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house Bill H.R. 5278

The Revised Plan to Fix Puerto Rico’s $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.

Aspros's Opinion
···
05/20/2016
How about Congress finally holds a vote on Puerto Rico statehood?
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Andrew's Opinion
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05/20/2016
Yes yes. They're a territory. It's our responsibility. Their power is limited, Congress is the authority. If we don't want to be responsible, then we should give them independence.
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madamesoleil's Opinion
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05/20/2016
Everyone needs to watch the John Oliver segment on Puerto Rico
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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.

BTSundra's Opinion
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05/20/2016
You can't have the best of both worlds. Either vote for statehood or deal with your own problems.
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chrisd3lacruz's Opinion
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06/09/2016
I don't know of any other way to voice my opinion in a way that matters, because lately I feel as though I don't matter because I am Puerto Rican. This bill is trash, not just because it would work to completely destroy the working and middle class in Puerto Rico, or because it would ruin environmental protections established, but because it would work against what we need to pull ourselves out of this fiscal crisis: MORE education and a minimum standard of living! We need a higher minimum wage not a lower one in order for us to be put on the right path, punishing THE FUTURE of this country merely for there age only exacerbates the problem further. You're snuffing your only source of income before it even has a chance to grow. $4.25 the hour is a death sentence for the more than 60% of people below the poverty line, and it would only exacerbate this situation infinitely. The PROMESA act is an act to kill my people and destroy my country; more than evidence for the argument that Puerto Ricans are lesser class citizens, it is a death sentence that the people do not deserve, nor have they merited it. I say NAY, I scream it! NAY to H.R.5278, and everybody who TRULY believes in freedom and justice for all say it too.
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Gopin2020's Opinion
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05/20/2016
No you made your mess , clean up your house yourself ; no more nanny state!
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bill Progress


  • Not enacted
    The President has not signed this bill
  • The senate has not voted
      senate Committees
      Committee on Energy and Natural Resources
  • The house Passed June 9th, 2016
    Roll Call Vote 297 Yea / 126 Nay
      house Committees
      Committee on Education and Labor
      Committee on Natural Resources
      Committee on Small Business
      Committee on the Judiciary
      Antitrust, Commercial and Administrative Law
    IntroducedMay 18th, 2016

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What is House Bill H.R. 5278?

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 House Bill H.R. 5278

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

To establish an Oversight Board to assist the Government of Puerto Rico, including instrumentalities, in managing its public finances, and for other purposes.

