The Senate approved a financial rescue package for Puerto Rico on Wednesday, clearing the measure for President Obama’s signature just days before the U.S. territory was expected to default on a $2 billion debt payment.
The bill passed easily, 68-30, and only a simple majority was needed.
Puerto Rico is $72 billion in debt and has no means to make the multi-billion dollar debt service payment by Friday. The legislation, which President Obama plans to sign, will authorize the creation of a financial control board empowered with the ability to restructure the island’s staggering debt.
Senate lawmakers passed the bill despite objections from both parties who opposed the deal for a variety of reasons.
“While there are many things we do not like about this, at the end of the day this legislation provides tools that allow Puerto Rico to survive, to hopefully restructure a meaningful portion of its debt,” said Minority Leader Harry Reid, D-Nev. “I wish we had something better.”
House Minority Leader Nancy Pelosi, D-Calif., also indicated it was the best compromise available for Republicans and Democrats.
“The bipartisan bill that will now go to the President’s desk provides a vital and urgently needed measure of relief for our fellow Americans in Puerto Rico,” she said. “While the bill contains many provisions that Democrats have objected to, it will begin to part the dark clouds of uncertainty that have shadowed Puerto Rico’s economy, its families and its future.
As Democrats fretted it didn’t do enough, some Republicans said it went too far, and were critical of Puerto Rico’s government for making poor financial decisions leading to the debt. Sen. Judiciary Committee Chairman Charles Grassley, R-Iowa, an opponent, argued the debt restructuring provision could raise borrowing costs for states and municipalities across the nation.
“The bill operates under the presumption that the only way to balance the budget is to restructure debt,” Grassley said. “This means that the oversight board will have more flexibility to avoid making difficult fiscal reforms to balance the budget because the debt can simply be restructured.”
Democrats said the appointed control board, which will have the authority to make “necessary reforms,” to help Puerto Rico attain fiscal solvency, would disenfranchise the island’s 3.5 million citizens. Democrats also opposed provisions that deny the island federal minimum wage and overtime standards.
“The board would have broad sovereign powers … to effectively overrule decisions by Puerto Rico’s legislature, governor and other public authorities,” Menendez argued in a floor speech prior to the vote. “These are the people who are elected by the 3.5 million citizens of Puerto Rico, United States Citizens to determine their future.”
But Republican and Democratic leaders both backed the bill and with the help of the Obama administration, convinced enough senators push it across the finish line. The bill passed the House on June 9.
“It is the only option on the table and delaying action would only hurt the Americans who reside on the island,” said Senate Finance Committee Chairman Orrin Hatch, R-Utah.
Proponents argued that without Senate passage, Puerto Rico faced mass litigation over the debt.
Passage followed two days of impassioned floor speeches against the measure by Menendez and Bernie Sanders, I-Vt., who has returned to the Senate after his unsuccessful bid for the Democratic presidential nomination.
Both senators said they wanted to amend the bill to make significant changes.
“Under my amendment, Puerto Rico would decide for itself whether it will access restructuring and accept the control board, thus preserving the people’s voice in the process,” Menendez said.
Menendez entered a motion to table the legislation so that his amendments could be debated, but it was defeated by a vote of 44-54.
