In a breakthrough, House Republicans and Democrats have struck a deal with the White House to help rescue Puerto Rico from $70 billion in debt.
A revised bill introduced late Wednesday would create a control board to help manage the U.S. territory's financial obligations and oversee some debt restructuring. The legislation came after weeks of negotiations.
House Speaker Paul Ryan, House Democratic Leader Nancy Pelosi and Treasury Secretary Jacob Lew all expressed support for the legislation Thursday, with Lew calling the bill “a fair, but tough bipartisan compromise.”
Ryan, R-Wis., said in a statement Thursday that the legislation would avoid an eventual taxpayer bailout.
The plan is “the most responsible solution to the crisis because it gives Puerto Rico a path to real reform while protecting taxpayers,” he said.
The House Natural Resources Committee could vote on the bill as early as next week. The committee's chairman, Utah Rep. Rob Bishop, has led the negotiations and worked closely with Ryan, Pelosi and the White House.
Bishop originally introduced a bill last month, but canceled a scheduled committee vote after objections from both parties. Since then, he has worked closely with Ryan to win over conservatives, who worry it might set a precedent for financially ailing states, and Democrats, who say they are concerned the control board will be too powerful and favorable to creditors.
After opposing previous versions of the legislation, House Democratic leader Nancy Pelosi of California said the new bill “achieved a restructuring process that can work.”
The goal is to pass the bill before Puerto Rico defaults on a $2 billion debt payment due July 1. The island has already missed several smaller payments. The Senate has not yet acted, and Senate Majority Leader Mitch McConnell, R-Ky., has said the chamber is waiting for the House to move first.
Disagreements over how the board would be appointed held up negotiations over the past week. Under the bill, President Barack Obama would select all but one of the board members from lists provided by congressional leaders. If Obama does not pick from those lists, the members must be confirmed by the Senate.
The final bill also removes a provision that would have transferred federal land on the nearby island of Vieques to the government of Puerto Rico. That was a major concession to Democrats, whose votes may be needed when the bill comes to the full House.
The new version does retain a provision to allow the Puerto Rican government to temporarily lower federal minimum wage requirements for some workers, which Democrats have objected to.
Puerto Rican Gov. Alejandro Garcia Padilla said after the bill was released that he was encouraged by progress on the bill, but that it is still “not consistent with our country's basic democratic principles.” He has advocated for a less powerful board that doesn't have control over Puerto Rico's finances.
Under the legislation, the control board would require the Puerto Rican government to create a fiscal plan, including directing the territory to provide adequate funding for pensions. The island has underfunded public pension obligations by more than $40 billion.
Creditors have expressed concern that they would take a back seat to the pension obligations, while the Obama administration has pushed to make sure that pensions are also a priority. Bishop has said the aim of the legislation is to make sure they are all paid.
In his statement supporting the bill, Lew said that “Congress must stand firm and resist calls from financial interests to undermine this effort every step of the way - in committee, on the House floor and in the Senate.”
As the bill comes up for votes, Bishop and Ryan are hoping to win over skeptical Republicans in the committee and on the House floor. Ads that have aired nationwide claiming the legislation amounts to a financial bailout — even though the bill has no direct financial aid — have complicated that effort. He has said the bill does not set a precedent for debt-ridden states who may want similar help.
A spokesman for one conservative group, Heritage Action for America, said the group is “very skeptical it moved in a conservative direction.”
Puerto Rico has been mired in economic stagnation for a decade and hundreds of thousands have fled the island. Financial problems worsened with setbacks in the wider U.S. economy, borrowing covered increasing deficits and bonds were sold on special terms.
Puerto Rico's representative in Congress, Pedro Pierluisi, said he is pleased with the progress though he has not yet endorsed the bill.
“I hope every member of Congress will bear in mind that the collapse of the bill could mean the collapse of Puerto Rico's government,” he said.