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senate Bill S. 2328

The Updated Plan to Help Puerto Rico Resolve its $72 Billion Debt Crisis

Argument in favor

This bill offers the best path forward in resolving Puerto Rico’s debt crisis without a bailout or financial market turmoil. It provides Puerto Rico with a process to collaboratively restructure its debt with creditors, and enacts reforms to boost the economy.

fdbetancor's Opinion
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07/01/2016
I'm happy to restructure PR's debt with neither a cut in basic services nor a taxpayer bailout. But isn't it time for PR to end it's inbetween status and become a full US state? There are already more Puerto Ricans on the mainland than on the island, and we would gladly welcome them as full members of our Union.
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operaman's Opinion
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06/29/2016
An appointed board not being subject to Puerto Rico's normal governing process may work. Waiting for Labor to start screaming about their benefits. Just think, a better run PR may bring more tourists and a increase in capital type business. Socialist is really admired until it runs out of taxpayers money. The Piper must be paid. $72Billion. This is not a rounding error.
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Ron's Opinion
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07/08/2016
I do believe since they are still a US territory that this is the best we can do. I also believe that we as a nation can not afford to repeat this effort. Puerto Rico needs to either become a state of the union or be given its independence.
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Argument opposed

The Oversight Board this bill creates would have too much control over Puerto Rico’s finances, and if it sides with creditors in negotiations then the Puerto Rican government may not receive as much debt relief as it needs. This is a bailout by another name.

injostice's Opinion
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06/29/2016
Can you say bailout? Puerto Rico needs to either be granted independence or statehood.
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Joshua's Opinion
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06/30/2016
The Puerto Rican Government needs to answer for its poor decisions. It is not the responsibility of the taxpayer to bail out their creditors.
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Dorothy's Opinion
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06/29/2016
It is a colonialist bill! Recent polls in Puerto Rico show the people do not want it. They are protesting it it. The bill uses austerity and overrides democracy. It assigns a financial control board over the common wealth over Puerto Rico.
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What is Senate Bill S. 2328?

Update June 28, 2016: This bill was co-opted through the amendment process from its original form to serve as the legislative vehicle for a bill to help Puerto Rico resolve its debt crisis known as PROMESA. Originally, it reauthorized funding for the National Sea Grant College program (like this bill). When the House approved its version of PROMESA, it also amended this bill by transferring the text of PROMESA to it so as a result this bill is considered to have passed the House as well.

This bill seeks to assist Puerto Rico handle the U.S. territory's $72 billion debt crisis by creating an Independent Oversight Board to approve and execute fiscal plans. The bill would create a process for the Commonwealth to further restructure its debt with creditors if necessary. It also contains regulatory reforms aimed at boosting Puerto Rico’s economic growth.

The seven member Independent Oversight Board would be composed of financial and management experts appointed by the President and nominated by congressional leadership. The Speaker of the House and Senate Majority Leader would each have two of their suggestions on the board, whereas the minority leaders of the House and Senate would each have one recommendation selected.

While the Oversight Board would be considered an entity within the government of Puerto Rico, it wouldn’t be subject to the control of the Governor or Legislative Assembly. The board would make use of the government’s audited financial statements to assist in the preparation of fiscal plans and budgets. It would also work with government agencies and public corporations to improve operational efficiencies and accountability, optimize revenues over expenses, and make public services more reliable for constituents.

If it becomes necessary for Puerto Rico to further restructure its debt, three conditions must be met before any restructuring can take place:

  • Required audited financial statements must be provided;

  • A fiscal plan and budget must be in place that constitutionally protects the hierarchy of creditors and pensions;

  • There must be mediation among the various debtors and creditors.

To be approved, a debt restructuring proposal must be agreed to by a two-thirds vote from Puerto Rico’s creditors, who would voluntarily restructure the Commonwealth’s debt. If an agreement on additional restructuring can’t be reached, the Oversight Board would be able to file a petition in U.S. district court for supervised restructuring that would be distinct from a Chapter Nine bankruptcy.

A Revitalization Coordinator would be established under the Oversight Board to vet proposed infrastructure projects and work with federal agencies when necessary to accelerate mandatory reviews. The coordinator would make recommendations to the board about a project that could be given access to expedited permitting and regulatory processes if the proposal addresses several factors:

  • Economic support provided by the project;

  • The project’s access to private capital for financing;

  • Whether the project addresses a flaw in Puerto Rico’s infrastructure.

