Puerto Rico is in trouble and only the U.S. Congress can help the island of U.S. citizens. Does the bill quickly moving through Congress actually help Puerto Rico?

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H.R. 5278: “Puerto Rico Oversight, Management, and Economic Stability Act” (PROMESA) Bill Highlights

Definitions

• “Territorial instrumentality”: “Any political subdivision, public agency, instrumentality – including any instrumentality that is also a bank – or public corporation of a territory, and this term should be broadly construed to effectuate the purposes of this Act.”

Title 1: Establishment and Organization of Oversight Board

Purpose: “To provide a method for a covered territory to achieve fiscal responsibility and access tot he capital markets.”

Constitutional Justification for the Board

• Article IV, section 3 of the Constitution
• “Provides Congress the power to dispose of and make all needful rules and regulations for territories.”

Records Access

• The Oversight Board will have the power to demand budgets from any public agency.
• The Oversight Board has the power to exclude any public agency from the requirements of this law.

Oversight Board Membership

• Seven unpaid members appointed by the President. Six of the selections will be from lists created by Congress.

  • Two people must be selected from two different lists submitted by the Speaker of the House of Representatives
  • Two people must be picked from a list created by the Majority Leader of the Senate
  • One person must be selected from a list created by the House Minority Leader
  • One person must be selected from a list created by the Senate Minority Leader
  • One person will be picked by the President

• Only one person on the board has to be a territory resident or “have a primary place of business in the territory”

• The appointments must be done by September 15, 2016

• The Governor, or his designee, will be an “ex officio member” with no voting rights.

• Term of service: 3 years

• Removal: Can be done by the President “only for cause”

• Expired terms: The member can serve until someone else is appointed.

• Consecutive terms are allowed

Member Qualifications

• Must have “knowledge and expertise in finance, municipal bond markets, management, law, or the organization or operation of business or government”
• No one who has worked for the territory’s government is allowed on the Oversight Board

Rules for the Oversight Board

• The Oversight Board will write the laws governing it’s own activities
• The work of the Oversight Board can be privatized

Majority Rule Needed To:

• Approve of fiscal plans
• Approve a budget
• To waive a law
• To approve or disapprove an infrastructure project

Territorial Laws

• The Oversight Board can change the territory’s laws “with the greatest degree of independence practicable”

• The Oversight Board may conduct their business behind closed doors.

Paid Staff

• Executive Director
  • The Board will determine his/her salary
• The Executive Director can hire as many staff members as he wants and decide how much they get paid, as long as none of them get more than he does.

Gifts

• Are allowed but need to be publicly disclosed

Exemption from Laws

• “The Executive Director and staff of the Oversight Board may be appointed and paid without regard to any provision of the laws of the covered territory or the Federal Government governing appointments and salaries. Any provision of the laws of the covered territory governing procurement shall not apply to the Oversight Board.”

Powers of the Oversight Board

• Data Collection
  • The Oversight Board “shall have the right to secure copies, whether written or electronic, of such records, documents, information, data, or metadata from the territorial government”
  • The banks can voluntarily submit information about how much money they think they’re owed

Subpeona Power

• Failure to obey an Oversight Board will be punished in court according to territorial laws.

Strikes Prohibited

• The Oversight Board must “ensure prompt enforcement” of any territorial laws “prohibiting public sector employees from participating in a strike or lockout

Lawsuits Against the Board

• Any legal action against the Oversight Board must be filed in a United States district court for the territory, or in the US District Court for Hawaii if that territory doesn’t have one.
• The courts are not allowed to consider challenges to the Oversight Board’s certification determinations

Oversight Board Funding

• The Oversight Board will be funded by the permanent budget of the territory in an amount chosen by the Oversight Board.
• Until the territory creates the law providing permanent funding, the territory must transfer whatever the Oversight Board requests in its budget – at least 2 million dollars per month – to a fund controlled by the Oversight Board.
• The Oversight Board will have the ability to give some money back

Oversight of the Oversight Board

• The territory is prohibited from exercising any oversight of the Oversight Board activities or from enacting any law related to the Oversight Board that “defeat the purposes of this Act”

Title II: Responsibilities of the Oversight Board

Approval of Fiscal Plans

• Fiscal plans submitted by the Governor will have to get certification from the Oversight Board.
• A fiscal plan developed by the Oversight Board will be deemed approved by the Governor

Approval of Budgets

• If the Governor and Legislature don’t have a budget certified by the first day of the fiscal year, the Oversight Board’s budget will be deemed approved.

