Puerto Rico's governor issued a "distress call" to Congress to help his heavily indebted government while signaling he will reroute money to make a bond payment that comes due on Tuesday.
Gov. Alejandro Garcia Padilla reiterated his plea to Congress to create a legal framework that would give the territory the authority to restructure its liabilities. He said after the Senate Judiciary Committee hearing that his administration will "do our best" to make a $355 million bond payment that's key to the U.S. territory's economic future.
But he said the island is running out of cash.
Puerto Rico's Government Development Bank has previously said it could run out of money by year's end. Failure to make the bond payment could complicate the island's efforts to reach restructuring deals on its $72 billion of public debt that Garcia has said is unpayable. At the hearing, Garcia did not give details on the bond payment but said he is attempting to divert money from other debt payments to pay what is due.
"We have begun to default on our debt in an effort to attempt to repay bonds issued with the full faith and credit of the Commonwealth and secure sufficient resources to protect the life, health, safety and welfare of the people of Puerto Rico," he said.
He did not say how much money would be diverted or where that money is coming from. Garcia emphasized the U.S. territory is not asking for a bailout but the tools to restructure.
"This is a distress call," he said. "It's your choice whether to answer or disregard."
The Obama administration has proposed a plan to help the island, but Republicans in Congress have said they want to first address the root causes of the crisis and see more data on Puerto Rico's financial condition.
"Merely extending debt restructuring authority, absent tools to address the fundamental causes of the fiscal problem, is not a long-term solution that will help Puerto Rico," said Judiciary Committee Chairman Charles Grassley, R-Iowa.
Grassley asked no questions of the governor after his testimony.
Pedro Pierluisi, Puerto Rico's delegate to Congress, told senators at the hearing that the federal government's policies toward the territory are "inequitable and incoherent" and have made it impossible for the island to prosper. He asked lawmakers to enact legislation to give the territory more equitable treatment under federal programs and authorize Puerto Rico to restructure a meaningful portion of its debt.
"We are reduced to the role of supplicant, pleading for equal treatment, or at least more equitable treatment," Pierluisi said.
The Obama administration has said that Puerto Rico's economic woes could quickly turn into a humanitarian crisis unless Congress adopts a blueprint for dealing with the island's crushing debt burden. It has proposed a territorial bankruptcy regime that would allow Puerto Rico to restructure its debt and impose new oversight on the island's finances, expand Medicaid benefits and allow residents to qualify for the same low-income tax credits that are offered to other American citizens through the Earned Income Tax Credit.
Democrats at the hearing called on Congress to act.
"Right now this crisis demands action," said Sen. Richard Blumenthal, D-Conn. "Congress cannot tell Puerto Rico to drop dead financially."