House members and financial experts said Tuesday a “team of neutrals” is needed to oversee Puerto Rico’s budget and get its fiscal house in order, as the island scrambles to pay its debts and stave off drastic service cuts to its 3.5 million residents.
The U.S. territory’s debt is slated to grow by $27 billion over five years, on top of $70 billion the territory already owes. That sea of red ink is heaping pressure on Congress to swoop in with a legislative recovery package by the March 31 deadline set by House Speaker Paul D. Ryan.
Members of the House Natural Resources Committee, including Puerto Rico’s nonvoting delegate, said a financial control board could help the island write responsible budgets and kick-start economic growth, so long as it treats Puerto Rico as a partner.
Rep. Don Young, Alaska Republican and chairman of the Subcommittee on Indian, Insular and Alaska Native Affairs, urged Congress to rely on former D.C. Mayor Anthony Williams — as the city’s chief financial officer, he worked with a congressionally mandated control board in the 1990s — and other financial gurus to craft an effective bill.
“If we write it by ourselves, we’ll screw it up,” Mr. Young said during his hearing on Puerto Rico’s woes.
Puerto Rico is cobbling together what it can to meet its bond payments without slashing health care, education and other services. It must pay $400 million to satisfy debts by May 1, with additional payments due in June, according to Treasury Secretary Jacob Lew, who visited the island last week.
As it stands, the island is resorting to drastic measures, selling off assets from depleted pension funds and borrowing from workers’ compensation and insurance funds, Mr. Lew has said.
Democrats were furious when Republicans refused to include language in a year-end spending package that would have allowed Puerto Rico to take advantage of U.S. bankruptcy laws and restructure its debts.
Mr. Young said use of Chapter 9 protection would be “shortsighted and naive, to say the least,” and that more serious reforms are needed.
“Chapter 9 is a process, not a solution,” he said.
At the same time, he said the territory’s predicament marked a “difficult time” for him. He believes Puerto Rico should have achieved statehood a long time ago, and wouldn’t have sunk to this point if it had.
Commissioner Pedro Pierluisi, the island’s nonvoting representative on Capitol Hill, said he could support the creation of an independent board to make sure Puerto Rico adheres to disciplined budgets, as the island has a history of financial mismanagement.
“We must acknowledge this painful fact,” said Mr. Pierluisi, a Democrat who warned that any such board should not infringe on the island’s self-rule.
Mr. Williams testified the board should consist of five to seven members and feature a chief financial officer who would work alongside the island’s governor and legislature to create reliable revenue estimates and spending forecasts.
Mr. Williams served as D.C. mayor from 1999 to 2007. Yet before that, he helped D.C. regain its financial footing as the city’s chief financial officer in the late 1990s.
Congress had imposed a control board in 1995 to oversee the city’s out-of-control budgets.
“The D.C. board was successful in instilling fiscal discipline only because it had buy-in from local government, business and labor leaders,” Mr. Pierluisi said.
Analysts say Puerto Rico’s woes are the result of years of over-borrowing and spending and the steady exit of professionals and other workers who could help turn around the island’s fortunes.
According to the committee, only four in 10 adult Puerto Ricans are employed or looking for work, compared to 63 percent of mainland Americans.
“The people who leave are the people who pay taxes,” testified Simon Johnson, a management professor at the Massachusetts Institute of Technology.
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