WASHINGTON — Six advocacy groups are urging two key Senate Republicans to keep Congress from providing the territory of Puerto Rico with access to Chapter 9 bankruptcy protection.
The Center for Individual Freedom, Frontiers of Freedom, Hispanic Leadership Fund, Institute for Liberty, National Taxpayers Union and Taxpayers Protection Alliance made their request in a Sept. 29 letter addressed to Senate Finance Committee chairman Orrin Hatch, R-Utah, and Senate Judiciary Committee chairman Chuck Grassley, R-Iowa.
The groups referred to the possibility of Chapter 9 applying to the entire commonwealth as “Super Chapter 9” and said such a measure, if passed by Congress, would give Puerto Rico Gov. Alejandro García Padilla “a free pass to violate Puerto Rico’s constitution, but would do nothing to bring about meaningful fiscal reform.”
CFIF and NTU are also listed as lobbying against a bankruptcy bill pending in the House, which has a companion measure sitting in the Senate, that would extend Chapter 9 to public authorities on the island. The exact amount of money they have spent lobbying against the legislation remains unclear.
While the House and Senate bankruptcy bills only focus on giving Chapter 9 access to Puerto Rico’s public authorities and municipalities, the concerned organizations allege García Padilla is asking Congress to approve a Super Chapter 9 bill. If that were to happen, the groups said, territory officials could refuse to pay holders of constitutionally-protected general obligation debt and could “violate the rights of Americans on the mainland and in Puerto Rico who have invested savings … in Puerto Rican bonds.”
The groups told the two senators that they want to see Congress “lead on this tough issue” but reminded them that Congress can impose other measures for financial reform, like a federal financial control board. Only after that type of reform is enacted will “an orderly restructuring of Puerto Rico’s debts that respects the constitutionally-protected bonds and the rule of law” be possible, the groups said.
Puerto Rico has already proposed a local financial control board as part of its five-year economic growth plan.
Both Hatch and Grassley have distanced themselves from the Chapter 9 bankruptcy proposals in Congress. Hatch held a committee hearing on Sept. 29 to gather more information about the island’s $72 billion in debt and its economic situation. During the hearing, Hatch and Grassley, who testified, both said they think Puerto Rico will require a more comprehensive solution than Chapter 9. Hatch said he needed more information about Puerto Rico’s financial situation.
Grassley has said he would consider imposing a federal financial control board on the territory.
