WASHINGTON – Senate Democrats and Independents joined together on Wednesday to call for swift action to write and pass legislation that authorizes debt restructuring for Puerto Rico.
The 46 senators, led by Sen. Maria Cantwell, D-Wash., and Senate Minority Leader Harry Reid, D-Nev., suggested Senate Majority Leader Mitch McConnell, R-Ky., emulate House Speaker Paul Ryan, R-Wis., who set a March 31 deadline for the House to produce a "responsible solution" for the commonwealth.
Sens. Angus King, of Maine, and Bernie Sanders, of Vermont were the two Independent senators who signed the letter. Both King and Sanders caucus with the Democrats and Sanders is running as a Democratic nominee for president.
The letter was sent as the House Natural Resources Committee Subcommittee on Indian, Insular, and Alaska native Affairs has a hearing scheduled for Feb. 2 to discuss the potential for a federal oversight board for the territory. Cantwell is the ranking minority member on the Senate Energy and Natural Resources Committee, which, along with the Senate Finance and Judiciary Committees, held separate hearings on Puerto Rico last year. The committees' three chairs also introduced a bill that would create a presidentially-appointed management authority for Puerto Rico but did not include any restructuring provisions.
But McConnell seems disinclined to follow in Ryan's footsteps, sources said.
A spokesperson for the Senate Majority Leader said Wednesday that McConnell plans to let the Senate follow "regular order," leaving the process up to the three committees with jurisdiction over Puerto Rico.
Michael Tadeo, a spokesman for the Senate Energy and Natural Resources Committee, said chair Sen. Lisa Murkowski, R-Alaska, will follow McConnell's plan and allow the bill she co-sponsors to go through the regular order process in Congress.
But the Democrats made clear in their letter that they believe quick action and leadership from McConnell to pass restructuring legislation is necessary for the commonwealth.
"This is the only way Puerto Rico can respond effectively and responsibly to this growing financial and social catastrophe," they said. "Any legislation that does not include a federal process that allows Puerto Rico to adjust its debt would not be a real solution for Puerto Rico's crisis."
The senators cited statistics such as Puerto Rico's having an unemployment rate over 12%, 45% of its population living in poverty, and a 10% drop in its population over the last ten years as proof that the commonwealth's situation will continue to deteriorate without congressional action.
Puerto Rico has already defaulted on three bond payments and Gov. Alejandro Garcia Padilla instituted a clawback procedure in late November that takes funds meant for non-general obligation bonds and diverts them for use in future GO payments. The clawback means only funds that non-GO bond trustees already had at the time of the procedure's implementation will be available for future non-GO payments.
"It is almost certain that Puerto Rico will be unable to make its upcoming $469 million in payments to bondholders in May and the $1.9 billion in payments due to bondholders in July," the senators said. "It is clear to us that Puerto Rico and its creditors will be unable to stop these trends without some form of intervention."
The bill from the three Senate committee chairs joins a number of others that have been introduced in both the House and Senate, including a measure in each chamber that would extend Chapter 9 bankruptcy protections to the commonwealth's public authorities.
Republicans have mostly tried to avoid legislation that would allow a federal restructuring process for the island's debt, while Democrats and local Puerto Rican politicians, have been wary of an overly powerful federal control board possibly resulting from legislation.
But Rep. Sean Duffy, R-Wis., introduced a bill in the House that would combine Democrats' calls for a restructuring process and Republicans' push for a federal oversight authority that could both sort through Puerto Rico's financial information and have the final say on any financial decisions the commonwealth makes.
While the Duffy bill has not gained traction yet, some observers have said it is the best place for Republicans and Democrats to start putting together an agreeable solution for the commonwealth, especially with a hearing next Tuesday.
