Sen. Ron Wyden (D-Oregon), chairman of the committee that oversees U.S. territories, pressed Puerto Rico to choose between statehood and independence, a decision that could eliminate the market's biggest supplier of triple-tax exempt bonds.

"The rejection of the current territory status last November leaves Puerto Rico with only two options: statehood under U.S. sovereignty or some form of separate national sovereignty," Wyden said Thursday at a a hearing of the Senate Committee on Energy and Natural Resources.

The hearing focused on plans for a new plebiscite, following a referendum last November in which a majority of Puerto Ricans voted against continuing the island's current territorial status. The current federal budget includes $2.5 million for the new plebescite. Should Puerto Rico become a state, it would lose the authority it has had as a commonwealth to issue triple-tax-exempt bonds. As of April, 12 large Puerto Rican issuers had about $60 billion in outstanding debt, according to Janney Capital Markets and the Government Development Bank of Puerto Rico.

Since only 3% of voters voted for gubernatorial candidates endorsing independence in the 2012 election, a vote for independence is unlikely.

Puerto Rico voters were asked two questions in November. In the first, 54% voted against continuing the island's current territorial status. In a second question concerning what they thought should replace the territorial status, 61% voted in favor of statehood.

"The current relationship undermines the United States' moral standing in the world," Wyden said. "For a nation founded on the principles of democracy and the consent of the governed, how much longer can America allow a condition to persist in which nearly four million U.S. citizens do not have a vote in the government that makes national laws which affect their daily lives?"

Wyden also said the lack of resolution to Puerto Rico's status contributes to its economic problems.

Committee Minority Leader Lisa Murkowski said she believed Puerto Rican voters must be given the choice among: continuation of the Commonwealth status, statehood, independence, and a free association similar to what the United State has with the Marshall Islands.

The Puerto Rico legislature is expected to create the wording for the upcoming plebiscite. Regardless of the outcome of the upcoming plebiscite, Senate and House committees as well as the full Senate and House would have to pass any Puerto Rico status change by a majority vote, and the president would have to approve it.

In his testimony before the committee, Puerto Rico Gov. Alejandro García Padilla endorsed the forthcoming plebiscite, saying that the previous one had several problems undermining its credibility.

The pro-statehood administration of the previous Puerto Rico governor, Luis Fortuño, constructed the referendum in a way to make it seem Puerto Ricans supported statehood, García Padilla said. For example, the first question asked if voters supported the current "territorial" status rather than asking them if they supported the "commonwealth" status. The term "territory" has a derogatory connotation, García Padilla said.

García Padilla also said the earlier referendum also fell short, because it did not allow the option of an enhanced version of the current commonwealth status. The previous referendum used wording concerning free association status that may have confused some voters into believing they were voting for the current commonwealth status, he said.

Finally, García Padilla's own party had urged voters to not vote on the second part of November's ballot. If those who chose not to vote are taken into account, only 44% of the voters voted in favor of statehood, García Padilla said.

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