Contract Reviews

• The Oversight Board can require review of government to government contracts that compete with the private sector “to ensure such proposed contracts promote market competition”
• Sense of Congress: Territorial government should be a “facilitator and not a competitor to private enterprise’
• If a “contract, rule, regulation, or executive order” fails to comply with Oversight Board policies, the Oversight Board can prevent “execution and enforcement of the contract, rule, executive order, or regulation.”
• The Oversight Board will be able to rescind any law enacted between May 4, 2016 and the day all members and the Chair of the Oversight Board are appointed.
  • They can’t rescind laws that comply with a court order, implement a Federal Government program, implement laws that match Oversight Board policies, or maintain Federally funded mass transportation assets.
• The Oversight Board is allowed to make recommendations to change how pensions are paid to government employees and to transfer government services and entities to the private sector
• The Board will have the authority to cut budgets for services, institute hiring freezes, and cut off agencies from making financial transactions.

Approval of debt restructuring plans

• Will need the approval of 5/7 Oversight Board members
• As long as the Oversight Board is in operation, the territorial government can’t make any transactions related to it’s debt.

Termination of Oversight Board

• The territory needs to balance its budget for 4 consecutive years and the Oversight Board must certify that the banks are willing to lend to the territorial government

No Full Faith & Credit of the United States

• The territories’ debt is not backed by and will not be paid by the United States.

Title III: Adjustments of Debts

• Allows Puerto Rico to have some ability under Chapter 11 (the bankruptcy chapter) to restructure it’s debt.
• Banks (“creditors”) that don’t consent to a payment moritorium will not be bound by it.

Title IV: Miscellaneous

Minimum Wage

• Allows the Governor of Puerto Rico to [lower the minimum wage to $4.25/hr for new employees under age 25 until the Oversight Board is terminated, not more than four years.

Lawsuit Freeze

• Lawsuits against Puerto Rico for repayment are prohibited from the day of enactment of this law until February 15, 2017 or six months after the Oversight Board is created.

Title V: Puerto Rico Infrastructure Revitalization

Revitalization Coordinator

• There will be a Revitalization Coordinator under the command of the Oversight Board, who will be appointed by the Governor from a list of three names selected by the Oversight Board.
• The Revitalization Coordinator must have experience in the planning, predevelopment, financing, development, operations, engineering, or market participation of infrastructure projects who isn’t currently contracting with the government of Puerto Rico and was not a former government employee after 2012.
• The Revitalization Coordinator will be paid no more than the Executive Director.

Project Assessments

• Will include how the project contributes “to transitioning to privatize generation capacities in Puerto Rico“

Expedited Permits

• Relevant agencies of Puerto Rico’s government need to create an expedited permitting process for the infrastructure projects declared “critical” by the Revitalization Coordinator.
  • The expedited permitting processes will be operated as if the Governor had declared an emergency under Puerto Rican law.
  • “Any transactions, processes, projects, works, or programs essential to the completion of a Critical Project shall continue to be processed and completed under such Expedited Permitting Process regardless of the termination of the Oversight Board“
• If a project is determined by “the Planning Board” to likely affect the implementation of existing Puerto Rican land use plans or an approved Integrated Resource Plan, the project will be “deemed ineligible” for Critical Project designation.
• The Oversight Board can waive any law that would “adversely impact the Expedited Permitting Process

Limited Access to Courts

• Lawsuits against a “critical project” must be brought within 30 days of the decision the lawsuit would challenge.

Vote

• June 9, 2016: Passed the House of Representatives 297-127

Sound Clip Sources

• TV Episode: Last Week Tonight with John Oliver: Puerto Rico (HBO), April 17 2016.

• TV Episode: Last Week Tonight with John Oliver: U.S. Territories (HBO), March 8, 2015.

• Hearing: H.R. 5278 Full Committee Markup, House Committee on Natural Resources, May 25, 2016.

• Hearing: H.R. 5278 Full Committee Markup, House Committee on Natural Resources, May 24, 2016.

• Hearing: Puerto Rico’s Debt Crisis and Its Impact on the Bond Markets, House Financial Services Subcommittee on Oversight and Investigations, February 25, 2016.

