House passes bill to help ease Puerto Rico’s debt

The House on Thursday overwhelmingly passed a rescue package for debt-stricken Puerto Rico, clearing a major hurdle in the ongoing effort to bring relief to the U.S. territory of 3.5 million Americans.

The bipartisan vote was 297 to 127 for the legislation that would create a financial control board and allow restructuring of some of Puerto Rico’s $70-billion debt. The measure heads to the Senate just three weeks before the territory must make a $2-billion payment.

In a rare display of bipartisanship, the bill had the strong support of President Obama, House Speaker Paul D. Ryan and Minority Leader Nancy Pelosi.

“The Puerto Rican people are our fellow Americans. They pay our taxes, they fight in our wars. We cannot allow this to happen,” Ryan said in imploring lawmakers, especially reluctant conservatives in the GOP caucus, to back the bill during debate.

The legislation would allow the seven-member control board to oversee negotiations with creditors and the courts over reducing some debt. It does not provide any taxpayer funds to reduce that debt.

It would also require the territory to create a fiscal plan. Among other requirements, the plan would have to provide “adequate” funds for public pensions, which the government has underfunded by more than $40 billion.

Hours before the vote, the White House strongly endorsed the bill, saying that failing to act could result in an “economic and humanitarian crisis” in the U.S. territory beyond what the island is already facing.

Puerto Rico has missed several payments to creditors and faces the $2-billion installment on July 1. A lengthy recession has forced businesses to close, driven up the unemployment rate and sparked an exodus of hundreds of thousands of people to the U.S. mainland. Some schools on the island lack proper electricity and some hospitals have said they can’t provide adequate drugs or care.

The island’s only active air ambulance company announced this week that it has suspended its services.

“It is regrettable we have reached this point, but it is reality,” said Pedro Pierluisi, Puerto Rico’s representative in Congress.

Despite leadership support, the measure faced opposition from some in the ranks of both parties, as some bondholders, unions and Puerto Rican officials have lobbied against it. Some conservatives said it would cheat bondholders, while some Democrats argued the control board has colonial overtones.

Democrats and labor unions have also opposed a provision in the bill that would allow the Puerto Rican government to temporarily lower the minimum wage for some younger workers. A Democratic amendment that would have deleted that provision was rejected, 225 to 196.

Still, Pelosi said the bill will provide the people of Puerto Rico with the tools they need to overcome the crisis and move forward.

“Today, more than 3 million of our fellow American citizens in Puerto Rico are facing a fiscal and public debt emergency that threatens their economy, their communities and their families,” Pelosi said.

In a push to get the bill passed, Obama summoned House Democrats with ties to Puerto Rico to a meeting in the Oval Office on Wednesday, including supporters and opponents of the measure.

Ahead of the vote, some bondholder groups tried to pick off conservatives with the argument that the bill is unfair to creditors and tantamount to a bailout for the territory.

Some conservatives strongly opposed the bill, expressing concern that it could set a precedent for financially-strapped states.

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