A Congressional leader is taking steps to change the Puerto Rico Oversight, Management, and Economic Stability Act, the 2016 law that provides the legal basis for the restructuring of the territory's debt.
Rep. Raúl Grijalva, D-Ariz., is leading a contingent of members of the U.S. House of Representatives Natural Resources Committee to visit Puerto Rico Friday through Monday in preparation for possible changes to PROMESA. Grijalva is chairman of the committee, which oversees Puerto Rico.
PROMESA was signed into law in the summer of 2016. Along with setting up a restructuring process for Puerto Rico’s public sector debt and pensions, it established an Oversight Board to control most local government financial decisions. Puerto Rico has about $72 billion in debt and $49 billion in unfunded pensions. The board's policies have come under fire from bond holders for failing to allot enough money for debt service, and from local government officials for its efforts to impose fiscal austerity.
Rafael Hernández Montañez, who is Puerto Rico House of Representatives minority leader, said there is increasing talk of rebellion from the U.S. government and the Oversight Board, not just among extremists, but also among members of the mainstream parties in Puerto Rico. PROMESA should be changed to improve Puerto Ricans’ input into their government not to lessen it. Otherwise, islander rebelliousness will increase, he said in December.
Ike Brannon, senior fellow of the Jack Kemp Foundation, disagreed. “The central barrier to fixing Puerto Rico’s long-term structural budget problems is that its government doesn’t want to make hard decisions and the PROMESA board doesn’t appear to have the power – or desire, anyway – to force them to do so, to my chagrin.
“Since any PROMESA reform certainly won’t strengthen the hand of the board, I don’t see any reason to revisit the original legislation,” Brannon continued.
In the next few days Grijalva and the five other representatives will be listening to ordinary Puerto Rican residents, Oversight Board members, Federal Emergency Management Agency directors, and others.
“We will be visiting Puerto Rico for a learning session in which ordinary folk from Puerto Rico are invited to come and give us their views, their criticisms, their recommendations, their ideas on how to go forward,” Grijalva said. “It’s important that we listen to people most affected, those that have endured the hurricane, those that have endured the fiscal crisis and the austerity moves by the Oversight Board.”
“We will put that all together and come back to Washington and begin to look at the PROMESA legislation and find out what needs to be reformed, what needs to be changed going forward,” Grijalva said.
Grijalva told The Bond Buyer he hoped there could be changes to PROMESA this year.
In mid-February the U.S. Court of Appeals for the First Circuit ruled that PROMESA’s appointment procedures for the board were unconstitutional. It said that the board’s decisions could stand and that its members could continue to act as a board for 90 days. Grijalva said this decision added to the need to make changes to the law.
“There’s also an urgency on the [Hurricane Maria] recovery that I think our government has not answered well,” Grijalva said.
Grijalva said he hoped a public listening session on Friday won’t turn into a debate on the status of the island. Puerto Rico is currently a territory but many residents want to make it a state.
Because the Democratic Party took control of the U.S. House in January, committee chairs have also changed to be Democrats. Democrat Grijalva is likely to have a different outlook on how the federal government should treat Puerto Rico than the committee Republicans who dominated that drafting of PROMESA.
Apart from whether there should be PROMESA changes, another question is whether there will be changes.
“Baseline expectations should be for no Congressional changes to PROMESA, because it’s hard to imagine members having enough interest in Puerto Rico to spend political capital to make material changes to the law,” said Municipal Market Analytics Partner Matt Fabian.
“In the same vein, if Congress does make changes, they are likely to be modest and probably additive as opposed to making changes to existing provisions,” Fabian continued. “For example, adding a strong economic development priority to the board’s mission, or adding language that could lead to a new tax preference that benefits employment on the island.”
A board spokesperson said, “Any discussion around changes to PROMESA is a matter for the U.S. government. The [board] continues to operate in accordance with the law.”
Along with Grijalva, the committee’s Republican leader Rob Bishop, Utah; Darren Soto, D-Fla.; Gregorio Sablan, D-Northern Mariana Islands; Nydia Velázquez, D.-N.Y.; and Jenniffer González Colón, R-Puerto Rico, will be on this weekend’s trip.
Brian Tumulty contributed to this story.
