Spotlight on Puerto Rico: House Democrats to hold Forum on Puerto Rico

Spotlight on Puerto Rico: House Democrats to hold Forum on Puerto Rico

By Jennice Fuentes / Fuentes Strategies

Democrats on the House Natural Resources Committee will hold a Congressional Forum on Puerto Rico on Tuesday, May 2, 2017 from 2:00 p.m. to 3:00 p.m. in the U.S. Capitol. The stated purpose of the forum is to pressure the Financial Oversight Board (FOB) to authorize Title III debt restructuring. Title III would avoid endless litigation in case the stay on bondholder collection lawsuits expires on May 1st without a negotiated resolution to the debt talks. House Democrats also want to build momentum for Congress to enact much needed economic tools for Puerto Rico to solve its crisis, with initiatives such as having access to the federal Earned Income Tax Credit (EITC) and other economic development measures.

Debt negotiations stalled as May 1st deadline looms

As the May 1st expiration of the stay on debt collection lawsuits nears, voluntary debt negotiations between the Government of Puerto Rico and major creditors appear to be at a standstill. Reports indicate that the mediation between General Obligations (GO) and Sales Tax Financing Corporation (COFINA in Spanish) bondholders have not yielded significant results. Creditors remain concerned about the underlying assumptions of the Fiscal Plan that was certified by the FOB. In addition, the Governor has opened the door, for the first time, to moving debt restructuring out of Title VI voluntary talks and into Title III bankruptcy proceedings. With barely a week before the deadline, many observers are wondering if an effective and meaningful negotiation is even feasible. That said, the FOB’s newly installed Executive Director, Natalie Jaresko, has said that she believes a breakthrough is still possible, alluding to similar experiences during her tenure as Finance Minister of Ukraine.

Budget deadline fast approaching

The Commonwealth is close to submitting its draft budget blueprint to the FOB for its approval. The submission deadline is April 30. Governor Ricardo Rosselló’s administration officials previewed several aspects of the budget proposal, which appears to take an even more aggressive approach on spending cuts and savings for the government. Among the major items that could be included in the budget are: consolidating every social-services and economic-development agency and closing a number of schools and some of Puerto Rico’s jails. Also under consideration is a mechanism whereby the Treasury would have oversight of other agencies’ finances and government funds, including COFINA, whose bondholders have not been affected by defaults.

The General Fund portion of the budget is expected to be $9.284 billion. The budget must comply with the Fiscal Plan approved by the FOB.

Status referendum still in flux

Governor Ricardo Rosselló plans to move ahead with a referendum on Puerto Rico’s relationship status with the United States, even as the U.S. Department of Justice (DOJ) has yet to certify the ballot language. Under the Consolidated Appropriations Act of 2014, Congress included $2.5 million for a referendum on Puerto Rico’s future status, conditioned upon approval by DOJ of the ballot language, and requiring an educational campaign conducted by the State Election Commission. Recently, DOJ rejected a bill—approved by the pro-statehood New Progressive Party (NPP)-controlled Legislature—that excluded the Commonwealth’s current status/relationship from the ballot, and requested a new ballot with modifications. The language was changed but the legislature refused to include the word “Commonwealth,” and instead used “current territorial status,” prompting the pro-Commonwealth Popular Democratic Party (PDP) to call for a boycott of the vote. The Puerto Rican Independence Party (PIP) and several other civil society groups have also called for a boycott. DOJ has yet to respond to these changes, but the State Election Commission has already started to print the ballots at a cost to taxpayers of more than $500,000.

Medicaid patch still being negotiated to avoid cliff

Resident Commissioner Jenniffer González said that Congress would likely approve a Continuing Resolution (CR) to extend government funding for another week, while negotiations continue on a longer-term bill. González believes that Puerto Rico’s advocates will benefit from the extra time, specifically regarding their push for a temporary continuation of Medicaid funding. If the funding expires as scheduled in October, its absence would create a $900 million hole in Puerto Rico’s budget.

Meanwhile, Senators Robert Menéndez (D-NJ) and Bill Nelson (D-FL) wrote a letter today asking Senate Majority Leader, Mitch McConnell (R-KY), to include funding for Puerto Rico to avoid the so-called “Medicaid Cliff” for the Island. The senators argue that a lack of Congressional action will cause Puerto Ricans to continue their migration to states where the costs of treating patients is 3-to-4 times more expensive. Senators Orrin Hatch (R-UT) and Marco Rubio (R-FL) wrote a similar letter to Health and Human Services Secretary, Tom Price, earlier this month.

Speaker Paul Ryan (R-WI) told a group of House Republicans, including González, that the reauthorization of the Children’s Health Insurance Program (CHIP) is the ideal vehicle to avoid the Medicaid Cliff. CHIP is tentatively scheduled for a vote in the fall. Puerto Rico’s authorities are concerned that this might be too late, given that insurance companies have until this summer to negotiate their Medicaid contracts with the Commonwealth.

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