To encourage hiring, Puerto Rico would have the ability to adjust its minimum wage from $7.25 per hour to $4.25 per hour for workers up to age 25 for a five-year period, as the current minimum is seen as too high to compete with neighboring islands. The Commonwealth would also be exempt from the Dept. of Labor’s proposed increase in the pay threshold that’s exempt from overtime requirements.

Impact

People who live and work in Puerto Rico; members of the Independent Oversight Board; Puerto Rico’s creditors; and the Puerto Rican government.

Cost of Senate Bill S. 2328

A CBO cost estimate is unavailable.

More Information

Of Note: Puerto Rico’s debt crisis began with an over-reliance on issuing tax-advantaged municipal bonds to finance government spending. When its economy declined and tax revenues fell, the condition of Puerto Rico’s public finances worsened as its population declined and more citizens required government assistance. These circumstances have aggravated Puerto Rico’s overall economic woes, as the island faces a 12 percent unemployment rate and a 45 percent poverty rate.

As it stands, Puerto Rico owes creditors around $70 billion in debt — a total that is nearly 70 percent of the Commonwealth’s entire economy — a substantial increase from 2000, when its total debt was only $24 billion. Most of the bonds issued by the government and other public institutions has been downgraded by credit rating agencies to junk status, with only $1.7 billion of its total debt still considered investment grade.

There’s a significant payment deadline looming that Puerto Rico must meet to cover its obligations, as there’s another $2 billion to be paid on July 1 after Puerto Rico defaulted on a $422 million due on May 1. The Commonwealth recently enacted legislation allowing it to delay debt payments and has its released its own proposal for restructuring debt, but investors and members of Congress worry that bond markets would be thrown into turmoil if it proceeds.


In-Depth: Sponsoring Rep. Sean Duffy (R-WI) introduced this bill to put Puerto Rico on a reasonable path to resolving its debt crisis while balancing the needs of creditors owed money by the Commonwealth’s government:

“Years of disastrous policies have completely wrecked Puerto Rico’s economy. As a result, the island and its millions of American citizens face a humanitarian crisis. That’s why we must allow for a responsible restructuring for Puerto Rico’s debt, and do it without using Wisconsin taxpayer dollars for a bailout.”

While the House initially set an end of March deadline for passing a solution for Puerto Rico’s debt crisis, negotiations over the nature of that solution have been protracted and contentious. Early proposals sought to give Puerto Rico access to Chapter 9 bankruptcy like states and cities have, which eventually led to this bill’s predecessor being introduced.

Following several delays and continued negotiations, House Republicans reached a deal with the Obama administration over a few key sticking points that stopped the earlier version of PROMESA. Specifically, this revised bill created a firewall between how constitutionally protected creditors and pensions would be treated in fiscal plans and also gives Puerto Rico the ability to choose to lower its own minimum wage but only for new hires, not for existing employees. Those provisions had proven to be a barrier to gaining Democratic support.



Media:

Summary by Eric Revell
(Photo Credit: Flickr user James Willamor)

AKA

PROMESA

Official Title

A bill to reauthorize and amend the National Sea Grant College Program Act, and for other purposes.

bill Progress


  • EnactedJune 30th, 2016
    The President signed this bill into law
  • The house has not voted
      house Committees
      Water, Oceans, and Wildlife
      Committee on Natural Resources
  • The senate Passed November 19th, 2015
    Passed by Voice Vote
    IntroducedNovember 19th, 2015

