Senate Passes Puerto Rico Rescue Bill 68-30

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WASHINGTON – Legislation to rescue Puerto Rico from its debt crisis is moving to President Obama's desk for a signature after the Senate approved it 68 to 30 Wednesday, just two days before the commonwealth is expected to default on a $2 billion debt payment.

Obama has made clear he supports the bill and intends to sign it, after which market speculation is likely to focus on who might be appointed to sit on the seven-person oversight board it creates. There will also be questions about how to implement the bill, called PROMESA, amid opposition from much of the Puerto Rican population and skepticism from the leading candidates to become the new governor and congressional representative.

Obama said in a statement following the bill's passage that it is not perfect, but is a "critical first step toward economic recovery and restored hope for millions of Americans who call Puerto Rico home."

"I look forward to signing the bill into law, and remain committed to working with Congress and the people of Puerto Rico to return to lasting economic growth and opportunity," he said.

Pedro Pierluisi, Puerto Rico's nonvoting member of Congress, applauded PROMESA's passage and said he is "firmly convinced that it is the best legislative solution to a terrible problem" that his constituents have been forced to confront.

"Once the President signs the bill into law, the next step will be to select the seven members of the oversight board," Pierluisi said. "I intend to play a role in this process, because it is critical that the board members be intelligent, hard-working, fair, and familiar with Puerto Rico. It is my hope and expectation that at least several of the board members, in addition to being highly qualified, will be of Puerto Rican birth or descent or have strong ties to Puerto Rico."

In a letter sent to senators yesterday, Pierluisi said that passing PROMESA, which is the product of lengthy negotiations led by House Natural Resources Committee chair Rob Bishop, R-Utah, was difficult but that "nothing truly worth doing is ever easy."

The Senate began its day of debate on the bill by invoking cloture with a bipartisan 68 to 32 vote Wednesday morning. The cloture vote eliminated the chance of a filibuster on the bill and cleared the way for general debate. The successful procedural vote, which required a 60-vote majority to pass, set the table for the final vote on bill passage later in the day, which only required a simple majority of 51 senators.

While some senators, like Sens. Robert Menendez, D-N.J., and Maria Cantwell, D-Wash., continued to oppose the bill Wednesday, many others made their decisions to vote for the bill because they saw it as the best option available and a necessary compromise between political parties, sources say.

Senate Majority Leader Mitch McConnell, R-Ky., and Senate Minority Leader Harry Reid, D-Nev., each urged their colleagues to support the bill.

"We all didn't get what we wanted," Reid said. "I wish we would have done more but I'm satisfied that this is going to be a broad step forward to help the people of Puerto Rico."

Senate Finance Committee chair Orrin Hatch said the bill "leaves a lot to be desired" and criticized what he sees as a lack of transparency from the Puerto Rico government and the Obama administration, but said he is ultimately supporting the bill because not doing so at this point would hurt Puerto Ricans.

The bill moved quickly through the higher chamber after McConnell successfully eliminated the possibility of amendments on the bill by filling its amendment "tree," which had only so many slots for proposed changes. The move upset Menendez and Cantwell who had argued there was not a "magic date" that made passage necessary and that the Senate should have been given time to fully vet the bill and offer amendments. An attempt from Menendez to table a McConnell amendment and introduce one of his own was failed in a 44 to 54 vote.

The quick action in the Senate responded to building pressure on the Senate to move on the bill before Puerto Rico faced its July 1 payment, roughly $800 million of which is on constitutionally backed general obligation debt. Puerto Rico already faces several lawsuits from creditors and would be subject to more if it defaults on Friday.

The lawsuits expected to accompany a default could lead to court orders requiring the government of Puerto Rico to pay its creditors before it funds essential services like healthcare and education. Puerto Rico Gov. Alejandro Garcia Padilla has so far prioritized essential services.

One portion of PROMESA protects the commonwealth from such a court order by putting a moratorium on any debt-related litigation filed between December of last year and the bill's enactment date. Puerto Rico and administration officials urged senators through letters and in person discussions this week to support the bill, citing the need for the moratorium.

The oversight board PROMESA would create would have the power to require balanced budgets and fiscal plans, as well as to file debt restructuring petitions on behalf of the commonwealth and its entities in a federal district court as a last resort if voluntary negotiations do not succeed. It would also have the power to require Puerto Rico to follow recommendations it makes, even if the commonwealth's government disagrees.

Republicans have been wary of the bill's restructuring process for its similarity to bankruptcy and the possibility it could create a precedent for fiscally troubled states like Illinois to come to Congress asking for similar treatment. Democrats are concerned with, among other things, the way the oversight board would be structured and its unilateral decision-making power. They also have condemned a separate provision that would allow the governor of Puerto Rico to authorize employers to temporarily pay employees under the age of 25 a $4.25 per hour minimum wage instead of the federal minimum wage of $7.25.

Congressional leadership would be responsible for appointing six of the seven board members while the president is responsible for appointing one. Additionally, only one of the board members is required to either have a permanent residence or place of business in the commonwealth.

Proponents of the bill consistently responded to that criticism by noting PROMESA only protects a territory with its restructuring regime and that the governor and board do not have to act in a way that hurts Puerto Rico.

Both Pierluisi and Garcia Padilla said last week that no governor is going to opt in to the minimum wage provision. Additionally, Pierluisi said he expects the board to have more than just one member who is representative of the Puerto Rican people. Obama has also hinted he has an interest in putting more than one Puerto Rican on the board, saying he is committed to making sure Puerto Ricans are well-represented in the process.–30—

 

 

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