The House Committee on Natural Resources has one last obstacle before it introduces redrafted legislation aimed at dealing with the Puerto Rico debt crisis: figuring out how to select federal officials to sit on a control board designed to oversee the debt-ridden island’s finances.
The board – which would help the commonwealth’s government develop budget plans and provide oversight on spending – is a critical component in getting the island back on a path of fiscal solvency, a GOP aide close to the process told The Daily Caller News Foundation Tuesday.
“That is the one last thing we are trying to work out, how this process will work,” the source confirmed. “I would say everything else in the bill is nailed down, it’s just how the appointments will proceed.”
Puerto Rico, which faces a $70 billion debt burden it says it can’t pay back, recently defaulted on most of its $422 million payment to its creditors and has another $2 billion payment due in early July.
The draft legislation introduced in April– which stalled in committee following pushback from both sides of the aisle – called for a federally appointed advisory board to help the island with its budgeting and money management. Concerns over the board were raised by both parties, with Democrats alleging it “would exert undue and undemocratic control over Puerto Rico’s government and residents” and some conservatives fearing it would be subject to political pressures that aren’t conducive to establishing a stable, free-market economy.
“At the end of the day, the primary growth tool will be this board, it will initially bring some structure to the chaos, some confidence from the investor point that the institutions of government actually work and will be able bring not just government reforms, but economic reforms,” the GOP aide said.
The language in the bill, which is expected to provide the island with tools to restructure debt without a taxpayer-funded bailout, was reworked in a way sources close to the negotiations say will garner more support than the initial proposal.
“What we’re striving for is a situation where private capital realizes that there is an investment opportunity for the island to move forward.What we are hearing is that if some certainty is brought to the island through the oversight board under its current design, this would be a positive in the eyes of the markets generally,” the source said, adding the situation is different from the what was seen in Detroit, where the city had guarantees from the state of Michigan to help it get back on its feet. Since Puerto Rico is not a state, lawmakers are hoping capital markets will be the island’s saving grace, not funds from the U.S. Treasury or U.S. government.
Republican lawmakers have expressed concern by granting the island bankruptcy rights, it will set an unaffordable precedent for the country.
The GOP aide reassured the entire statute is being pursued through the territorial clause, not the bankruptcy clause, which should ease concerns states would potentially be allowed to file for Chapter 9. According to the committee, the legislation has been crafted using a bipartisan approach and is designed in a way that will help the commonwealth restore self-governance.
The bill is expected to push the island to prioritize its general-
Both Republicans and Democrats on the committee have been working closely with the Department of Treasury on the technicalities of restructuring the territory’s debt.
While a date has not been announced on with the legislation is introduced, it is expected to be released soon.
Congress is hoping to have the bill passed by the July 1 deadline.
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