I previously discussed Puerto Rico’s current debt crisis and the possible solutions to it. As an update, last week the United States House of Representatives passed H.R. 5278, otherwise known as the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA), that would hopefully act to ease the island’s debt crisis. The legislation creates a way for the federal government to oversee the fiscal affairs of the territory.
The legislation was a rare display of bipartisanship, passing by a 297-127 vote. In addition to House Speaker Paul Ryan and House Minority Leader Nancy Pelosi, the bill also has the support of President Barack Obama. This bipartisan legislation will give Puerto Rico the ability to restructure its debts and creates a seven member board to oversee the debt restructuring process.
The oversight board would be appointed by the President and Congress and will be able to audit the Puerto Rican government’s financial statements. The Governor of Puerto Rico would serve as an ex officio member of the board and would have no voting rights. This will provide transparency and organization to the process. The board will also enforce budgets and make reforms if the government fails to do so. This oversight will act to prevent the government from spending recklessly and mismanaging finances.
No Cost to American Tax Payers
One reason why there is such bipartisan support for PROMESA is that no taxpayer dollars will go to Puerto Rico under the legislation. The Congressional Budget Office has confirmed that PROMESA will not significantly affect the United States government’s deficit. It is not a bailout, and will act to prevent a taxpayer bailout of the territory.
Additionally, the legislation establishes the framework for the United States government to establish oversight boards in other territories, such as Guam, American Samoa, and the U.S. Virgin Islands. These boards would be established at the request of the territories, but as discussed above, would automatically establish the oversight board for Puerto Rico.
If PROMESA passes the Senate and is signed into law, it will help relieve Puerto Rico of its debt burden and will provide the framework to deal with any similar situation that might arise in other territories. Many feel that if Congress fails to pass the bill, Puerto Rico’s debt crisis will escalate to a humanitarian crisis, and the effects of that could very well be passed on to the American taxpayers.
If you are struggling with your own personal debt crisis, the attorneys at Bond & Botes are here to help. Please contact one of our offices to set up a free consultation.
Kathryn Davis is an attorney at the Bond & Botes Law Offices in Huntsville and Decatur, Alabama. She holds a Bachelor of Arts from Auburn University, and a Juris Doctorate from Samford University, Cumberland School of Law. She is passionate about utilizing the bankruptcy process to help clients navigate through what is usually some of the lowest points in their lives. Read her full bio here.