P. Rico Debt-Restructuring Bill OK'd 10/27 06:11
SAN JUAN, Puerto Rico (AP) -- Puerto Rico's Senate and House approved a bill
Tuesday that would slash the central government's debt by half but has also
sparked protests and led to fiery exchanges between lawmakers and a federal
control board that oversees the U.S. territory's finances.
The bill aims to end a bankruptcy-like process that began after Puerto Rico
announced in 2015 that it could not pay its more than $70 billion public debt
accumulated during decades of mismanagement, corruption and excessive
borrowing. In May 2017, the government filed for the biggest municipal
bankruptcy ever in the U.S.
The bill would allow Puerto Rico to cut its debt by more than $30 billion,
issue new debt worth $10 billion and award some $7 billion in cash to
bondholders who have not been paid for nearly five years. Critics say Puerto
Rico's government does not have the finances to adhere to the proposed debt
service and warned of upcoming austerity measures.
However, the bill, which squeaked by in a 14-13 vote in the Senate and later
34-12 in the House, is still in limbo because it does not have the control
board's support, although Puerto Rico Gov. Pedro Pierluisi is in favor of it.
"Today we took a step forward toward the end of our government's bankruptcy
and the board's departure," he tweeted.
One of the biggest points of contention between Puerto Rico's government and
the board was a proposed cut to some public pensions. The government refused to
approve a bill that contained any kind of public pension cuts, while the board
sought to cut pensions higher than $1,500 a month by 8.5%, a move that would
affect some 40,000 retirees.
Some lawmakers also demanded zero cuts to the University of Puerto Rico, the
island's largest public university, and to the island's 78 municipalities.
Two organizations that represent mayors across Puerto Rico warned in a
statement that some city and town services still might be cut as a result of
"Municipalities already have made great sacrifices and budgetary adjustments
to maintain its services, some with a reduction in hours and others with
layoffs," officials said.
The control board issued a brief statement late Tuesday saying only that it
would carefully evaluate the measure, though it has said previously that it
would not approve of the bill.
The impasse between the board and legislators threatens to erase nearly five
years of negotiations with bondholders as part of a bankruptcy-like process
that has generated nearly $1 billion in earnings for the attorneys involved. It
also could expose Puerto Rico to litigations that were temporarily suspended as
part of the process and force the government to pay bondholders.
Both sides are expected to go into mediation after the federal judge in the
case, Laura Taylor Swain, warned Monday that she would not push back the Nov. 8
confirmation hearing on the plan, adding that "my patience is wearing thin."
Puerto Rico Sen. Jos Antonio Vargas Vidot said it was best to skip the bill
and go straight into mediation.
"The judge's patience is running out, and so is the people's," he said.