A rare compromise between the White House and House Republicans on how to help Puerto Rico has received cautious acceptance from CT lawmakers and advocates who had rejected previous congressional efforts to help an island mired in a severe financial crisis.
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The bill introduced by the House’s Natural Resources Committee seeks to provide the US commonwealth relief from its $72 billion debt burden, which the island’s government says is unpayable unless it were to stop providing basic public services.
A bill unveiled late Wednesday would create a control board to oversee fiscal reforms in Puerto Rico, a USA territory saddled with $70 billion in debt.
House Speaker Paul Ryan said the Puerto Rico bill is ‘exactly where we wanted it’.
“Chairman Bishop and Speaker Ryan should be commended for advancing revised legislation that will aid the Puerto Rican people, honor creditors” legal rights and safeguard US taxpayers against funding a bailout.
Republicans in Congress have opposed anything resembling a bailout without concessions on pensions. Along with the more than $70 billion in bond debt, the island is sitting on more than $40 billion in unfunded pension liabilities. The new legislation also removes a controversial provision that would have turned over federal land on Vieques to the island’s government. The island defaulted on a payment of about $400 million on May 2 and faces payments of $2 billion on July 1. Even Padilla has problems with the outcome; he believes the government oversight board infringes on Puerto Rican sovereignty. Municipalities in many US states can seek bankruptcy protection in court, but Puerto Rico can’t because territories are excluded from the relevant part of the federal bankruptcy code. The island has already missed several smaller payments.
“This is not a flawless bill, and I have reservations about the inclusion of extraneous provisions like delaying overtime protections for Puerto Rico’s workers”, said Rep. John Larson, D-1 District.
The new version has concessions to Republicans, Democrats and members who want to make sure that Congress has the utmost say in who sits on the board.
More than 200,000 people have left Puerto Rico in the past five years, as the island’s financial problems worsened after setbacks in the wider US economy.
On May 18, 2016, the U.S. Department of Labor, Wage and Hour Division, announced the final changes to the regulations that govern the “white collar” overtime exemptions to the Fair Labor Standards Act (“FLSA”). Former Treasury Secretary Lawrence Summers warned them not to challenge the bill, telling reporters that if creditors “were successful in further impoverishing millions of Puerto Ricans for the sake of their bonds, which they bought with a very substantial risk premium, it would really be a demonstration that financial interests have excessive power in formulating public policy”.
Under the new bill, the board would have seven members, appointed by the president from recommendations by members of the U.S. House and Senate.
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Hanson said the bill lacks clarity over the treatment of constitutionally protected bondholders versus pensioners. Republicans are pushing for a measure requiring the board to be named by January 3, so as to eliminate the risk of a Democratic Congress picking a more liberal board after November’s election.
