Sen. Bob Menendez (D-NJ) announced Monday he will introduce a comprehensive legislative package to provide Puerto Rico a real path to solvency through comprehensive reforms, backed by three other lawmakers.
Sens. Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, Maria Cantwell (D-Wash), Ranking Member of the Senate Committee on Energy and Natural Resources, and Sen. Richard Blumenthal (D-CT), the legislative package is comprised of the Puerto Rico Stability Act and the Puerto Rico Recovery Act.
When combined, the legislative package would help the island avert a complete financial collapse, stabilize its financial standing in an orderly and legal fashion, and provide for equitable tax credit treatment and health care equity for the 3.5 million U.S. citizens residing in Puerto Rico.
With some $70 billion in debt, the economy of Puerto Rico is quickly crumbling with no clear path to salvage without technical assistance and restructuring by the federal government.
Having already defaulted on several debt payments to creditors in the past year, and without being granted bankruptcy protections by the U.S. government, the island’s economy will soon face further hardships as it is expected to miss another round of large payments to bondholders in May and July unless major reforms are enacted.
“For the 3.5 million American citizens living on the island of Puerto Rico, time is running short,” said Menendez. “Congress has to act immediately to fix the federal funding shortfalls and give Puerto Rico the tools it needs to fully restructure its debt.”
“That’s why I’m introducing a comprehensive legislative package that provides critical healthcare funding, individual tax incentives to encourage work in the formal economy, and a mechanism for territory-wide restructuring of the island’s debts,” he said. “I look forward to working with my colleagues on both sides of the aisle so we may prevent this fiscal crisis from devolving into a full blown humanitarian calamity.”
The Puerto Rico Stability and Recovery Package seeks to provide the government of Puerto Rico territory-wide restructuring authority that allows for the readjustment of all of its debt — not just the one-third that would be covered under Chapter 9 of the U.S. Bankruptcy Code.
Additionally, the legislation would establish a nine-member Financial Stability and Reform Board and a Chief Financial Officer position, both calibrated to provide much needed transparency, oversight, and technical assistance to the restructuring and budgeting processes in the island, the lawmaker said. To trigger the restructuring mechanism, the Puerto Rico legislature would need to pass a resolution to opt in to the process.
As part of a long-term stabilizing strategy, the legislation also includes policies to move Puerto Rico toward a Medicaid system that provides steady funding moving forward and would extend the Earned Income Tax Credit and the Child Tax Credit to all eligible families in Puerto Rico.
While House Republicans are currently negotiating their own legislative proposals to address Puerto Rico’s debt crisis by the end of the first quarter of this year, Monday’s bill introductions represent the most comprehensive solution put forth by Congress to address the island’s deteriorating economic and fiscal turmoil in a holistic manner.
“With the introduction of the Puerto Rico Stability and Recovery Package, Senator Menendez demonstrates a true understanding of the humanitarian crisis we are currently facing,” Puerto Rico Gov. García-Padilla said.
“This legislation will provide us with the requisite tools needed to not only stave off the worst effects of the crisis in the near term, but will allow us to stabilize our economy and build upon that foundation for a prosperous future,” he said, adding U.S. House Speaker Paul Ryan committed to Congressional action by April 1 to support Puerto Rico.
“A demonstration of that commitment would be the introduction of a companion bill in the House that would afford the Commonwealth access to the necessary tools to undertake a broad restructuring of its debts,” García-Padilla said.
Meanwhile, Puerto Rico’s Resident Commissioner in Washington, Pedro Pierluisi, said he is “focused exclusively on the House side, where there is a process underway that will hopefully result in a bipartisan and balanced bill that can be enacted into law.”
“As I have stated repeatedly, we are either going to have a successful bill that embodies a principled compromise between Republicans and Democrats, or an unsuccessful bill that goes nowhere-which is the worst possible outcome for both Puerto Rico and its creditors,” Pierluisi said.