WASHINGTON – Presidential candidate Sen. Bernie Sanders, I-Vt., plans to introduce a bill on Puerto Rico next week as an alternative to the one pending in the House, which he says would be "disastrous" because it would impose a powerful, unelected control board on the territory's citizens.
His complaints about the pending bill come as the Congressional Budget Office
Sanders announced he would introduce his bill before Puerto Rico's June 5 Democratic primary as he was trailing former Secretary of State Hillary Clinton 34% to 66%, according to a poll of Puerto Rican voters released in mid-May.
Sanders has promised to filibuster the pending bill, which was approved 29 to 10 by members of the House Natural Resources Committee on May 25.
He is not alone in his opposition as other prominent senators, including Sens. Robert Menendez, D-N.J., Orrin Hatch, R-Utah, Dick Durbin, D-Ill., and Chuck Grassley, R-Iowa, raised concerns about some of the provisions the pending bill contains. A number of the leading candidates to become governor or Puerto Rico's representative in Congress have said they oppose the bill.
The bill in the House would create a strong oversight board and have seven members that are appointed by the president and congressional leaders. The board would have the power to require balanced budgets and fiscal plans, as well as the ability to file debt restructuring petitions on behalf of the commonwealth and its entities in a federal district court as a last resort if voluntary negotiations do not succeed.
Sanders' proposal "rejects the austerity-driven approach taken by House Republicans and instead prioritizes the people of Puerto Rico over Wall Street vulture funds by coupling debt restructuring with economic stimulus," said a spokesperson.
The senator's bill would create a seven-member Reconstruction Finance Corporation of Puerto Rico, called the public corporation, which would be a restructuring agency with authority to lend to Puerto Rico and facilitate debt restructuring for the commonwealth, according to a bill summary.
The corporation would be funded from the Exchange Stabilization Fund at the U.S. Treasury Department and could make loans to the territory and its public authorities for, among other things, operating and investment expenses.
The territory and its authorities would be able to file for insolvency with the public corporation. After they have filed, a stay on repayment of their debt would be imposed and the bonds would be written down to whatever the bondholders paid for them. The corporation would then purchase the bonds at that price, and reset the par value to that price.
The section that would create the board makes clear that "pensions of ordinary investors should be protected, and that Wall Street speculators should not be able to profit from the misfortune of U.S. citizens," the summary says.
Puerto Rico's legislature would choose four of the corporation members, the territory's governor would choose two, and the U.S. president would choose one. Each of the members would have to be full-time Puerto Rico residents and have expertise in the commonwealth's economy, culture, and history.
In addition to the corporation, the bill would include U.S. territories under the Chapter 9 bankruptcy title, a proposal that Republicans have condemned in the past. Republican legislators have also said they want any bill to respect the current legal hierarchy of debt, which places constitutionally backed general obligation bonds above pensions. The current House legislation tries to maintain that hierarchy.
Sanders' bill would also mandate that Puerto Rico receive payments under Medicare and Medicaid that are at least equal to payments received by all states and would extend the Earned Income Tax Credit and Child Tax Credit to the commonwealth.
One section of the bill is devoted to "modernizing Puerto Rico's infrastructure," according to the summary, and would appropriate $10.8 billion to the island over the next five years. The investment would be expected to support nearly 140,000 "good-paying jobs," the summary says.
Finally, the bill would authorize the State Elections Commission of Puerto Rico to hold a vote or series of votes for the commonwealth's citizens to determine their status. The votes would have to be held by Jan. 31, 2018 and a transition respecting the outcome of the votes would be put into place by Jan. 31, 2022.
The bill is unlikely to garner much support from many legislators and especially Republicans, who have opposed suggestions to use federal money or bankruptcy to address the crisis, among other things proposed in the bill.
While introduction and votes on the Puerto Rico bill approved by the House Natural Resources Committee have proved fluid and been delayed in the past, observers expect the full House to take the measure up at some point during the week of June 6. Senators have said they are mostly waiting for the House to act on legislation before starting work.
Puerto Rico faces roughly $2 billion in debt payments on July 1, including about $800 million from GO bonds. The commonwealth's Gov. Alejandro Garcia Padilla has said the territory will default on the payment.
