Puerto Rico Gov. Alejandro Garcia Padilla’s plea to Congress last week to attach a provision extending Chapter 9 bankruptcy rights to the island in a must-pass end-of-the-year spending bill proved to be unsuccessful upon the legislation’s release early Wednesday morning.
The commonwealth holds around $70 billion in public debt, and narrowly avoided default earlier this month. A $957 million payment is due in early-January, and Padilla has warned it might not be able to meet its financial obligation.
While a policy rider allowing the territory to refinance its liabilities did not make it into the $1.1 trillion omnibus, an idea several Democrats and Puerto Rican politicians lobbied for, it does provide some financial relief.
Around $900 million over the course of the next 10 years would be added to the commonwealth’s health funding, increasing its Medicare reimbursement payments.
The bill would also allocate $222,500,000 for the Department of Treasury to provide the island with technical assistance to improve its disclosure, budgeting, grant management and accounting practices.
Proponents of a bailout or the extension of Chapter 9 don’t feel Congress is giving the territory enough support.
“I’m deeply disappointed by the lack of Congressional action,” Eric LeCompte, executive director of the religious development group Jubilee USA, said in a statement after the release of the omnibus. “We are failing millions of Americans on the island.”
“While we could not agree to including precedent-setting changes to bankruptcy law in this omnibus spending bill, I understand that many members on both sides of the aisle remain committed to addressing the challenges facing the territory,” said House Speaker Paul Ryan. “That’s why I am instructing our House committees of jurisdiction to work with the Puerto Rican government to come up with a responsible solution by the end of the first quarter of next year.”
Critics of allowing the island to file for bankruptcy say the move won’t solve the problem in the long run and say there are better alternatives for the island to get back on track.
During a hearing in early-December, Iowa Republican Sen. Chuck Grassley said allowing the commonwealth to restructure its debt would be unfair to investors since it “issued its bonds with the knowledge that Chapter 9 bankruptcy wasn’t an option in the event of a default.”
Sens. Orrin Hatch of Utah, Grassley and Lisa Murkowski of Alaska also called for technical assistance for Puerto Rico in a bill they unveiled last week. The Republicans’ measure would would allow for the allocation of up to $3 billion in aid for Puerto Rico to transition into a more stable economy while providing the island tax relief.
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