WASHINGTON – The Republican chairs of three Senate committees that have jurisdiction over Puerto Rico and bankruptcy introduced a bill on Wednesday night that would establish an authority that could issue bonds and provide up $3 billion in resources to help Puerto Rico stabilize its budget and debt.
But the bill, sponsored by Sens. Orrin Hatch, R-Utah, Lisa Murkowski, R-Alaska, and Chuck Grassley, R-Iowa, called the Puerto Rico Assistance Act of 2015, would stop short of providing any bankruptcy protection for the island or its authorities.
The measure would make clear that the U.S. is not bailing out Puerto Rico or pledging its full faith and credit to any bonds issued by the Financial Responsibility and Management Assistance Authority, whose six members would be appointed by the President.
The bill would provide a 50% cut in the employee side of the payroll tax for five years and reduce the employee share of the tax to 3.1% from 6.2%.
It 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, the bill would provide assistance to the island in improving its accounting and disclosure practices given the opacity of the commonwealth's current financial situation.
Hatch chairs the Senate Finance Committee, Murkowski the Senate Committee on Energy and Natural Resources and Grassley the Senate Judiciary Committee.
Earlier on Wednesday, Rep. Sean Duffy, R-Wis., introduced a bill that would provide public authorities in Puerto Rico with Chapter 9 bankruptcy protection in exchange for the commonwealth's acceptance of oversight from a presidentially-appointed five-member Financial Stability Council.
The Puerto Rico Financial Stability and Debt Restructuring Choice Act "empowers the government of Puerto Rico with the choice to partner with the federal government and put the island on a path towards balanced budgets and a return to financial security," said Duffy, chairman of the House Financial Services Committee's subcommittee on oversight and investigations.
"If Congress does not act, it would have a devastating effect on the people of Puerto Rico and countless Americans throughout the stats who stand to lose billions in the bonds markets," he said.
Members of the Financial Stability Council would have to have knowledge and expertise in finance, management, and the organization or operation of business or government and would have to either have a primary residence in Puerto Rico or have their primary place of business on the island, according to the bill's text. They could not provide goods or services to the commonwealth's government and could not be a member of the government.
Once established, the council would review an annual financial plan and budget from the governor and would have to approve it before the materials would be sent to Puerto Rico's legislature. Any borrowing the commonwealth plans would also have to go through the council.
But Duffy's bill would probably need approval from the House Judiciary Committee, whose chairman has been opposed to providing bankruptcy protection to Puerto Rico or its authorities.
The bills were introduced after Puerto Rico's governor and Antonio Weiss, counselor to Treasury Secretary Jack Lew stressed that Puerto Rico's debt and fiscal crises are dire and called on Congress to take action to assist the commonwealth.
Some lawmakers are hoping Congress adds legislation to help Puerto Rico in the omnibus spending bill that must be approved by Dec. 11 to avoid a shutdown of the federal government.
Hatch told reporters, "It's not easy, but we're going to find some way to resolve [Puerto Rico's crisis] before we go home. Resolve it so we can at least help them to get through this current crisis, but hopefully resolve it so in the future they won't get back into the crisis."
Resident Commissioner Pedro Pierluisi, D-P.R. issued a statement praising Duffy's bill but warning that its oversight portion has some problems.
"I commend Congressman Duffy for his leadership in acknowledging that Puerto Rico requires a federal mechanism to restructure debt. I hope [he] will work with me to re-calibrate the oversight portion of his bill, which I believe has problematic aspects."
Pierluisi said "there are aspects of the [Hatch] bill that are positive" and aspects "that I have concerns with, such as the absence of a federal mechanism to enable Puerto Rico to restructure any of its debt."
Gov. Alejandro García Padilla, speaking at the Puerto Rico Federal Affairs Administration in Washington, stressed that an extension of Chapter 9 bankruptcy protections to the island's public authorities is not a federal bailout and simply a way to give Puerto Rico the "tools" it needs to fix its problems. He said Puerto Rico is a lost ship of 3.5 million people sending a distress call to the federal government.
"We are not asking for a bailout, we are asking for the tools to do the job," García Padilla said. It is up to the federal government whether it wants to answer the commonwealth's calls, he added, but if Congress continues its inaction, there will be a humanitarian crisis on the island.
Puerto Rico's problem extends further than its $72 billion public debt and includes a lack of health care funding and federal tax credits that can put a halt to the large outmigration of its citizens and bolster the commonwealth's economy. The governor, who has continually said the government does not have the funds to repay its debt, signed an executive order on Dec. 1 to pay $355 million in Government Development Bank notes that were due. But the order implemented claw back procedures that would take funds away from some lower priority bonds to pay back obligations backed by the commonwealth's constitution. Puerto Rico has to pay $1 billion of debt service by Jan. 1 and the fate of that payment is uncertain with the lack of action from Congress.
The Treasury Department released a four-part plan in October that would address many of the issues García Padilla mentioned in his speech. The plan includes expanding Chapter 9 bankruptcy protection to the entire commonwealth, not just its public authorities, in return for the creation of a federal oversight body. It also seeks action by Congress to reform Puerto Rico's access to federal healthcare programs and extend the Earned Income Tax Credit, as well as provide funding to update and modernize the commonwealth's antiquated accounting and disclosure practices.
García Padilla said Treasury has been "very supportive" throughout the commonwealth's struggles and added he would accept a federal fiscal oversight body as long as it respects Puerto Rico's autonomy and the island's officials play a part in drafting the documents that create the body.
The governor said he plans to meet with Treasury officials at some point this week to further discuss the commonwealth's position, but he did not have specific details on the meeting at the press conference.