“It still has some hurdles,” said Representative Raul Grijalva, the top Democrat on the Natural Resources Committee, who backs the bill even though he says it’s imperfect. “I think it can pass, but it’s going to be a difficult process.”
If the bill can’t clear the House, it would leave Puerto Rico and its bondholders in limbo with no clear road ahead on how to keep the island’s government functioning ahead of a likely July 1 default on a $2 billion debt payment.
One question for Republican leaders is whether to allow debate on any amendments, and, if so, which ones. Leaders may be tempted to avoid any surprises or complications by holding a simple up-or-down vote with no amendments, but that may not bring enough lawmakers on board.
The bill, approved last week by the Natural Resources Committee, has been attacked from two sides: by conservatives who oppose anything resembling a bailout of Puerto Rico, and by liberals, including Democratic presidential candidate Bernie Sanders, who reject restrictions on the island’s government.
The legislation, H.R. 5278, would create a seven-member board to manage a restructuring of Puerto Rico’s $70 billion debt and oversee the island’s finances. The control board could ask a judge to order a forced restructuring if the commonwealth’s government can’t reach a deal with bondholders. The board could enforce balanced budgets for Puerto Rico’s government and require the sale of government assets if needed.
Treasury Secretary Jacob J. Lew said this week he was lobbying lawmakers on the bill even as he was en route to Seoul, South Korea, for economic talks. He has been warning Congress that the proposal must be “protected” from significant changes when the House considers it. Natural Resources Chairman Rob Bishop of Utah has said he is convinced that can happen, although he has suggested Congress might not meet the July 1 deadline.
Before the bill reaches the House floor, it will pass through the Rules Committee, which will help decide how to proceed on amendments.
Blocking any amendments during the floor debate would prevent “poison pills” from being added that could scuttle the measure, Grijalva said.
But many Democrats say they will have trouble voting for the current version of the bill, unless they can try to strip out a provision allowing Puerto Rico’s minimum wage to be reduced for young workers. They unsuccessfully tried to eliminate that provision during the committee debate.
"I think if Democrats aren’t able to lay out what they think are improvements to the bill it would jeopardize some votes,” Grijalva said.
Republican Amendments
If Democrats are granted votes on amendments, Republicans will almost certainly make their own demands, including some proposals that could ultimately kill the bill entirely.Before the Natural Resources panel approved the bill on a 29-10 vote, several Republicans tried unsuccessfully to change it in ways that Bishop and Grijalva warned could doom the plan. An amendment offered by John Fleming of Louisiana would strip the bill of a temporary moratorium on lawsuits over Puerto Rico debt. Fleming said that provision would be unfairly “picking winners and losers” among the island’s creditors.
Another offered by Tom McClintock of California would exempt general obligation bondholders -- who hold $18 billion of Puerto Rico’s bonded debt -- from the bill’s provisions, including forced restructurings.
A proposal by Thomas MacArthur of New Jersey would state that the bill applies only to Puerto Rico and not other U.S. territories. A congressional aide who sought anonymity to discuss the matter said the Obama administration has expressed concern that the measure could be open to court challenges if it doesn’t apply uniformly to U.S. territories.
No Bailout
The bill contains no taxpayer funds to cover debt payments. Ryan has been stressing that repeatedly with his party’s rank and file, amid assertions by some Republicans and outside groups that it is a bailout. Some Republicans also have expressed concern that the measure might create precedents for financially troubled U.S. municipalities and states.The proposal “addresses Puerto Rico’s fiscal crisis at no risk to taxpayers, giving the territory the opportunity to make much-needed reforms,” Ryan’s office said in a statement this week. “The only risk to taxpayers comes if we do not pass this plan.”
Even if the bill passes the House, it still faces potential snags in the Senate.
Senate Majority Leader Mitch McConnell said this month he wants to put a House-passed measure directly on the Senate floor, and Senate Democratic Leader Harry Reid has said he’s not taking a position on the measure at this time.
Sanders Plan
Sanders plans to weigh in next week with an alternative that would let the Federal Reserve provide the island with emergency loans and bankruptcy protections. It would create a seven-member public corporation to help facilitate a debt restructuring and bankruptcy filing, with six of the corporation members selected by island officials. It also would protect pensions of commonwealth residents, provide $10.8 billion over five years to rebuild roads and bridges, and allow the island to get payments under Medicare and Medicaid that are on par with U.S. states.“It is morally reprehensible that Wall Street vulture funds are demanding that Puerto Rico fire even more teachers, close more schools, cut pensions and slash the minimum wage so that they can reap huge profits off the misery of the people of Puerto Rico,” Sanders said in a statement.
Other Democrats led by Senator Robert Menendez of New Jersey are advancing a proposal that also would give much more control over the process to Puerto Rico’s government. The territory’s governor would develop a five-year fiscal plan subject to a federal oversight board’s approval. There would be no restructuring until Puerto Rico’s legislature votes to “opt in” to such a process, and top officials in the commonwealth would make many of the control board’s appointments.
‘Bad Bill’
Menendez told reporters earlier this month that he wouldn’t agree to speed up a vote on legislation without an agreement to consider some amendments.“I don’t believe in being jammed on a bad bill,” Menendez said, adding that while he doesn’t take the July 1 deadline lightly, it shouldn’t “be the end-all and be-all.”
The next major deadline is January, when general-obligation interest is due once again.
Laura Litvan
Puerto Rico Bill Faces Unclear Fate as House Floor Debate Nears
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