Secretary of the Treasury Jacob J. Lew and National Economic Council Director Jeffrey Zients met with Puerto Rico Governor Alejandro Garcia Padilla on Thursday as part of the Obama Administration’s continued engagement with Puerto Rico as the U.S. territory addresses its fiscal challenges.
The group discussed the Governor’s recently released plan to strengthen the territory’s public finances and restore economic growth, which a U.S. Treasury spokesperson called “a serious and comprehensive accounting of the Commonwealth’s overall fiscal position” and “an important step toward finding a sustainable path forward.”
Secretary Lew, Director Zients and Governor Padilla discussed the role of the federal government in assisting Puerto Rico. Secretary Lew and Director Zients reportedly underscored that given Puerto Rico’s projection that it will exhaust its liquidity later this year, Congress must act now to provide Puerto Rico with access to a restructuring regime. Without federal legislation, according to Treasury, a resolution across Puerto Rico’s financial liabilities would likely be “difficult, protracted, and costly.”
Democratic bills in both houses of the Congress seek to grant Puerto Rico the power of a state to enable government instrumentalities to revise their debts under Federal Bankruptcy Code Chapter 9. Gov. Garcia Padilla’s fiscal plan proposes more expansive power to the Puerto Rican government than states have, permitting broader “access to a legal framework to restructure the Commonwealth’s liabilities in an orderly process” rather than limiting Puerto Rico’s restructuring authority only to smaller governmental instrumentalities.
The Puerto Rico fiscal plan also calls for equal funding in Medicaid and Medicare, a decision that will ultimately made by the U.S. Congress.
Puerto Rico, as a territory, can legally be treated differently from the states, and receives less in funding in a number of cases. This fact has contributed to the fiscal crisis in Puerto Rico.