    How about Congress finally holds a vote on Puerto Rico statehood?
    Like (187)
    Follow
    Share
    You can't have the best of both worlds. Either vote for statehood or deal with your own problems.
    Like (53)
    Follow
    Share
    Yes yes. They're a territory. It's our responsibility. Their power is limited, Congress is the authority. If we don't want to be responsible, then we should give them independence.
    Like (72)
    Follow
    Share
    Everyone needs to watch the John Oliver segment on Puerto Rico
    Like (37)
    Follow
    Share
    I don't know of any other way to voice my opinion in a way that matters, because lately I feel as though I don't matter because I am Puerto Rican. This bill is trash, not just because it would work to completely destroy the working and middle class in Puerto Rico, or because it would ruin environmental protections established, but because it would work against what we need to pull ourselves out of this fiscal crisis: MORE education and a minimum standard of living! We need a higher minimum wage not a lower one in order for us to be put on the right path, punishing THE FUTURE of this country merely for there age only exacerbates the problem further. You're snuffing your only source of income before it even has a chance to grow. $4.25 the hour is a death sentence for the more than 60% of people below the poverty line, and it would only exacerbate this situation infinitely. The PROMESA act is an act to kill my people and destroy my country; more than evidence for the argument that Puerto Ricans are lesser class citizens, it is a death sentence that the people do not deserve, nor have they merited it. I say NAY, I scream it! NAY to H.R.5278, and everybody who TRULY believes in freedom and justice for all say it too.
    Like (37)
    Follow
    Share
    No you made your mess , clean up your house yourself ; no more nanny state!
    Like (33)
    Follow
    Share
    Puerto Rico needs our help. They're Americans too and they deserve to be treated as such.
    Like (18)
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    There are far too many people posting their opinion here based only on the Countable title of the bill without seeming to understand much about the Puerto Rico situation. I'm from Puerto Rico and my family lives there, and there's a fair amount of outrage due to this bill. Puerto Rico belongs to the states, but is not a part of it, so it has no voting rights in the US congress nor presidency. This is not the Puerto Ricans' choice, as many seem to believe. Puerto Rico's statehood is purely dependent on the US congress. This bill appoints an oversight board with no accountability to the people of Puerto Rico whatsoever, which simply means they will just push the island to pay its debt without any consideration as to the impact of their decisions on the healthcare and education systems in Puerto Rico. This bill reduces the minimum wage to under $5 an hour for folks under 25 - if any of you have traveled to Puerto Rico, you'll realize that's not a living wage, much less for someone who just finished an education. Lastly, what many here don't seem to realize when they say "they should fix their own mess, it's not our responsibility" is... every single Puerto Rican is a US citizen. My family can move to the US in a heartbeat and this kind of policy will simply make it all the more appealing for young Puerto Ricans to pay the $50 it costs to get on a JetBlue flight to the US, as 6000 Puerto Ricans have been doing each month for the past year. Furthermore, it is a combination of policies made in Congress and local PR policies that led the island to its current position. Being a territory with no voting power in congress, it is unfair to hold Puerto Rico fully accountable for its current position. Just like when a company fails we first look at its board of directors and executive teams, we should hold accountable both the United States and Puerto Rico politicians that shaped the current situation of what we like to call a US "territory", which is eerly similar to a colony.
    Like (16)
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    You can't have autonomy and then want to be bailed out. Either become a state or start making reforms to your own welfare state.
    Like (12)
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    Puerto Rico needs help. This won't solve their problems, but it's a step in the right direction. By removing Puerto Rico's right to declare bankruptcy in the 1980s, the federal government doomed the island. It's time the federal government did something.
    Like (9)
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    NO! NO! NO! No more bailouts! Let's worry about our own debt....19 TRILLION....And let's not open the back door for Obama and the libs to bail out Illinois, California, Detroit, Baltimore, and any other municipality or pension plan that they have mismanaged.
    Like (7)
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    This is despicable. Lowering the minimum wage to $4.25 for those under 25? What universe does Congress live in. Please call or email your Congress people, and ask them to vote no on the Promesa Bill. Puerto Ricans can't do this because they have virtually no representation in Congress. We need to stand up for our brothers and sisters.
    Like (7)
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    This seems so ludicrous to me! Congress has allowed our lawless president to add more to our national debt than any other president in our history! But here they are, presuming to help Puerto Rico with THEIR debt problem! "Physician, heal thyself!" Who is keeping YOUR hands out of the cookie jar???! The American people had better start voting out a whole bunch of you incumbents, like North Carolina just did with Renee Ellmers! I don't want to see the United States of America go the way of Europe or Venezuela!! And we REALLY need to AUDIT THE FED!! And by the way, the Bilderbergers are only out for themselves and their presidential candidate of choice is none other than the corrupt Socialist, Hillary Clinton. If you elect Hillary as president, she will disarm us, grant amnesty to all the illegal aliens, bring in thousands more Muslim "refugees," continue or expand Obama's and the globalists' open borders policy, raise taxes, burden us with a plethora of new regulations, and tighten the noose of tyranny around our necks until we can hardly BREATHE! How are you going to find a good job, if you're having to compete with all the new foreigners invading our country? Oh, wait! 90% of them will be on WELFARE and be given all KINDS of ENTITLEMENTS! AT OUR EXPENSE!! She is BOUND to take us right down the same path as Europe and Venezuela, and there will BE no more free world! You will regret having elected your first woman president, just like we have come to regret our first black president! And before any of you call me a racist, just let me add that I would GLADLY substitute Sheriff David Clarke or Lt. Col. Allen West for the man currently occupying the White House!
    Like (6)
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    While Puerto Rico brought on some of its own debt troubles, Wall Street preyed upon the situation and made fixing the problem impossible. We need to help clean up this mess and reign in the circus that is Wall Street.
    Like (5)
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    Hopefully this will work well, and spur Congress to do something about our own debt.
    Like (5)
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    So it's okay to not only treat these American citizens like second-rate citizens by not allowing them to vote AND by not helping them in a moment of crisis because they were screwed over by corporations. Congress needs to get its shit together
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    This board sounds more political than helpful. Puerto Rico is a US territory and has many of the traditional obligations of states with few of the actual benefits. If states were in a similar situation, they would be allowed to file Bankruptcy and then restructure their debt. Puerto Rico should be given the same option. Remember, this is a restructuring of debt and NOT a bailout (despite what some very misleading TV commercials would have you believe). In many ways, it was congressional involvement in Puerto Rico that led to the bonds in the first place, it's time to let the People of Puerto Rico restructure their debt to alleviate the current financial crisis. If this board was a group of non-partisan experts, maybe, but this board will be composed of clearly partisan selections who may or may not have the best interests of the people of Puerto Rico at heart.
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    The Puerto Rico government learned from NYC. Spend, borrow and promise looked like a good thing. And when the piggy bank got low, sugar daddy, the US would bail out the debt, pensions and broken infrastructure like CA, IL, or CT. While $72B is chump change or a rounding error, real Taxpayers are effected and the US Debt of $20T increases. Democratic Congressman still haven't learned that you can't Tax yourself into prosperity. Hawaii is also approaching this indebtedness and it's a state. What's with these islands? So sorry PR, maybe your buddy Charlie Rangel or Sen Menendez can help. PS, ex-POTUS may want an island off the East Coast since he has house off the West Coast in HI.
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    We need to support our Territory. If we can't take care of them then they need to be their own country.
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    When your neighbor's house in on fire, you don't negotiate over the price of your fire hose.
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