Menendez Outlines Puerto Rico Stability and Recovery Act Package

Menendez Outlines Puerto Rico Stability and Recovery Act Package

Schumer, Warren, Booker Join Menendez, Brown, Cantwell, Blumenthal as Co-sponsors

WASHINGTON, DC – U.S. Senator Bob Menendez (D-N.J.) spoke on the Senate floor last evening to formally introduce and outline a comprehensive stability and recovery package for Puerto Rico designed to avert fiscal collapse, stabilize its financial standing and provide for equitable tax credit and health care treatment.  Joined by Sens. Sherrod Brown (D-Ohio), Ranking Member of the Senate Banking Committee, Maria Cantwell (D-Wash.), Ranking Member of the Senate Committee on Energy and Natural Resources, Richard Blumenthal (D-CT), Charles Schumer (D-N.Y.), Elizabeth Warren (D-Mass.), and Cory Booker (D-N.J.), the legislative package includes the Puerto Rico Stability Act (S. 2676)  and the Puerto Rico Recovery Act (S. 2675) (Sen. Cantwell is not a co-sponsor of S. 2675).

“Senator Menendez is providing the kind of leadership we need by introducing a comprehensive restructuring bill that gives Puerto Rican’s the bankruptcy reform they most desperately need,” said Sen. Cantwell, Ranking Member of the Senate Committee on Energy and Natural Resources.

“For years, those on Wall Street have taken advantage of Puerto Rico with exorbitant interest rates, and now they’ve left the American citizens there out to dry,” said Sen. Brown, Ranking Member of the Senate Banking Committee.  “We cannot allow Wall Street greed to destabilize Puerto Rico’s economy and harm the American citizens who live there.”

“As Puerto Rico’s fiscal fire continues to spread, Congressional inaction is only fanning the flames,” said Sen. Blumenthal.  “The legislation we introduced yesterday directly addresses this crisis with critical restructuring authority. With 3.5 million Americans facing immense and irreparable damage, a fiscal and humanitarian crisis is imminent. Congress can still – and must – take urgent action.”

"Puerto Ricans are members of the American family," said Sen. Schumer. " And when someone in your family is struggling –you help them out.  Puerto Rico deserves the ability to use territory-wide restructuring tools to address its debt -- tools that won't cost taxpayers a penny.  And we must end the unfair healthcare reimbursements that have shortchanged our fellow citizens there for far too long. Congress must say 'enough is enough' and give our family members the help they deserve." ‎

“Congress should step up and pass the laws needed for Puerto Rico to reorganize its balance sheet—and we should do it right now. The 3.5 million American citizens on it their island are running out of time,” Sen. Warren said. “This legislation sets up an orderly process for Puerto Rico to restructure its debt, and it helps put the island back on a path to growth.”

“I am pleased to join Sen. Menendez and my colleagues in cosponsoring a package that takes meaningful steps towards providing relief to our fellow American citizens in Puerto Rico,”  said Sen. Booker. “ This vital legislation gives Puerto Rico the ability to restructure its debt and provides struggling families with equal access to tax credits and health care benefits to support their stability and economic wellbeing at a time when our neighbors need it the most.”

Menendez delivered the following remarks:

“M. President, I rise to be a voice for the 3.5 million American citizens living in Puerto Rico – the 200,000 Puerto Ricans who’ve served in our armed forces in every conflict since World War One and the 20,000 who currently wear the uniform and put their lives on the line for our country.

“I rise to introduce a comprehensive stability and recovery package that restores fairness, ensures accountability, and gives Puerto Rico the tools it needs to dig itself out of this hole.  And I rise to implore this Congress to act before it’s too late.

“I want to thank Senators Schumer, Brown, Warren, Cantwell and Blumenthal for supporting these efforts and working so hard on behalf of the people of Puerto Rico. I also want to thank Congressman Pierluisi, who coauthored the tax sections of this bill along with parts of the healthcare titles. 

“Finally, I want to thank Governor Padilla for his incredible leadership on the island and for strongly endorsing our legislation.  The people of Puerto Rico are fortunate to have a Governor that cares deeply about their lives and is so dedicated to putting them first and above politics. 

