Congressional hearings on a debt relief bill for Puerto Rico began Wednesday after a House bill was redrafted in response to complaints from conservative lawmakers and the island’s government.
The new bill from the House Committee on Natural Resources would allow Puerto Rico’s creditors to vote on any debt-restructuring plan, giving them new leverage in any settlement on its $72 billion debt, which the local government says it cannot pay.
“This is the constitutionally sound solution that will provide real, long-lasting reform to the commonwealth while respecting the rights of all parties and creditors,” said Chairman Rob BishopRobert (Rob) William BishopGOP's Westerman looks to take on Democrats on climate change House Republicans who didn't sign onto the Texas lawsuit OVERNIGHT ENERGY: Westerman tapped as top Republican on House Natural Resources Committee | McMorris Rodgers wins race for top GOP spot on Energy and Commerce | EPA joins conservative social network Parler MORE (R-Utah). “It is the island’s best shot to mitigate its financial collapse.”
Some provisions in the Puerto Rico Oversight, Management and Economic Stability Act — its acronym, Promesa, means “promise” in Spanish — that caused great consternation on the island also have been eliminated, including a proposal to do away with the federal minimum wage for workers 25 and under.
But several key provisions remain that were heavily criticized in the original draft, including an oversight board whose members would be appointed by Congress and which would not be accountable to the island government.
“The control board would still have veto power over Puerto Rico’s budget, laws, financial plans, regulations, contracts, and other vital decisions that should be made by the duly elected officials of the island, not seven unelected bureaucrats,” says Federico de Jesús, a former Obama administration official and Puerto Rico government aide.
Puerto Rico Gov. Alejandro García Padilla (D), in Washington this week to meet with lawmakers, said he felt confident that Congress would approve legislation to help the island, saying the committee has been working “in good faith” to find a solution and that “both sides [of the political aisle] are committed to Puerto Rico. The island needs to move forward and look ahead to the future with confidence,” he told reporters.
Opposition to the bill has come from the left and the right, highlighting the tightrope authors of the bill must walk to get the legislation through Congress.
Speaker Paul RyanPaul Davis RyanPaul Ryan researched narcissistic personality disorder after Trump win: book Paul Ryan says it's 'really clear' Biden won election: 'It was not rigged. It was not stolen' Democrats fret over Trump-district retirements ahead of midterms MORE (R-Wis.) is unlikely to bring the bill to the floor unless it is supported by a majority of his conference, but will also likely need votes from Democrats — some of whom are critical of the bill.
“A provision permits the transfer of 3,100 acres of federal land to Puerto Rico. I believe we need to incorporate protections to ensure that this land is not sold and used to make a ‘quick buck’ by private developers,” said Rep. Nydia Velázquez (D-N.Y.), a native of Puerto Rico.
On the fight, advocacy group Latino Partnership for Conservative Principles says the legislation offers an easy way out for the island government after years of overspending and mismanagement.
“I don’t think conservatives should support it because it violates the principles of law by providing an unprecedented 18-month stay to bond claims against the island government. This disincentivizes Puerto Rico to negotiate with its bondholders and discourages the island government from making much-needed reforms,” says Carlos Mercader, the group’s deputy director.
Several legislators in Puerto Rico also are actively lobbying against the bill.
“This [legislation] has wide-reaching and wide-ranging decisionmaking powers that exclude the people of Puerto Rico from that process and those decisions and ignores the precepts of democracy under our island constitution”, says Puerto Rico House Speaker Jaime Perelló. “It has no economic development measures. I urge my fellow Puerto Ricans on the island and in the diaspora to join forces and call or write Congress to voice their displeasure”.
Island legislators are floating a new restructuring plan that would offer some relief to holders of the island’s debt, most of which is in municipal bonds. Under the proposal, close to $50 billion of the debt would be covered by having creditors accept $38 billion up front and exchange current bonds for new bond issuances that would have different recovery rates.
That plan comes just days after island legislators approved, and the governor signed into a law, a nearly one-year debt moratorium that the Puerto Rico government said was necessary to pay for essential services.
That move did not sit well with GOP leaders in Congress.
“The Puerto Rican government broke its fiscal obligations when it passed a moratorium on repaying any of its debt,” said Ryan. “Congress has a constitutional and financial responsibility to bring order to the chaos that is unfolding in the U.S. territory, chaos that could soon wreak havoc on the American bond market.”
Ryan praised H.R. 4900, saying “it holds the right people accountable for the crisis, shrinks the size of the government, and authorizes an independent board to help get Puerto Rico on a path to fiscal health.”
The island government has also been lobbying for authority to file Chapter 9 bankruptcy, as U.S. cities and municipalities can, as another mechanism to restructure its debt.
The island is still facing some very large debt payments, including $422 million on May 1 and $2 billion on July 1, but the government’s bank has just over $562 million on hand.
The Natural Resources committee holds a markup hearing on the bill on Thursday, and the legislation could reach the House floor next week.
Patricia Guadalupe is a contributing writer for LATINO magazine.