A key Republican senator is leaning against establishing a federal financial control board to oversee Puerto Rico’s troubled finances.
Senate Finance Committee Chairman Orrin Hatch, R-Utah, told reporters the U.S. territory may be better able to independently resolve its debt crisis rather than rely on legislation that would establish federal oversight.
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“We are not moving very fast on it,” Hatch said when asked about his panel’s consideration of the plan recommended last month by President Obama to help the island cope with a $72 billion debt.
“Frankly, I’m not sure what we should do with it,” Hatch said of the plan. “There are some people who argue they can work it out if they are willing to. That it can work itself out.”
Some members of Congress also want the federal government to help Puerto Rico escape its debt, which has grown thanks to a shrinking tax base, a 12 percent unemployment rate, and higher levels of spending. The Puerto Rican government announced this week it could default on its debt or be forced to reduce government services by the end of the year because of a funding shortage.
The Obama administration in late October outlined a 10-page proposal for helping Puerto Rico, which it called “A roadmap for Congressional Action.” In addition to a control board, Obama wants Congress to allow Puerto Rico to have access to special Chapter 9 bankruptcy protection against its debtors and to expand Medicaid access to Puerto Ricans.
But most Republicans have been unwilling endorse Obama’s plan but others have called for some kind of federal involvement.
Sen. Lisa Murkowski, R-Alaska, who chairs the Senate Energy and Natural Resources Committee and held a hearing to examine Puerto Rico’s financial crisis, said the island could run out of money this month.
“Puerto Rico’s short-term liquidity crunch is real and action is needed,” Murkowski said. “At both the local and federal level, we must pursue actions that could have the most positive impact to make for a more effective and efficient government.”
Among those who support the idea of a financial control board is Sen. Charles Grassley, R-Iowa, who heads the Senate Judiciary Committee but is Hatch’s predecessor on Finance. Grassley said he believes a control board could help put in place the fiscal reforms Puerto Rico needs to escape its massive debt.
“Historically, these oversight and control boards created by higher levels of government, for example in New York City and the District of Columbia, have shown success,” Grassley said at a September hearing on Puerto Rico’s financial and economic challenges.
But Republicans are wary of the cost to investors, who would lose money if Puerto Rico is permitted to declare bankruptcy.
“So what happens when a retiree in Wyoming goes to their mailbox, opens their financial statement only to find their investment has been negatively impacted because Congress changed the rules of the game after the fact?” Sen. John Barrasso, R-Wyo., asked recently on NPR. “What do I tell them?”
