The United States Senate passed Puerto Rico debt legislation 68-30. President Obama will sign the legislation Thursday before Puerto Rico likely defaults on nearly $2 billion in debt payments. The legislation passed with majorities from both parties.
"The Senate put partisanship aside and put Puerto Rico's children first," noted Eric LeCompte, executive director of the religious development coalition Jubilee USA. "This legislation stops predatory behavior and identifies the need to urgently reduce child poverty on the island."
The Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) contains tools to restructure the US Territory's debt and establishes a fiscal oversight board. Puerto Rico faces a $72 billion debt and its Governor says the US territory will default on debt payments July 1. The legislation passed the House 297-127 on June 9th. Republicans and Democrats initially proposed less ambitious legislation in 2015 that did not pass.
"This bill supports Puerto Rico's ability to pay pensions and social services before paying the debt," stated LeCompte.
President Obama and Republican and Democrat leadership in the House and Senate will appoint seven members to the new oversight board before it takes effect September 1. Only one of those members must be a Puerto Rico resident or have Puerto Rico as a primary place of business. The board will have authority to review Puerto Rico's budgets and financial statements.
"We are concerned with aspects of the legislation," said LeCompte. "While public budget transparency is essential, there is general concern that local democracy be respected."
The board is also tasked with initiating a debt restructuring process if Puerto Rico and its creditors cannot negotiate an agreement. Puerto Rico's religious leaders mediated a debt dialogue between a representative group of creditors and Puerto Rico's Governor in the spring.
"The bill offers important aspects of any bankruptcy process," offered LeCompte. "It encourages all sides to come to the negotiating table and provides vital breathing space."
Read more about the Puerto Rico Oversight, Management and Economic Stability Act
Read a timeline of Puerto Rico's debt crisis