“Now, let me put this bluntly:  Puerto Rico is on the brink of default and staring into the abyss.  For the better part of the past year, the government has been compelled to take drastic and unprecedented actions just to avoid a total default of the central government.  They have closed schools and hospitals, laid off police officers and firefighters, raised taxes on businesses and individuals.

“But all the spending cuts and tax hikes in the world won’t make a dent in this crisis unless Puerto Rico has the ability to restructure its debts.  That’s because just servicing the government’s $72 billion debt is swallowing a massive 36 percent of the island’s revenue.  That’s 36 cents of every dollar the government takes in going, not to roads, bridges, and schools, but bondholders instead. 

“This percentage is six times the U.S. state average and simply unsustainable by any measure.  In fact, despite all we hear about Puerto Rico’s significant annual budget deficits, the island would actually be running a surplus if it didn’t have to make debt payments.

“Let me repeat that: a surplus. 

“These debt service payments act like an albatross and handcuff the people of Puerto Rico, preventing them from investing in their economy.  Less resources for education, infrastructure and essential services causes a death spiral as talented workers opt to leave the island, businesses are shuttered, and revenue drops even further.  

“That’s why the first and most important step we must take is to give Puerto Rico the ability to restructure its debts in an orderly fashion.  Our legislation would do just that, providing a fair and reasonable way for Puerto Rico to restructure all of its debts while avoiding a race to the courthouse that would result in years of costly litigation.

“But before Puerto Rico can even access this authority, it needs to affirmatively opt-in and accept the establishment of an independent ‘Fiscal Stability and Reform Board’ and Chief Financial Officer.  This both ensures that any restructuring plan is based on objective and independent analysis of the island’s situation and provides assurances to creditors that future governments will adhere to a prudent long-term fiscal plan, while affirming and respecting Puerto Rico’s sovereignty.    

“Once Puerto Rico opts in, it receives an automatic 12-month stay to give government officials the necessary breathing room to organize their finances and develop a sustainable five-year fiscal plan upon which annual budgets and their restructuring proposal will be based. 

“Once the Governor submits a restructuring proposal, a judge selected by the First Circuit Court of Appeals would have to confirm it complies with the Fiscal Plan, protects the rights of pensioners, and if feasible, does not unduly impair general obligation bonds.  Our process follows precedent by giving creditors a voice and the ability to object in court, and ultimately gives an independent judge the authority to ensure any plan is fair and reasonable. 

“And in order to ensure the long-term fiscal plan is followed not just now, but in the future, our legislation gives the independent Board the power to review annual budgets, future debt issuances, and exercise strong oversight and transparency powers.

“If future budgets do not comply with the fiscal plan, the Board has the authority to issue a vote of ‘no confidence’, which will send a strong and unequivocal message to the legislature, capital markets, and Puerto Rican people that the proposed path is unsustainable; which in turn will provide much needed transparency and accountability to the budgeting process.

“But at the same time, we are careful to affirm the fundamental pillars of democracy by making the Board of, by, and for the people of Puerto Rico. The Board will consist of 9 members chosen by the Puerto Rico Governor, Legislature, Supreme Court, and President of the United States.  At least six of the Board members must be full-time residents of Puerto Rico, at least six must have knowledge of Puerto Rico’s history, culture, and socioeconomics, and all members must have financial and management expertise.

“This structure strikes the proper balance by providing strong and independent oversight and accountability while still respecting the sovereignty and democratic rights of the people of Puerto Rico.

“It is not a bailout, far from it in fact.  This proposal wouldn’t cost the U.S. treasury a penny and because it is limited to the territories, wouldn’t have a contagion effect on the broader municipal market. 

“Now as I said before, giving Puerto Rico the flexibility to restructure its debts is the top priority and a prerequisite for any legitimate recovery plan.  But it’s also clear that the lack of health care funding parity is adding pressure to the overall financial situation as the island’s health care system accounts for 20 percent of the island’s economy – and is responsible for a third of its overall debt burden.

