SAN JUAN, PUERTO RICO - JULY 01: A for sale sign is seen hanging from a balcony next to a Puerto Rican flag in Old San Juan as the island's residents deal with the government's $72 billion debt on July 1, 2015 in San Juan, Puerto Rico. Governor of Puerto Rico Alejandro GarcÃÂa Padilla said in a speech recently that the people of Puerto Rico will have to make sacrifices and share the responsibilities to help pull the island out of debt. (Photo by Joe Raedle/Getty Images) (2015 Getty Images)
House Republicans are drafting a bill aimed at giving Puerto Rico tools to address its financial crisis.
The proposed legislation is not without controversy, since it calls for tight oversight of each unit of the Puerto Rican government – something many on the island oppose and find offensive.
The plan calls for each government unit to be audited, and allows restructuring of some of its debt “where necessary,” reported The New York Times.
House Republicans want Puerto Rico to give details of its pension assets and liabilities, viewing the measurements provided by actuaries as too conservative. Puerto Rico says it has a pension deficit of some $43 billion, but some believe the true value of that shortfall could be twice as much.
The legislation, which was drafted by the House Committee on Natural Resources, comes weeks before Puerto Rico is expected to default on bond payments, further devastating the island’s finances.
The House proposal refused to honor Puerto Rico’s top wish – that it be allowed to restructure its $72 billion debt through bankruptcy.
Under the House GOP plan, oversight would be provided via a five-member board appointed by the U.S. president.
The board would include two non-voting members in addition to the five. Those two would be the U.S. Treasury secretary and the Puerto Rico governor.
The board also would have offices in San Juan and Washington D.C.
The so-called rescue package was put together under the supervision of House Speaker Paul Ryan. The Treasury Department and Democratic leaders, including Rep. Nancy Pelosi, minority leader, also had input.
The Treasury had pushed for Puerto Rico to pay out pensions to retired government workers, rather than prioritize giving money to bondholders. Lawmakers refused that request.
Puerto Rico’s debt became unwieldly from years of taking on long-term debt to pay short-term expenses.
When Puerto Rico officials fail to manage the budget appropriately, the oversight board would be authorized to take over, even if it entails cutting services, the Times said.
The Times noted that the House viewed granting bankruptcy to Puerto Rico as a possible “constitutional minefield.”
Next, lawmakers plan to make public a “discussion draft” on Tuesday.
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