Washington / AP
House Republicans are preparing legislation to create a new oversight board that would help Puerto Rico control its finances, a move designed to deal with the territory’s $70 billion in debt.
The legislation is in response to House Speaker Paul Ryan’s promise at the end of last year that the House would work with Puerto Rico to come up with “a responsible solution” by the end of March for the territory’s massive debt problems. The House Natural Resources Committee is expected to release the bill publicly.
A draft bill would create a five-person board designed to audit the territory’s government and create new fiscal plans and budget measures. According to a summary of the legislation obtained by The Associated Press, the board would not give Puerto Rico the broad bankruptcy authority it has asked for, but would allow the oversight board to decide whether debt restructuring is necessary. If the board decides debt restructuring is needed in some areas and certain conditions are met, it could facilitate court-supervised restructuring.
Puerto Rico, along with the bama administration and many Democrats in Congress, has pushed for bankruptcy protection, saying it would not cost U.S. taxpayers and is the right thing to do. Some Democrats have been wary of an oversight or control board asserting too much authority over the territory’s government.
The summary makes it clear that Republicans oppose giving the island full ability to declare bankruptcy. Like all U.S. states and territories, Puerto Rico cannot declare bankruptcy under federal law — though mainland municipalities and their utilities can, and municipalities and utilities in Puerto Rico cannot. The island’s public utilities are heavily indebted.
The document says that allowing the island to declare bankruptcy could harm U.S. taxpayers who have invested in Puerto Rican bonds, undercut efforts to reform the territory’s “irresponsible fiscal policies” and make it harder for Puerto Rico to access capital markets in the future.
In a statement, Pedro Pierluisi, Puerto Rico’s non-voting representative in Congress, said the draft bill “represents a very serious effort to address a very serious problem.” Pierluisi endorsed the idea of a control board and its ability to facilitate some debt restructuring.
Still, he said he believes the proposal may give the oversight board too much control. “For the board to be effective in achieving its goals, it must have teeth but not fangs,” Pierluisi said.
He did not detail his concerns and said he would not discuss them until the legislation is public.
Puerto Rico has been mired in economic stagnation for nearly a decade. The territory’s financial problems grew worse as a result of setbacks in the wider U.S. economy, and government spending in Puerto Rico continued unchecked as borrowing covered increasing deficits. Almost 10 percent of Puerto Rico’s 3.4 million residents have left, and hundreds of businesses have closed.
Gov. Alejandro Garcia Padilla has said the island is headed for a humanitarian crisis. If the government isn’t able to restructure its debt, Puerto Rico will have to start laying off police officers, firefighters, medical professionals and other public employees, officials say.