“Currently, Puerto Rico’s Medicaid program, rather than being reimbursed for necessary costs, is capped and set to hit a funding ‘cliff’ as soon as mid-2017.  When this happens, the island will instead receive funding to cover only a very small portion of its Medicaid costs, a burden no state could handle.

“Our legislation fixes this by moving Puerto Rico towards a Medicaid system that provides stable funding for the long-term.  Additionally, there are several policies in Medicare that treat the island differently than the rest of the nation, leaving providers and seniors to face unfair penalties and lower reimbursements.  This bill eliminates many of these discrepancies to more accurately align Medicare policies in Puerto Rico with the rest of the country.  

“As citizens of the United States, it’s only fair that Puerto Ricans be afforded the same access to care, coverage and health benefits as everyone else.

“Finally, our legislation would incentivize Puerto Rican workers to enter the formal economy and give families the help they need to raise their children by providing parity to the island for the Earned Income Tax Credit and Child Tax Credit. 

“Praised by both Republicans and Democrats as one the most effective tools to combat poverty and encourage workers to enter the labor market, the Earned income Tax Credit is currently unavailable to the people of Puerto Rico. 

“However, as American citizens, all it takes for a resident of Puerto Rico to become eligible for the credit is a short plane ride to Miami. This is just another reason why so many Puerto Ricans have fled the island and taken up residence on the mainland. 

“It makes no sense to prohibit American citizens living in Puerto Rico from taking advantage of this important credit, especially with such a stubbornly lower labor participation rate.  Our legislation corrects this inequity, providing equal treatment for all American citizens, regardless of whether they reside in Puerto Rico or the States.

“I shouldn’t need to remind this body that from the infancy of our nation, the people of Puerto Rico have been there for us – and now we need to be there for them. 

“Puerto Rico was ceded to the United States in 1898 after the Spanish American War.  Less than two decades later, in 1917 Congress passed the Jones-Shafroth Act granting American citizenship to residents of island.

“But even long before they were granted U.S. citizenship, Puerto Ricans have had a long and proud history of fighting on the side of America. As far back as 1777, Puerto Rican ports were used by U.S. ships, enabling them to run British blockades and keep commerce flowing, which was so crucial to the war effort.

“It was Puerto Rican soldiers who took up arms in the U.S. Civil War, defending Washington D.C. from attack, and fought in the battle of Fredericksburg.  In World War I, almost 20,000 Puerto Ricans were drafted into the U.S. armed forces. 

“And let’s not forget about the 65th Infantry Regiment known as the Borinqueneers – the segregated military unit composed almost entirely of soldiers from Puerto Rico that played a crucial and prominent role in World War I, World War II, and the Korean War.

“I’m proud to say that I worked with Senator Blumenthal and others to make sure that the heroic Borinqueneers – the only active-duty segregated Latino military unit in the history of the United States and the last segregated unit to be deactivated – received well-deserved and long-overdue national recognition when we passed a bill awarding these courageous patriots with the Congressional Gold Medal – the highest expression of national appreciation for distinguished achievements and contributions to the U.S.

“While some might be tempted to point our fingers at our brothers and sisters on the Island and fault Puerto Rico for carrying more than $70 billion in debt, I challenge my Senate colleagues to work with me on finding solutions.  Because this problem isn’t just going to go away. 

“Mark my words… if we don’t act now, this crisis will explode into a full blown humanitarian catastrophe not in a matter of decades or even years -- but months. And we’ll be right back here next year with the same set of problems, only far worse.

Delaying action is akin to letting an infection reach the bloodstream before seeking treatment.  The longer you wait, the more painful and challenging the treatment. 

“Puerto Rico isn’t asking us to pull them out of this hole, just to give them back the shovel they need to dig their way out of it.  Let’s not stand beside and do nothing while the island burns. Let’s not turn our backs on our friends and fellow citizens when they need us most.

“Let’s instead come together as a nation and support our fellow citizens like we always do when things get tough. The people of Puerto Rico have always been there for us, let’s make sure we’re here for them.”