House Bill to Punt Key Puerto Rico Issues to Board

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WASHINGTON – House members are considering legislation for Puerto Rico that would mandate the creation of a federal oversight board and make it responsible for restructuring the territory's debt and determining the priority of debt obligations and pension payments, several sources said on Wednesday.

"All of the tough decisions would be punted to the board" rather than decided by members of Congress, said one knowledgeable source who did not want to be identified.

A discussion draft of the bill could be released as early as next week by House Natural Resources Committee chair Rep. Rob Bishop, R-Utah, they said. That's later than planned, but in keeping with the delayed schedule outlined by House Speaker Rep. Paul Ryan, R-Wis., on Tuesday.

Ryan and Republican aides told reporters that the committee would hold a hearing on the bill after members come back from the Easter recess, possibly on April 13 and vote on the bill the following day. Easter recess runs from March 24 through April 11.

But there are still key sticking points on how the bill is drafted, sources said. One is how strong the oversight or control board would be. Puerto Rico lawmakers and officials have insisted the board not reduce or eliminate the autonomy of the territory's government or legislature.

One idea under consideration by House members is to prohibit the board from overriding the Puerto Rico governor or legislature, but allowing it to staunch the flow of federal funds flowing to the territory if its officials or lawmakers object to the board's mandates.

Another sticking point is whether pension payments would have priority over, or equal treatment to, Puerto Rico's constitutionally-backed general obligation debt. Currently, the territory's Constitution says bonds or guaranteed by the government must be paid before any other expenditures made by the island. That amounts to about 26% of Puerto Rico's almost $70 billion of debt, sources said. The Treasury Department and some Democrats want Puerto Rico's pension payments on a par with or ahead of its GO debt. But Congress may leave that up to the control board.

"Many representatives don't want to weigh into a prioritization of debt but believe that the island's debt load is unpayable and needs to be addressed for Puerto Rico to move forward. As a result they will leave it up to the oversight board to do that and this includes [GOs] and constitutional protections," said commentary posted on courtstreetgroup.com on Tuesday.

Another sticky issue that needs to be resolved by House members is what pro-growth measures to include in the legislation. The House Republican Study Committee recently said it opposes to giving Puerto Rico or its authorities Chapter 9 protection, and would rather provide the territory with pro-growth measures.

Current drafts of the legislation do not offer increased help under Medicaid or with the Earned Income Tax Credit to Puerto Rico – something territory officials, the Obama administration and some Democrats have pushed for.

One idea being floated is to exempt Puerto Rico from the Jones Act for shipments of liquefied natural gas. The Jones Act currently requires any ships moving between U.S. ports (including Puerto Rico ports) be American built, owned, flagged and crewed. But this is likely to be strongly opposed by shipping interests.

Another idea is to exempt young workers in Puerto under the age of 25 from minimum wage requirements. But this is opposed by many Democrats. "The biggest problem with Puerto Rico's economy is people are leaving. This would encourage more of that," said a source who did not want to be named.

The Senate is waiting for the House to act, sources said. Senate Finance Committee chair Orrin Hatch, R-Utah, said last month that he wanted Senate members to come up with a plan for Puerto Rico by the of March. But last week he criticized Democrats and the Obama administration for proposing unrealistic and "unworkable" solutions for Puerto Rico, indicating Republicans and Democrats in that chamber are still at loggerheads.

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