Labrador Backs Conservative Bill Protecting US Taxpayers in Puerto Rico Debt Crisis

Press Release

Rep. Raúl Labrador, R-Idaho, voted to approve a bill blocking a taxpayer bailout and establishing an orderly process for restructuring Puerto Rico's $72 billion in government debt. H.R. 5278 was approved 29-10 Wednesday by the House Natural Resources Committee, which has jurisdiction over U.S. territories.

"The leaders of the Commonwealth of Puerto Rico got themselves into this mess," Labrador said. "Our bill takes important steps to prevent the U.S. taxpayer from bailing out a government that spent recklesslyand provides a conservative solution to a problem caused by liberal excess.

"The bill will stabilize municipal bond markets vital to Idaho and other states and avoid setting a precedent that could tempt free-spending states to walk away from their obligations by behaving irresponsibly," Labrador said. "The bill establishes fiscal reforms without spending a single dollar in U.S. taxpayer money to relieve Puerto Rico's debt."

On May 2, Puerto Rico defaulted on a $400 million debt payment. In July, another $2 billion comes due. Congressional action is necessary because Chapter 9 reorganization does not apply to Puerto Rico and the island's politicians have failed to face fiscal reality.

"The bill was the result of long and difficult negotiations," Labrador added. "It includes changes I demanded to protect the rights of creditors, stave off a taxpayer bailout and ensure that nothing in this bill will harm Idaho's ability to access bond markets."

H.R. 5278, the Puerto Rico Oversight, Management, and Economic Stability Act, creates a seven-member Oversight Board to oversee debt restructuring and conduct financial audits. The board would require sustainable government budgets, establish fiscal plans to achieve needed reforms and have power to override laws, regulations and executive orders that conflict with the fiscal plans. Republican appointees would have a 4-3 majority over Democrats on the board.

Labrador's work blocked a request by the White House to prioritize Puerto Rican pension funds over other secured creditors, a move that would have destabilized bond markets. He also secured language prohibiting unlawful transfers of funds or property and guaranteeing that the fiscal plans respect priorities and liens as guaranteed by the territorial Constitution.

The bill allows creditors and debtors to work on voluntarily restructuring. If voluntary negotiations fail, the board could file debt restructuring petitions in federal court. The Oversight Board's authority would expire after the Puerto Rican government has balanced budgets for four consecutive years and has reestablished access to credit.

"Many interest groups tried to kill the bill in hopes of sparking a financial catastrophe in Puerto Rico which would have led to a taxpayer bailout," Labrador said. "Contrary to the misleading ads and information propagated by these groups, this bill provides a conservative path to restore stability and revitalize Puerto Rico's economy without costing the people of Idaho and the American taxpayer."

In an editorial Tuesday, the Wall Street Journal praised Congressional Republicans for "using conservative principles to solve an urgent problem caused by progressive government" and said "the overall bill steers the commonwealth in the direction of free-market reforms after years of welfare-state politics."

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