Puerto Rico debt relief faces serious challenges in Senate

A bill to help Puerto Rico handle its $70 billion debt crisis is facing an uncertain future in the Senate. 

No Senate Democrats have endorsed a bill backed by House Speaker Paul Ryan (R-Wis.) and Minority Leader Nancy Pelosi (D-Calif.), while some are actively fighting it.

{mosads}Sen. Bernie Sanders (I-Vt.), a Democratic presidential candidate, said the bill treats Puerto Rico “like a colony” by setting up an unelected oversight board to restructure the U.S. territory’s debt.

He has argued the bill would help hedge funds and says the Federal Reserve should step in to buy and restructure the commonwealth’s debt. 

Sen. Bob Menendez (D-N.J.) called a key provision of the bill “neo-colonialism,” and has teamed up with Rep. Luis Gutierrez (D-Ill.) to push for changes before the House votes on it.

On the Republican side, senators say they’re hopeful to pass a bill but don’t know if they can support the current legislation — which is expected to win House approval given its backing from leaders in that chamber.

“We’ve stayed in touch with the House as they’ve negotiated their way through it,” said Senate Majority Leader Mitch McConnell (R-Ky.). “We’ve been informed and we’re anxious to take up whatever they can pass.”

Called the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA), the bill was crafted through months of arduous negotiations and survived fierce political headwinds.

Puerto Rico faces a $2 billion payment deadline in July, and lawmakers would like to get a bill to President Obama’s desk before it comes due.

Some of the legislation’s biggest critics, including Puerto Rico’s non-voting representative, are quick to point out its flaws. Still, they insist it’s the only viable solution to prevent a much worse crisis.

PROMESA passed the House Natural Resources Committee on Wednesday with wide bipartisan support, a key hurdle before a vote on final passage through the House. But the opposition from Sanders and Menendez coupled with the cool reception from other Democrats poses trouble for the bill if it gets to the Senate.

Sen. Dick Durbin (D-Ill.), second in command of the Senate Democrats, said this week that he has major problems with the bill and that several colleagues have spoken out against it behind closed doors.

He cited provisions that would allow Puerto Rico’s governor to cut the minimum wage for young workers, and an exemption for businesses in the territory from a recent Labor Department rule that greatly expands the number of salaried employees eligible for overtime pay.

“I think there are a lot more questions,” said Durbin. “At this point there’s a lot of pushback in my caucus.”

Other Senate Democrats have been tepid on the bill or have reserved judgment.

Minority Leader Harry Reid (Nev.) said the upper chamber wouldn’t have a bill until mid-June and doesn’t want to weigh in until it reaches the Senate.

“Let’s wait until we get the bill before we start choosing sides,” Reid said. 

Sen. Chuck Schumer (N.Y.), the Democratic leader-in-waiting, and Senate Finance Committee ranking Democrat Ron Wyden (Ore.) said they haven’t reviewed the bill closely enough yet to speak on it.

Senate Republicans are also treading carefully, saying they’re eager to act but nervous the bill won’t solve Puerto Rico’s problems long-term. 

Finance Committee Chairman Orrin Hatch (Utah), called the bill “a really strong, heartfelt effort to get something done this time,” but is concerned “that we’ll be right back where we are now in a couple of years.”

“I probably will have to support it,” he added. “It may be the only approach that can be done at this particular point.”

Sen. Marco Rubio (Fla.) said he was “encouraged” by the bill, but has questions about how it treats bondholders and the precedent it sets for other territories and states. Many Republicans in both chambers share those concerns. 

“We need to do something and so far what the House has produced is as close as anything I’ve seen to the kind of product that I can potentially support,” said Rubio.

“I want to support something. I really do want to us to do something on this,” he said.