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Three and a half million Americans live on an island that is in economic free-fall, and Congress still isn’t sure whether it will throw them a lifeline, according to a New York Times editorial today. A bipartisan bill to help Puerto Rico is expected to come to a vote soon in the House, and while it has flaws and it is facing opposition on many fronts, it offers the island its best chance of survival, according to the editorial. This is how urgent the situation is: Thousands of residents leave for the mainland every month to seek jobs and better public services, and the exodus will accelerate if nothing is done to change Puerto Rico’s trajectory. With its economy in decline for a decade, the island has accumulated huge debts that it cannot repay. It owes $72 billion to investors and about $46 billion to government pension funds. Two weeks ago, Republican and Democratic lawmakers in the House and the Obama administration reached a compromise on aiding Puerto Rico. The island desperately needs to restructure its debt, which is about 100 percent of its gross national product. Given its shrinking economy and population, Puerto Rico cannot possibly repay bondholders every dollar it owes them. The island’s government has cut spending and raised taxes, but that has only made the situation worse by depressing economic activity. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

Two Democratic lawmakers yesterday said they will actively work to significantly change or sink a House bill to give Puerto Rico debt restructuring tools, MorningConsult.com reported. Sen. Robert Menendez of New Jersey and Rep. Luis Gutiérrez of Illinois said that the current legislation, H.R. 5278, does not provide for an orderly debt restructuring process and places too much power in the hands of a fiscal oversight board whose members are still unknown. That type of action continues neo-colonialist behavior that Gutiérrez said has been all too common throughout the mainland United States’ relationship with Puerto Rico. Gutiérrez said that he will “actively work” to defeat the current language in the bill, adding that he has met with officials such as Sen. Dick Durbin (Ill.), the second-ranking Senate Democrat, to muster opposition to the House legislation. Menendez also said that a number of unnamed Democratic senators appeared interested in his reasons for opposing the bill. Menendez said that there is no hurry to help passage of a bill in a short time, including before a July 1 payment is due. He believes that deadline is “about paying bondholders” nearly $1 billion. “I don’t believe in being jammed for a bad bill,” he said. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

U.S. lawmakers yesterday backed a plan to help Puerto Rico escape crippling debt and expand the economy, a move that could put a rescue before the House of Representatives within days, Reuters reported. The House Natural Resources Committee endorsed the plan by a 29-10 vote and left intact most provisions endorsed by House Speaker Paul Ryan. The plan would empower a federal oversight board to negotiate with investors and decide what they would recover from the roughly $70 billion they lent the island. Taxpayer money will not be spent in the rescue which would prevent a bailout, Ryan's office said in a statement yesterday. Puerto Rico's Governor, Alejandro García Padilla praised the bill for elements to help address insolvency, protect essential services and grow the economy. However, he reiterated reservations about the broad power of the oversight board. Under the plan, investors may not sue Puerto Rico while the oversight board does its work, and all the island's creditors could face a loss despite recent lobbying from Wall Street interest groups. With the House and Senate set to begin a week-long Memorial Day holiday break at the end of this week, debate of the bill by the full House is not expected until sometime in June. Read more. 

For more news and analysis of Puerto Rico's debt crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage. 

The House Committee on Natural Resources will continue its hearing today at 10 a.m. ET today to markup H.R. 5278, the “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA). For a live webcast of the hearing, please click here.

For more news and analysis of Puerto Rico's financial crisis, be sure to visit ABI's "Puerto Rico in Distress" webpage.

The agreement on May 19 between House Speaker Paul D. Ryan (R-Wis.) and the Obama administration on a measure to help Puerto Rico out of its debt crisis presents an obvious and urgently needed plan for the territory, according to a Washington Post editorial on Friday. Neither House Speaker Paul Ryan nor the Treasury Department ever contemplated using federal taxpayer funds to pay off debts incurred by the island’s government, which has been justly accused of taking a bad economy and making it worse through mismanagement and, in some cases, corruption, according to the editorial. Creditors may be bought out at a discount, giving Puerto Rico financial breathing room, in return for which the island will have to make structural reforms so it can meet reduced obligations and restart growth. Legislation to make this possible has been crafted pursuant to Congress’s constitutional authority to make laws for the territories, thus debunking another of the opponents’ claims: that a bill would set a debt-escape precedent for fiscally irresponsible states. The bill would also put a temporary halt to lawsuits by creditors and put an oversight board, appointed on a bipartisan basis by Congress and the president, in charge of Puerto Rico’s finances.

Puerto Rico Governor Alejandro García Padilla presented a $9.1 billion spending plan for the fiscal year starting July 1 that allocates just $209 million for bond interest payments, reiterating his stand that the commonwealth plans to skip most debt obligations, Bloomberg News reported yesterday. “Paying the debt in its totality would have meant taking health benefits away from more than a million people, or having to fire countless police officers and closing the Centro Medico” health facility, García Padilla said during a televised address. Or, he said, “going without school transportation and garbage collection.” Island lawmakers have until June 30 to approve a budget for fiscal 2017 or the government uses the current year’s spending plan as a framework. The budget proposal doesn’t rely on borrowing to fill a deficit and doesn’t include any tax increases, the governor said. It is $192 million less than the revised $9.3 billion fiscal 2016 budget. This is García Padilla’s final budget as he is not seeking re-election. Island officials anticipate Puerto Rico’s economy will shrink by 2 percent in fiscal 2017, for the fifth straight year of economic contraction. The administration is working on reducing the island’s $70 billion debt burden by asking investors to accept losses on their securities. The commonwealth and its agencies owe $2 billion on July 1, including $805 million for general obligations which García Padilla has said multiple times that the government doesn’t have the money to pay.