it  referred to as the optimized fleet response plan. This plan seeks to  maximize the employability of the existing fleet while preserving adequate  time for maintenance and training, providing continuity in ship leadership  and carrier strike group assignments, and restoring operational and  personnel tempos to acceptable levels. The Navy’s implementation of the  optimized fleet response plan—and readiness recovery more broadly—is  premised on adherence to deployment, training, and maintenance  schedules.

However, in May 2016, we found that the Navy was having difficulty in  implementing its new schedule as intended. Both the public and private  shipyards were having difficulty completing maintenance on time, owing  primarily to the poor condition of the ships after more than a decade of  heavy use, deferred maintenance, and the Navy’s inability to accurately  predict how much maintenance they would need. We reported that in  2011 through 2014 only 28 percent of scheduled maintenance for surface  combatants was completed on time and just 11 percent was completed  on time for aircraft carriers. We updated these data for the purposes of  this testimony to include maintenance availabilities completed through the  end of fiscal year 2016 and found continued difficulty completing  maintenance on time for key portions of the Navy fleet (see figure 7):

Aircraft Carriers (CVNs): In fiscal years 2011 through 2016,  maintenance overruns on 18 of 21 (86 percent) aircraft carriers  resulted in a total of 1,103 lost operational days—days that ships were  not available for operations—the equivalent of losing the use of 0.5  aircraft carriers each year.

Surface Combatants (DDGs and CGs): In fiscal years 2011 through  2016, maintenance overruns on 107 of 169 (63 percent) surface  combatants resulted in a total of 6,603 lost operational days—the  equivalent of losing the use of 3.0 surface combatants each year.

Submarines (SSNs, SSBNs, and SSGNs): In fiscal years 2011  through 2016, maintenance overruns on 39 of 47 (83 percent)  submarines resulted in a total of 6,220 lost operational days—the  equivalent of losing the use of 2.8 submarines each year.

Navy officials are aware of the challenges faced by both the public and  private shipyards and have taken steps to address the risks these pose to  maintenance schedules, including hiring additional shipyard workers and  improving their maintenance planning processes. However, Navy officials  have told us that it will take time for these changes to bring about a  positive effect. For example, as of May 2016, data on the public  shipyards’ workforce showed that 32 percent of all employees had fewer  than 5 years of experience. According to Navy officials, this workforce  inexperience negatively affects the productivity of the shipyards, and it will  take several years for them to attain full productivity.

Navy Readiness Rebuilding is Part of a Broader DOD Effort

In September 2016, we found that although DOD has stated that  readiness rebuilding is a priority, implementation and oversight of  department-wide readiness rebuilding efforts did not fully include key  elements of sound planning, and the lack of these elements puts the  overall rebuilding efforts at risk. The Navy states that its overall goal for  readiness recovery is to reach a predictable and sustainable level of  global presence and surge capacity from year to year. The Navy identified  carrier strike groups and amphibious ready groups as key force elements  in its plan for readiness recovery and had set 2020 for reaching a  predictable and sustainable level of global presence and surge capacity  by implementing the optimized fleet response plan. However, we found in  2016 that the Navy faced significant challenges, such as delays in  completing maintenance and emerging demands, in achieving its  readiness recovery goals for carrier strike groups and amphibious ready  groups, and projections show that the Navy will not meet its time frames  for achieving readiness recovery.

As a result, we recommended that DOD and the services establish  comprehensive readiness goals, strategies for implementing them, and  associated metrics that can be used to evaluate whether readiness  recovery efforts are achieving intended outcomes. DOD generally  concurred with our recommendations and, in November 2016, issued  limited guidance to the military services on rebuilding readiness; it has  also started to design a framework to guide the military services in  achieving readiness recovery but has not yet implemented our  recommendations. The Navy has since extended its time frame for  readiness recovery to at least 2021, but it still has not developed specific  benchmarks or interim goals for tracking and reporting on readiness  recovery. Navy officials cited several challenges to rebuilding readiness,  chief among them the continued high demand for its forces, the  unpredictability of funding, and the current difficulty with beginning and  completing ship maintenance on time.

