WASHINGTON -- Legislation giving Puerto Rico the ability to restructure its $70 billion in debt overcame a major hurdle on Thursday, passing out of committee in the House.
The House Natural Resources Committee approved the bill, which would establish an oversight board to help the commonwealth restructure its un-payable debt and craft an economic recovery plan, in a 29-10 vote.
It’s a significant step for proponents of the bill, who had to write multiple versions of the legislation and abruptly cancel the first markup scheduled last month. The bill will now advance to the House floor.
“Congress has sown the wind, and Puerto Rico has reaped the whirlwind,” Rep. Rob Bishop (R-Utah), chair of the committee, said in his opening statement. “This bill is Puerto Rico’s last and best chance to get on sound financial footing and put its economy on the path to recovery and prosperity.”
The passage out of committee comes after Bishop and Republican leaders worked for months to make the bill palatable for conservatives in their ranks, Democrats and the administration. It’s a win for Republican leaders attempting to show they can pass critical legislation during a tense election year.
Despite supporting the legislation, Rep. Raul Grijalva (D-Ariz.), ranking member on the committee, said he was concerned that the bill strengthened the oversight board’s authority over what is ultimately decided on Puerto Rico’s debt.
Still, like a majority of Democrats on the committee, Grijalva backed the bill, citing its ability to allow restructuring and the little time left for the island to crawl its way back from the brink. Puerto Rico faces a critical $2 billion debt payment on July 1 that it will not make unless legislation reaches the president's desk in time.
“So here is the bottom line: Puerto Rico is drowning in debt, and H.R. 5278 is a lifeline,” Grijalva said. “This is the only bill that will attract enough support from our colleagues on the Republican side to pass in a Congress they control.”
During the three-hour hearing, divisions between the committee's Democratic and conservative members were evident. Rep. Debbie Dingell (D-Mich.) offered an amendment that would require the oversight board to study the health care disparities on the island. It was adopted.
Rep. John Fleming (R-La.) offered up a number of amendments attempting to prioritize debt owned by creditors in the restructuring hierarchy, which were struck down.
Fleming warned that the bill entered "uncharted waters" and said he disagreed with language that would put a stay on litigation against the island's government by bondholders.
Under Puerto Rican law, certain debt is constitutionally prioritized over others. But the Treasury Department and Republican leaders like Bishop have argued that the oversight board will institute a more balanced approach during restructuring.
The difficulty in striking the delicate balance between Republicans and Democrats was on full display as Bishop began growing tired during the markup and ushering people to move faster on amendments.
"Just pass the crap out," he said two hours in.
While the bill is expected to pass once it reaches the House floor, it remains to be seen if opposition from Democratic presidential candidate Sen. Bernie Sanders (I-Vt.) and others in the Senate will slow the bill down in the upper chamber.