Senators Richard Blumenthal (D-CT) and Charles Schumer (D-NY) are expected to introduce today the Puerto Rico Chapter 9 Uniformity Act to address the fiscal crisis of the U.S. territory, home to roughly 3.5 million U.S. citizens.
The legislation is expected to be the Senate companion to a related proposal introduced by Puerto Rico Resident Commissioner Pedro Pierluisi (D-PR).
Senators Blumenthal and Schumer refer to the current fiscal crisis as growing but avoidable. The Senate proposal would serve as a tool to ensure that Puerto Rico and its agencies can service the territory’s debt, currently valued at roughly $73 billion. Puerto Rico, unlike U.S. states, does not possess the power to authorize its municipalities or public utilities to declare bankruptcy. There is concern that this inability to restructure its debts could lead to these entities defaulting and in turn result in Puerto Rico offering diminished public services, a potential government shutdown, and a federal bail out.
The bill’s introduction follows a ruling by the federal First Circuit court that a local Puerto Rico law (the Puerto Rico Public Corporation Debt Enforcement and Recovery Act ) is preempted by the United States Bankruptcy Code and therefore invalid. The court recognized that even though its decision arguably leaves Puerto Rico with no current options for debt relief, “Puerto Rico may turn to Congress for recourse.”
