With debt payment looming, House weighs Puerto Rico bill

Printed from: http://newbostonpost.com/2016/06/09/with-debt-payment-looming-house-weighs-puerto-rico-bill/

WASHINGTON (AP) — House Republican leaders and President Barack Obama pressured lawmakers in both parties to back legislation to help ease Puerto Rico’s financial crisis as the U.S. territory faces a $2 billion debt payment in just over three weeks.

The House was scheduled to begin debate Thursday on a bill that would create a financial control board and restructure some of Puerto Rico’s $70 billion debt. Republican and Democratic leaders support it, as does the Obama administration, but it faces opposition from both sides, as well, as some bondholders, unions and island officials who have lobbied against the bill.

Speaker Paul Ryan will need significant support from his own caucus as well as most Democrats to get the bill passed. He has argued the legislation is the only way to avoid an eventual taxpayer bailout for the island.

Obama summoned House Democrats with ties to Puerto Rico to a meeting in the Oval Office Wednesday. One of those, Rep. Luis Gutierrez, is an outspoken opponent of the legislation, saying he doesn’t believe it will do enough for ordinary Puerto Ricans.

Puerto Rico’s representative in Congress, Pedro Pierluisi, is supporting the bill despite opposition from other lawmakers on the island.

“He made absolutely clear that there is no ‘Plan B’ here,” Pierluisi said of Obama.

Puerto Rico, which has struggled to overcome a lengthy recession, has missed several payments to creditors and faces the $2 billion installment on July 1. The economic crisis has forced businesses to close, driven up the employment rate and sparked an exodus of hundreds of thousands of people to the U.S. mainland. Schools lack electricity and some hospitals have said they can’t provide adequate drugs or care. The island’s only active air ambulance company announced Tuesday that it has suspended its services.

Ahead of the vote, Republicans said they had enough support from both parties for passage. Supporters were bolstered by a 29-10 vote in the House Natural Resources Committee on May 25.

But some bondholder groups continued to try and pick off conservatives with the argument that the bill is unfair to creditors and tantamount to a bailout for the territory.

The control board would “cast aside bondholder contracts and retroactively subvert them to Puerto Rico’s government pension system at its sole discretion,” a group called Main Street Bondholders said in a release this week.

Some conservatives said they would vote against the bill.

“People in my district are very unhappy with it,” said Rep. John Fleming, R-La. “They see it as just another bailout of a government that was run in a liberal progressive way.”

Others are supporting it, however. Idaho Rep. Raul Labrador, a Republican born in Puerto Rico who is a member of the House Freedom Caucus, helped negotiate the legislation and has worked to sell it to colleagues.

Unions have also lobbied against the legislation because of a provision that would allow the Puerto Rican government to temporarily lower the minimum wage for some younger workers. Democrats are offering an amendment to delete that provision from the bill.

The Senate has not yet acted, but senators said this week that they are watching the House vote. Texas Sen. John Cornyn, the No. 2 Senate Republican, said Tuesday that it’s likely that the Senate will take up the House version of the bill if it passes the House this week.

“We don’t want to be in a situation where there is a huge meltdown and then the next cry is for a taxpayer bailout,” Cornyn said.

Like U.S. states, Puerto Rico cannot declare bankruptcy. The legislation would allow the control board to oversee negotiations with creditors and the courts over reducing some debt. It does not provide any taxpayer funds to reduce that debt.

It would also require the territory to create a fiscal plan. Among other requirements, the plan would have to provide “adequate” funds for public pensions, which the government has underfunded by more than $40 billion.

During negotiations, the administration pushed to ensure that pensions are protected in the bill, while creditors worried they would take a back seat to the pension obligations. Supporters say the bill is designed so that all can be paid.

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