In January 2017, the President directed the Secretary of Defense to  conduct a readiness review and identify actions that can be implemented  in fiscal year 2017 to improve readiness. DOD and Navy officials told us  that, as part of this readiness review, the Navy prioritized immediate  readiness gaps and shortfalls. These officials added that this review  would guide the Navy’s investment decisions in future budget cycles, with  the intention to rebuild readiness and prepare the force for future  conflicts. However, high demand for naval presence will continue to put  pressure on a fleet that is already stretched thin across the globe.  Looking to the future, the Navy has plans to grow its fleet by as much as  30 percent, but it has not yet shown the ability to adequately man,  maintain, and operate the current fleet. These readiness problems need  to be addressed and will require the Navy to implement our  recommendations—particularly in the areas of assessing the risks  associated with overseas basing, reassessing sailor workload and the  factors used to size ship crews, and applying sound planning and  sustained management attention to its readiness rebuilding efforts. In  addition, continued congressional oversight will be needed to ensure that  the Navy demonstrates progress in addressing its maintenance, training,  and other challenges.

Chairmen Wilson and Wittman, Ranking Members Bordallo and Courtney,  and Members of the Subcommittees, this concludes my prepared  statement. I would be pleased to respond to any questions you may have  at this time.

If you or your staff have questions about this testimony, please contact  John Pendleton, Director, Defense Capabilities and Management at (202)  512-3489 or pendletonj@gao.gov.

Contact points for our offices of Congressional Relations and Public  Affairs may be found on the last page of this statement. GAO staff who  made key contributions to this testimony are Suzanne Wren, Assistant  Director; Steven Banovac, Chris Cronin, Kerri Eisenbach, Joanne  Landesman, Amie Lesser, Tobin McMurdie, Shari Nikoo, Cody  Raysinger, Michael Silver, Grant Sutton, and Chris Watson.

Appendix I: Implementation Status of Prior GAO Recommendations Cited in this Testimony

Over the past three years, we issued several reports related to Navy  readiness cited in this statement. Table 1 summarizes the status of  recommendations made in these reports, which contained a total of 11  recommendations. The Department of Defense generally concurred with  all of these recommendations but has implemented only one of them to  date. For each of the reports, the specific recommendations and their  implementation status are summarized in tables 2 through 4.

Appendix II: Summary of Major Mishaps for Navy Ships at Sea for Fiscal Years 2009 Through 2017, as of August 2017

The Navy defines a class A mishap as one that results in $2 million or  more in damages to government or other property, or a mishap that  resulted in a fatality or permanent total disability. We analyzed data  compiled by the Naval Safety Center for fiscal years 2009 through 2017  to provide a summary of major Navy mishaps at sea (see table 5).

Report numbers with a C or RC suffix are Classified. Classified reports  are available to personnel with the proper clearances and need to know,  upon request.

Department of Defense: Actions Needed to Address Five Key Mission  Challenges. GAO-17-369. Washington, D.C.: June 13, 2017.

Military Readiness: Coastal Riverine Force Challenges. GAO-17-462C.  Washington, D.C.: June 13, 2017. (SECRET)

Navy Force Structure: Actions Needed to Ensure Proper Size and  Composition of Ship Crews. GAO-17-413. Washington, D.C.: May 18,  2017.

Military Readiness: DOD’s Readiness Rebuilding Efforts May Be at Risk  without a Comprehensive Plan. GAO-16-841. Washington, D.C.:  September 7, 2016.

Navy and Marine Corps: Services Face Challenges to Rebuilding  Readiness. GAO-16-481RC. Washington, D.C.: May 25, 2016.  (SECRET//NOFORN)

Military Readiness: Progress and Challenges in Implementing the Navy’s  Optimized Fleet Response Plan. GAO-16-466R. Washington, D.C.: May  2, 2016.

Navy Force Structure: Sustainable Plan and Comprehensive Assessment  Needed to Mitigate Long-Term Risks to Ships Assigned to Overseas  Homeports. GAO-15-329. Washington, D.C.: May 29, 2015.

Military Readiness: Navy Needs to Assess Risks to Its Strategy to  Improve Ship Readiness. GAO-12-887. Washington, D.C.: September 21,  2012.

Force Structure: Improved Cost Information and Analysis Needed to  Guide Overseas Military Posture Decisions. GAO-12-711. Washington,  D.C.: June 6, 2012.

Military Readiness: Navy Needs to Reassess Its Metrics and  Assumptions for Ship Crewing Requirements and Training. GAO-10-592.  Washington, D.C.: June 9, 2010.

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