The federal PROMESA bill to help Puerto Rico with its debt crisis may be necessary to forestall a worse crisis, but is only a stop-gap, according to V.I. Delegate to Congress Stacey Plaskett.
"I don’t think this is a bill that will help Puerto Rico recover. I think it is a bill that will allow Puerto Rico not to default on its debt and give it space to restructure its payments. That is all it will do. … But if there is not an equitable treatment of the territories and Puerto Rico, if they are not given the tools to grow their economy, they will eventually end up in the same position again," Plaskett said earlier this week. She supports the bill in its current form, now that provisions allowing the USVI to create a similar oversight board and seek protection from its creditors too has been removed.
"They have a July 1 debt payment they are running up against that they do not want to see themselves default on. For that reason they need to see closure on that point. … The bill triggers a stay on the debt Puerto Rico has while the oversight board is set up," Plaskett said.
And she said it is likely to pass the Senate soon.
"It is much more difficult to pass in the House than the Senate," so major changes are probably unlikely at this point, Plaskett said.
But it is not the ideal solution, she feels.
To get on the road to a sustainable recovery, Puerto Rico – and the U.S. Virgin Islands – would be better served by and actual cash infusions, she said, by treating insular territories more like states for Medicaid, for example, and by direct investment in infrastructure. The White House issued a series of recommendations to do just that, but those were stripped from the bill.
Those recommendations included expanding Medicaid to remove the cap for the territories and treating them more like states and extending the Earned Income Tax Credit, which applies to all 50 states but not the USVI or Puerto Rico. Both of which would mean millions of dollars in direct revenue to the territories.
"They also discussed a review of Puerto Rico’s pension fund, which is something I think all of the territories would like to see some discussion around," Plaskett said.
The president’s recommendations urged any restructuring of Puerto Rico’s debt to give a high priority to that territory’s underfunded government pension plan, which is projected to have sold off its trust fund and be unable to make full pension payments by 2019.
Until earlier this week, the bill also applied to the U.S. Virgin Islands and other insular territories to also seek bankruptcy protections through a similar oversight board. But only if "the Legislature adopts a resolution, signed by the governor, requesting the establishment" of an oversight board. [HR 5278]
Asked why the USVI would not want to have similar protection, Plaskett said the fact that the territory secures its bonds with federal rum tax revenues and local gross receipts taxes, and cannot declare bankruptcy help keeps rates down.
Being able to declare bankruptcy would "create a much greater risk to creditors, which will raise the interest rates we pay. … Right now ours is about 4 percent while Puerto Rico is 9 percent," she said.
The bill also gives Puerto Rico’s governor the power to reduce the territory’s minimum wage to $4.25 per hour, Plaskett said. She said she would not like to see that happen to the USVI or Puerto Rico. Asked why that was in the bill, Plaskett said it reflected Republican Party priorities and views on the economy.
She said she and other Democrats in Congress have several items of legislation that would help address the economic situation in the territories, "but this Congress is not interested in expanding anyone’s budget."