• Hearing: Puerto Rico’s Fiscal Problems: Examining the Source and Exploring the Solution, United States Senate Committee on the Judiciary, December 1, 2015.

• Hearing: The Broken State of Puerto Rico, Senate Judiciary Committee, December 1, 2015.

Additional Reading

• Article: Democrats Could Slow Passage of Puerto Rico Rescue Bill By Mary Clare Jalonick, Associated Press, ABC News, June 21, 2016.

• Article: Hedge Funds Sue Puerto Rico in N.Y. Over Fiscal Crisis Law By Erik Larson, Bloomberg, June 21, 2016.

• Article: Supreme Court Says No to Puerto Rico’s Bankruptcy Law By Rachel Greszler, The Daily Signal, June 13, 2016.

• Article: Supreme Court rules Puerto Rico can’t restructure debt By Lydia Wheeler, The Hill, June 13, 2016.

• Article: Congress’ Proposal to Restrict Legal Proceedings in Puerto Rico Debt Crisis Could Trigger Chaos By Rachel Greszler and Salim Furth, The Daily Signal, June 8, 2016.

• Article: Bernie Sanders leads liberals’ fight against Puerto Rico rescue bill By Mike DeBonis, The Washington Post, May 23, 2016.

• Articles: News about Tea Party Movement, including commentary and archival articles published in The New York Times, The New York Times, Last Updated May 23, 2016.

• Article: The Vultures’ Vultures: How A New Hedge-Fund Strategy Is Corrupting Washington By Ryan Grim and Paul Blumenthal, The Huffington Post, May 13, 2016.

• Articles: News about Mutual Funds and E.T.F.’s, including commentary and archival articles published in The New York Times, The New York Times, Last Updated May 7, 2016.

• Article: Mystery: Strom Thurmond, Puerto Rico and bankruptcy protection By Jon Greenberg, Politifact, April 27, 2016.

• Article: Puerto Rico woos US investors with huge tax breaks as locals fund debt crisis By Rupert Neate, The Guardian, February 14, 2016.

• Article: The Price Of Inequality For Puerto Rico By Maria Levis, Health Affairs Blog, December 29, 2015.

• Article: Inside the Billion-Dollar Battle for Puerto Rico’s Future By Jonathan Mahler and Nicholas Confessore, The New York Times, December 19, 2015.

• Article: Is this 1917 law suffocating Puerto Rico’s economy? By Chris Bury, PBS, August 13, 2015.

• Article: For Puerto Rico, There is a Better Way A Second Look at the Commonwealth’s Finances and Options Going Forward, By Jose Fajgenbaum, Jorge Guzman, and Claudio Loser, Centennial Group International, July 2015.

• Article: Here Are the Winners and Losers of Puerto Rico’s Debt Crisis By Michelle Kaske, Bloomberg, May 19, 2015.

• Article: Puerto Rico Fighting to Keep Its Tax Breaks for Businesses By Larry Rohter, The New York Times, May 10, 1993.

Additional Information

• Documentary: THE LAST COLONY: A Close Look At Puerto Rico’s Unique Relationship With The United States

• Website: House Natural Resources Committee Puerto Rico Legislation, May 25, 2016.

• OpenSecrets: Career Profile for Rep. Mick Mulvaney of South Carolina’s 5th disctrict

• Website: Summary of Puerto Rico Tax Incentives

• OpenSecrets: Career Profile for Rep. Sean P Duffy of Wisconsin’s 7th District

• OpenSecrets: Lobbyists lobbying on H.R.4900: PROMESA

• House Natural Resources Section by Section Summary of H.R. 5278

• Foraker Act, April 12, 1900, Establishing the initial government structure of Puerto Rico.

• Jones Act of 1917, provided Puerto Ricans with American citizenship and established maritime laws that Puerto Rico would be ruled by, among other things.

• Constitution of the Commonwealth of Puerto Rico, February 6, 1952.

Reports

• Puerto Rico’s Political Status and the 2012 Plebiscite: Background and Key Questions By R. Sam Garrett, June 25, 2013.

Music Presented in This Episode

• Intro & Exit: Tired of Being Lied To by David Ippolito (found on Music Alley by mevio)

Cover Art

Design by Only Child Imaginations