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Rep. Don Young: We have neglected for over 100 years a territory that should be a state

The U.S. House Committee on Natural Resources’ Subcommittee on Indian, Insular and Alaska Native Affairs held a hearing yesterday on the possible consequences of creating a federally-created control board for the territory of Puerto Rico. The official name of the hearing was “The Need for the Establishment of a Puerto Rico Financial Stability and Economic Growth Authority.”

While the focus of the hearing was on the pros and cons of instituting a control board for Puerto Rico, access to Chapter 9 bankruptcy and the territory’s political status remained a major topic of conversation.

Subcommittee Chairman Don Young (R-AK) brought the hearing to order and delivered an emotional opening statement where he conceded that issues surrounding Puerto Rico are very personal to him. Rep. Young said that if Congress had done what he wanted to do 15 years ago – make Puerto Rico a state – this entire mess could have been avoided. The congressman went even further to say “[Congress has] neglected Puerto Rico for over 100 years; a territory that should be a state. I say shame on us.”

In his opening statement, Puerto Rico’s Resident Commissioner Pedro Pierluisi stressed the urgency and importance of enacting legislation to aid Puerto Rico:

“If no bill is enacted, the already-grave situation in Puerto Rico, a U.S. territory home to 3.5 million Americans, will get worse. That would not be in the national interest, in the interest of my constituents, or in the interest of Puerto Rico’s creditors, many of whom are also my constituents. Therefore, this Congress should act swiftly and wisely.”

Resident Commissioner Pierluisi went on to explain the three elements he deems “essential” to the legislative fix:

  1. The creation of an independent board to approve the Puerto Rico government’s long-term financial plan and annual budgets, to help ensure that that the Puerto Rico government adheres to both throughout the fiscal year, and to make certain that the Puerto Rico government publishes accurate and timely financial information with “buy-in” from the local government and the local population;
  2. Legislation must allow for Puerto Rico’s government to restructure its bonded debt; and
  3. The legislation should provide Puerto Rico with more equitable “more state-like-treatment” under federal spending and tax credit programs, because decades of neglect from Washington is the single greatest cause of the territory’s economic, fiscal and migration problems.

After hearing from Chairman Young and Resident Commissioner Pierluisi, the subcommittee heard testimony from five witnesses:

  1. The Honorable Anthony A. Williams, Former Mayor of Washington, D.C., 1999-2007
  2. Carlos M. Garcia, Former Chairman and President of the Government Development Bank of Puerto Rico
  3. Professor Simon Johnson, Professor of Global Economics and Management at the MIT Sloan School of Management
  4. Thomas Moers Mayer, Partner at Kramer Levin Naftalis & Frankel, LLP
  5. Eric LeCompte, Executive Director of Jubilee USA Network

Mayor Williams said that “the time is now for Congress to create an authority that would have as its goals both achieving financial stability and a balanced budget for the Island, while also focusing on economic growth strategies that over time can assist the Island in gaining true financial independence.”

Mr. Garcia discussed his time on the local control board in Puerto Rico, which only had authority over the central government and not government corporations, and suggested how a federally created control board for Puerto Rico should be structured:

“The Authority should be composed of five members, including its chairman. The chairman should be a federally appointed, independent, full-time expert in fiscal and economic matters. The Authority should have appropriate, qualified and strong representation from the Government of Puerto Rico, Puerto Rico’s organized labor, Puerto Rico’s private sector and Puerto Rico’s civic/not-for-profit sector.”

The third witness to testify was Professor Simon Johnson. Professor Johnson agreed with Rep. Young: if Puerto Rico were a state, they would have the tools to tackle a financial crisis. He also reminded the committee to keep in mind the needs of the Puerto Rican people. If they are not happy with Congress’ actions, they can simply up and move.

“[R]esidents of Puerto Rico are also U.S. citizens and they vote with their feet – the population has fallen from 3.9 million to 3.5 million in recent years as talented and energetic people have moved to Florida, Texas, and other parts of the mainland.”

Jubiliee executive director Eric LeCompte expressed confidence that the crisis can be solved and was insistent that in order to do so, Chapter 9 bankruptcy protection must be extended to Puerto Rico.

“The good news is that we can solve this crisis in ways that promote economic growth and reduce child poverty. A step in this direction is enacting bankruptcy protection for Puerto Rico – the same type of protection US municipalities have access to. We applaud the efforts of Representatives Duffy and Pierluisi for introducing bankruptcy legislation. We are grateful to Speaker Ryan for setting a timeline for action.”

The final witness was Mr. Thomas Moers Mayer, who represents Puerto Rico’s creditors. He said that “the only way to assure the Main Street retail investors who have entrusted their savings to Puerto Rico in the past that they can do so in the future is the creation of a strong, independent and federally appointed Authority.

While the general consensus from the hearing is that a federally created control board in some form or another is likely in the works for Puerto Rico, some Democrats were concerned that additional federal oversight would further suppress an already subjugated population of American citizens:

Rep. Jose Serrano (D-NY): “How do you give the territory the needed assistance, while not making it more of a colony? To bring Puerto Rico on its knees when it’s already on one knee would just add more pain.”

Rep. Luis Gutierrez (D-IL): “It wasn’t like Puerto Ricans got together one day, had a convention, and said, ‘Would you allow us?’ No, it was military intervention. Puerto Rico belongs to, but is not part of, the United States of America.”

Congress’ proposed legislative solution for Puerto Rico should be known by the end of the first calendar quarter. Last December, Speaker Paul Ryan instructed House committees “work with the Puerto Rican government to come up with a responsible solution” to “Puerto Rico’s fiscal crisis” by March 31st.


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