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    I'm happy to restructure PR's debt with neither a cut in basic services nor a taxpayer bailout. But isn't it time for PR to end it's inbetween status and become a full US state? There are already more Puerto Ricans on the mainland than on the island, and we would gladly welcome them as full members of our Union.
    Like (11)
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    Can you say bailout? Puerto Rico needs to either be granted independence or statehood.
    Like (8)
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    The Puerto Rican Government needs to answer for its poor decisions. It is not the responsibility of the taxpayer to bail out their creditors.
    Like (7)
    Follow
    Share
    An appointed board not being subject to Puerto Rico's normal governing process may work. Waiting for Labor to start screaming about their benefits. Just think, a better run PR may bring more tourists and a increase in capital type business. Socialist is really admired until it runs out of taxpayers money. The Piper must be paid. $72Billion. This is not a rounding error.
    Like (5)
    Follow
    Share
    I do believe since they are still a US territory that this is the best we can do. I also believe that we as a nation can not afford to repeat this effort. Puerto Rico needs to either become a state of the union or be given its independence.
    Like (4)
    Follow
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    We need to do something to help the United States territory of Puerto Rico. If we are not willing to help them get out of the debt and all the issues that America has created for them, their economy which is backed by the USD will go bankrupt and will have even more issues and most likely be costlier in the long run. This does seem like a bailout, however I do remember a ton of people calling for a bailout of the automotive industry quite a few years ago.
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    I like the sound of us not having to bail them out. We don't have to foot the bill every time their government screws up. I understand they are American citizens (sorta). If they're Americans before Puerto Ricans, then they should try for statehood. If that's not the case, then I don't see why we need to babysit them much longer. This may be because I don't know too much about the matter.
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    This bill doesn't cost taxpayers a dime and restructures Puerto Rico's debt without a bailout. It's the only way for Puerto Rico to avoid default in the coming days, and it also avoids "vulture" debt collectors from continuing Puerto Rico's poverty. Dissenters to this bill complain that it usurps the territory's democracy, but their democracy has caused this debt crisis by irresponsible policy making. Austerity is a consequence of irresponsible spending, as it is a necessity for the territory's debt relief.
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    It is a colonialist bill! Recent polls in Puerto Rico show the people do not want it. They are protesting it it. The bill uses austerity and overrides democracy. It assigns a financial control board over the common wealth over Puerto Rico.
    Like (2)
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    US Territories operate under their own governments. A government that got themselves into this mess. The US has its own debt crisis- who does the Congress think they are that they can give advice or make rules for someone else when they can't manage the money we don't have! We are over $20 TRILLION in debt and they want to set the rules for PR's debt crisis? Until which time we have balanced our own budget and paid of our debt, then all bets are off when it comes to helping others manage their poor financial choices. May I will call my Congressman and Senators to help me pay my bills? I think not.
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    Congress needs to focus on restoring funds to social security and Medicare first. For PR, it is their problem, let them fix it.
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    This legislation is nothing short of a hostile take-over of Puerto Rico by morally bankrupt billionaires & less-than-scrupulous Wall Street opportunists worshipping at the altar of Greed. Any hope of Puerto Rico breaking free from its economic chains to engender a brighter future as the 51st state will surely be snuffed out & buried. Oh, and anyone unfortunate enough to remain on the island will become indebted prisoners, their futures & dreams vetoed by committee.
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    Absolutely no! They have been sucking off the Federal teat for too many years. Fix your own mess or seek statehood. As soon as this BAILOUT is completed the libs will want the same for Detroit, Baltimore and every other city the have bankrupted with bloated pension plans for votes strategy.
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    Spend this on programs that work, take the money from congress
    Like (1)
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    This plan puts a non elected board in charge of them, like in Michigan where they made that water crisis that has been ongoing for over a year. Plus they focus on cutting pay and benefits to get them out of an economic crisis, a "solution" that has NEVER worked and will make things worse
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    Puerto Rico deserves to be a State but this legislation acknowledges them as good participants in the United States.
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    Puerto Rico's debt is unpayable. It is the direct result of more than 117 years of colonialism, that have shrunk our economy and allow vulture funds to make profit of it. Although the bill may sound like a lifesaver to Puerto Rico, the Independent Oversight Board will only impose extreme austerity measures to be able to recover the debt at the expense of our suffering. The food, health, housing, education, and social programs should go first than to keep enriching the bonds holders. We cannot combat anorexia with hunger, specially in an economy built to merely benefit the American bonds holders. What Puerto Rico really needs is our independence to have the sovereignty to take the decisions to protect our people and develop our economy.
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    a deal is needed.... Like so many issues we face!
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    This could be done with the people of PR having more input into the process. They get virtually no legitimate federal recognition or representation and should be able to have major input into the process.
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    This is shades of Michigan. Governor Snyder appointed one manager to oversee Flint's budget crisis. That turned out so well for Flint, didn't it? These predatory hedge funds should not be encouraged to continue their ways. This panel guarantees the hedge funds will be paid, while the middle class pays for it and continues to disappear.
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