WASHINGTON – Senate Finance Committee chair Orrin Hatch, R-Utah, on Thursday called for Democrats and the administration to be more transparent and realistic, after proposing "unworkable" solutions to Puerto Rico's crisis as Congress continues to work toward bipartisan legislation for the commonwealth.
Hatch made his comments during a lengthy speech on the floor of the Senate following several proposals from Senate Democrats earlier in the week that would give Puerto Rico and its public authorities the ability to restructure their roughly $70 billion of debt, institute an oversight board, and improve federal tax and healthcare treatment for the island.
His comments may not bode well for the development of bipartisan legislation that would provide relief for Puerto Rico.
"The latest group of bills introduced by Democrats includes a number of repackaged ideas from last year, including unscored and unsound proposals to allocate funds and direct aid as well as a renewed effort to grant unprecedented debt resolution authority for Puerto Rico," Hatch said.
He added that any congressional solution must be done "in a manner that is fiscally responsible with an eye toward righting the irresponsible course taken by the government of Puerto Rico."
Democrats in Congress and the administration, led by the Treasury Department, have not made clear how much their proposals, like broadening Puerto Rico's access to the federal Medicaid program, would cost the federal government or how they would offset those costs in legislation, he said.
Hatch also attacked Democrats for incorrectly saying their restructuring ideas or bills would simply be an extension of federal Chapter 9 bankruptcy law, which allows a state's public authorities to restructure their debts.
"In reality, their proposal would create, for lack of a better word, a Super Chapter 9 specifically for Puerto Rico and grant the territory unprecedented authority to restructure its debt," he said.
A bill from Sen. Bob Menendez, D-N.J., that was introduced on Monday would also elevate Puerto Rico's pension obligations to be senior secured debt, which presumably means they would have priority over the commonwealth's constitutionally backed general obligation debt since pension obligations are neither secured nor debt unless he's referring to pension bonds. Hatch said that proposal was "irresponsible" and instead called for "at least some action to improve public pension reporting and transparency" instead of allowing complete restructuring that would cause costs to go up because of "bad and imprudent actors."
If both Republicans and Democrats are going to come to a consensus, Hatch said several things must happen, starting with serious attempts at consensual debt negotiations between Puerto Rico's government and its creditors. He also wanted to make clear that Republicans do not have any interest in helping "vultures" or "speculators" trying to make fast money from Puerto Rico debt, apparently referring to hedge funds. Individuals who have invested their retirement funds in Puerto Rico debt should not be given those labels, he said.
If Democrats are serious about putting forward "practical and fiscally responsible legislation," Hatch said, they should show more interest in a bill that he and Sens. Lisa Murkowski, R-Alaska, and Chuck Grassley, R-Iowa, introduced last year. The three senators lead the Senate committees with jurisdiction over Puerto Rico.
Their legislation would not give any restructuring authority but instead would establish an authority that could issue bonds and provide up to $3 billion in resources, taken from unallocated Affordable Care Act funds, to help Puerto Rico stabilize its budget and debt. The bill also calls for a number of studies, including on the commonwealth's pension plans and liabilities and the commonwealth's healthcare treatment by the federal government. Additionally, it would provide assistance to the island in improving its accounting and disclosure practices given the opacity of the commonwealth's current financial situation.
While there are many proposals for the commonwealth currently floating in Congress, observers expect the House Natural Resources Committee to come out with a bipartisan proposal before a March 31 deadline House Speaker Paul Ryan, R-Wis., imposed late last year. Discussions for that proposal have centered on some type of restructuring paired with a federal oversight authority.
Puerto Rico Gov. Alejandro Garcia Padilla, who has been actively lobbying Congress for some type of restructuring authority, said in a press call earlier on Thursday that any legislation should also impose a stay on litigation over Puerto Rico's debt.
The commonwealth has two major payments looming in May and July. Garcia Padilla and others have said that without a congressional solution by that time, Puerto Rico will default on much of its debt.
