House Republicans released draft legislation Tuesday designed to help Puerto Rico weather a fiscal storm through comprehensive audits of the protectorate’s finances and restructuring of its debts.
Released as a “discussion draft” by Natural Resources Chairman Rob Bishop, R-Utah, the bill addresses Puerto Rico’s ballooning $70 billion debt.
The bill “will change,” Bishop said in a formal statement. “We are releasing it now to encourage feedback, so people can respond to the draft proposal, not a supposition of its contents.”
Home for more than 3.5 million American citizens, Puerto Rico has been fiscally underwater since 2006. Today unemployment on the tropical island hovers around 12 percent, access to credit markets has dried up, and the island has a public pension liability of $46 billion.
Bishop’s rescue plan would appoint an independent oversight board to guide Puerto Rico out of that fiscal crisis. Made up of five members, the board would have broad power.
The bill would encourage Puerto Rico to pass a budget. If the oversight board finds that plan lacking, it would have the authority to enforce another one unilaterally.
“There needs to be an oversight board with teeth,” a committee aid familiar with the drafting process told reporters during a press call Tuesday.
In addition, the legislation would encourage Puerto Rico to renegotiate debts with creditors voluntarily. If that effort fails, the board could petition for court-supervised debt restructuring.
The aide insisted that the bill would not allow Puerto Rico to file for Chapter 9 bankruptcy.
Though cities, towns, and other local municipalities can seek shelter from creditors under that provision of federal law, states cannot. And as a U.S. protectorate, Puerto Rico cannot enjoy bankruptcy relief without an act of Congress changing the law.
Allowing Puerto Rico to file for bankruptcy would be like trying to “take a territory and cram it into something that’s uniquely for municipalities and states,” another aide said Tuesday. He insisted that the bill “obviously would not allow that to happen.”
Conservatives fear that Chapter 9 bankruptcy would amount to a bailout for Puerto Rico and set a dangerous precedent for states to follow.
In the past, Democrats sought that option for the island territory. But in a summary of the bill, Republicans dismissed the option as “ill conceived” and noted that it “would undermine the rule of law.”
Already the Republican Study Committee, with more than 170 House members, has gone on record opposing “any congressional action forcibly restructuring debt or granting access to Chapter 9.” That opposition could have significant impact on the final draft of the bill.
The bill also would direct the oversight board to prohibit public-sector unions from striking or participating in a lockout, and allow the island to adjust the minimum wage for temporary workers below the age of 25.
House Speaker Paul Ryan put the Natural Resources Committee on notice in December to address the Puerto Rico debt issue by March 31.
That gives lawmakers a short window to mount a rescue plan. But as a discussion draft, committee staff notes that the legislation likely will evolve by the time lawmakers return to Capitol Hill from Easter recess.
Pedro Pierluisi, Puerto Rico’s non-voting resident commissioner in the House, complained that the legislation gives the oversight board too much power at the expense of local lawmakers.
Still, in a lengthy statement, the Democrat described the bill “as a promising start.”
This story has been modified.