Congress Releases New Proposal to Address Puerto Rico’s Fiscal Challenges; Consideration Likely Next Week

A new version of legislation to resolve Puerto Rico’s fiscal challenges was introduced last night.  The bill is sponsored by Rep. Sean Duffy (R-WI), with the support of House Natural Resources Committee Chairman Rob Bishop (R-UT) and former House Judiciary Committee Chairman Jim Sensenbrenner (R-WI).

The text of the bill may be found here; related background materials are on line here.

Democratic Leader Nancy Pelosi released statement encouraging the passage of the bipartisan legislation explaining that “three million of our fellow Americans in Puerto Rico are facing a desperate fiscal and public debt emergency that threatens their economy, their communities and their families,” and that “(o)nly Congress can provide Puerto Rico with the tools it needs to emerge from this crisis.”

Pelosi also explained:

“After long bipartisan negotiations, we believe we have achieved a restructuring process that can work. We will do our part to act expeditiously in providing President Obama with a list of qualified candidates for appointment to the oversight board. Democrats are also pleased that Republicans removed the Vieques land transfer from the legislation. While we would have preferred for the bill not to include extraneous minimum wage and overtime rule provisions that harm working families, these provisions are less harmful than originally proposed.”

House Speaker Paul Ryan (R-WI) added a statement in support of the proposal, stating that “right now, the stability of the U.S. territory is in danger, as the Puerto Rican government continues to default on major loan payments. We have insisted that our response meet basic principles, and first among them is protecting taxpayers from a bailout. Today, Republicans and Democrats came together to fulfill Congress’s constitutional and fiscal responsibility to address the crisis with the introduction of PROMESA, the House’s bipartisan legislation. PROMESA is the most responsible solution to the crisis because it gives Puerto Rico a path to real reform while protecting taxpayers. I commend Natural Resources Committee Chairman Bishop, Rep. Duffy, and Rep. Sensenbrenner for their leadership on this legislation.”

Puerto Rico’s Resident Commissioner Pedro Pierluisi issued a longer statement which we print below in its entirety:

“Between February 2015 and April 2016, the U.S. House and the U.S. Senate held nine hearings on Puerto Rico, seeking the information necessary to develop bipartisan legislation that is in the interest of Puerto Rico, a U.S. territory home to 3.5 million American citizens, and in the broader national interest.  As Puerto Rico’s only elected representative in Washington, I participated in each of these hearings, explaining my views and listening to the views expressed by the witnesses and my colleagues on both sides of the aisle.

“These hearings confirmed that this is not an academic or theoretical problem.  The future of Puerto Rico, and of my constituents, is in jeopardy.  Island residents are relocating to the states in unprecedented numbers, in search of a better life for themselves and their families.  The Puerto Rico government is on the verge of collapse, a victim of decades of profound inequality at the federal level and profound mismanagement at the local level.  But, rather than dwelling on the past and assigning blame for the present, we must focus on the future.

“Although this is a complex issue, I set a simple, two-part standard for what legislation would need to contain in order to ultimately obtain my support.

“First, the government of Puerto Rico and its instrumentalities have $70 billion in bonded debt, three public entities on the island—the Puerto Rico Government Development Bank, the Puerto Rico Infrastructure Financing Authority, and the Puerto Rico Public Finance Corporation—have already defaulted on scheduled payments to creditors, and larger defaults appear to be forthcoming.  In addition, Puerto Rico’s three main pension systems—the Employees Retirement System, the Teachers Retirement System, and the Judiciary Retirement System—are seriously underfunded, with total assets of about $1.9 billion and total liabilities of about $45 billion.  Furthermore, the government of Puerto Rico has lost access to the credit markets, meaning it cannot borrow money to meet current payment obligations.   All objective observers—including virtually every major conservative, moderate and liberal editorial board in the nation—understand that the government of Puerto Rico must restructure its debts, ideally through voluntary agreements with creditors, but through a federal court-supervised process if voluntary agreements prove elusive, as they often do.  It is regrettable that we have reached this point, but it is reality.  Accordingly, my first test for the bill is that it must authorize a fair and orderly debt restructuring process, because the only alternative is a chaotic series of payment defaults followed by creditor lawsuits that will harm Puerto Rico, participants in government pension plans, and bondholders, many of whom live on the island.

“Second, as noted, the people of Puerto Rico have been poorly served by too many of their leaders, who have often over-promised and under-delivered, leading to tremendous skepticism, even cynicism, among the Puerto Rico public.  Therefore, it is inevitable that any federal legislation that provides Puerto Rico with debt restructuring authority will also establish a temporary and independent oversight board to assist the Puerto Rico government so that it can better manage its public finances, balance its budget, become more efficient and transparent, and regain access to the credit markets.  My test from day one has been that the board should have teeth but not fangs, vested with the authority to oversee—but not to command and control—the government of Puerto Rico for a well-defined period of time.  I have worked very hard with House Speaker Paul Ryan and House Natural Resources Committee Chairman Rob Bishop to craft a board that meets this standard.  But, make no mistake, this is personally painful for me.  I am embarrassed that Puerto Rico has reached the point where a board is being contemplated.  And, as a lifelong advocate for statehood for Puerto Rico, I want full democratic rights for the island on both the national and local level, not fewer democratic rights.  However, I believe a board—so long as it is properly calibrated—can serve as a bridge to a brighter future for Puerto Rico, a future that includes a 51st star being added to the American flag.

“H.R. 4900, released on April 12th, did not meet this two-part test, primarily because the debt restructuring provisions of the bill were not workable.  As a result, congressional leaders returned to the negotiating table, assisted by the experts at the Treasury Department, and worked to refine the legislation.

“The new bill introduced today is not perfect.  Like any product of bipartisan compromise, it contains provisions I oppose or view as unnecessary, and it is my hope these provisions can be modified or removed as the legislative process moves forward.  However, the heart of the bill—the debt restructuring section and the oversight board section—now comes far closer to meeting the stringent criteria I established in order for the legislation to earn my support.  Over the coming days, I will continue to consult with House leaders and the Treasury Department before making a final decision regarding whether to vote for the bill when it is considered in the Natural Resources Committee, but it is clear we are moving in the right direction.  I hope every Member of Congress will bear in mind that the collapse of the bill could mean the collapse of Puerto Rico’s government.  History will judge us harshly if we do not act swiftly and wisely.”

The House Natural Resources Committee will likely consider the proposal next week. If the Committee approves the proposal, the bill will move forward for consideration by the full House of Representatives.

Because Puerto Rico’s territorial status precludes it from having voting representation in Congress, Resident Commissioner Pierluisi will not have the ability to cast a vote for or against the legislation when it is considered by the House of Representatives.  He will be able to vote during Natural Resources Committee consideration of the proposal.

 

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