[Congressional Record Volume 162, Number 43 (Thursday, March 17, 2016)]
[Senate]
[Pages S1571-S1574]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              PUERTO RICO

  Mr. HATCH. Madam President, I am trying to assess the financial and 
economic challenges facing Puerto Rico, an issue I have been speaking 
about since last summer. In fact, it was July of last year when I first 
wrote to Treasury Secretary Lew, expressing my concern about the fiscal 
situation in Puerto Rico and inquiring about the Obama administration's 
plans to address this predicament. While I did eventually get a 
response from the Treasury Secretary, numerous questions that I asked 
in that initial letter to this day remain unanswered.
  Over the ensuing months, I made other inquiries to Health and Human 
Services Secretary Burwell because, for some time now, we have been 
told that funding--or to be more specific, a decline in funding--for 
Federal health care programs was a factor contributing to Puerto Rico's 
debt crisis. So as the chairman of the Senate committee of jurisdiction 
over most of those programs, I wanted to know what HHS thought needed 
to be done.
  Not surprisingly, I am still waiting for a substantive response to 
those inquiries.
  Instead of detailed proposals, I was initially told simply that 
health funding issues surrounding Puerto Rico are difficult and that 
the administration expected Congress to address these issues in a 
fiscally responsive way--and to do it quickly.
  Eventually, last month, with the release of the President's budget 
proposal, we learned that the administration wants to provide $30 
billion--that is with a ``b''--in additional Medicaid funds for Puerto 
Rico. When asked how the administration thought we should pay for this, 
Secretary Burwell suggested we simply adopt the President's budget. 
However, given that there are more surviving members of The Beatles 
than there are Senators willing to vote in favor of an Obama budget, I 
don't know if anyone can take that suggestion very seriously.
  That is the sum total of the input we have gotten from the 
administration on dealing with Puerto Rico's health funding issues--a 
proposal for dramatically increased spending with no credible way to 
pay for it and a demand that we provide that funding as quickly as 
possible. That is all they are willing to say publicly on this matter, 
even though administration officials have labeled this a humanitarian 
crisis.
  By the way, buried in all of the details is the fact that this 
proposal for increased Medicaid funds is meant to shore up an inequity 
created by the so-called Affordable Care Act. Apparently, the 
Democrats' partisan health law provided billions in additional Medicaid 
funding for Puerto Rico, but also included a cliff--or a point in time 
when that funding would drop off quickly and dramatically--and that 
cliff is fast approaching.
  Let's be clear: The Democrats constructed that cliff, presumably 
knowing what they were doing at that time. The Democrats in Congress 
voted for it, and the Democrat in the White House signed it into law. 
No Republican in Congress supported that cliff.
  Yet, now we are told that we must act quickly to eliminate the cliff 
that they have created and add even more funds without a realistic way 
to pay for them. And, on top of that, Democrats in Congress have 
labeled any hesitation on the part of Republicans to fix a problem they 
created and to fix it in the exact way they prescribe as callous 
indifference toward the plight of the American citizens living in 
Puerto Rico.
  I have been as clear as I can be on this issue. I have said 
repeatedly that I want to work with my colleagues to find a solution, 
but we need to do so in a manner that is fiscally responsible with an 
eye toward righting the irresponsible course taken by the Government of 
Puerto Rico.

[[Page S1572]]

  Toward that end, I, along with a number of my colleagues, have 
repeatedly requested audited financial statements from the Government 
of Puerto Rico. One would think that is a reasonable request. These 
requests date back to last September with the first hearing I held on 
these issues in the Finance Committee. That was six months ago, yet we 
still don't have that information from fiscal year 2014, let alone 
2015.
  In addition, last month I wrote a 9-page letter to the Governor of 
Puerto Rico, asking a number of questions about Puerto Rico's finances, 
and I asked that they be answered by the first of this month. I have 
received no answers to these questions.
  In the face of a humanitarian crisis, it seems to be too much to ask 
of the Government of Puerto Rico that they provide some verifiable 
financial information so that Congress can make an informed decision 
about how to handle this very difficult situation. And, apparently, 
some of my friends on the other side of the aisle are ready and willing 
to spend tens of billions of dollars in taxpayer funds without all the 
relevant information and to publicly attack anyone who questions that 
strategy.
  So far, my friends on the Democratic side, including Members of 
Congress and the administration, have been generally unwilling to 
provide even the most basic information about how much their various 
proposals for Puerto Rico would cost the Federal Government or whether 
they intend to offset those undisclosed costs. And none of them show an 
interest in even discussing ways to help Puerto Rico return to a more 
sustainable fiscal and economic course. Yet they repeatedly have the 
audacity to accuse Republicans of indifference to the struggles faced 
by the residents of Puerto Rico. Sometimes I feel as though I am all 
alone, trying to solve this problem without any help from the other 
side, and there are even difficult times on our side.
  The absurdity of this debate, if that is what we want to call it, is 
compounded by the fact that the only practical and fiscally responsible 
legislation introduced in Congress to address these issues has come 
from Republicans.
  As most of my colleagues should know, even with the severely 
incomplete information we have, Senators Grassley and Murkowski, who 
chair the Judiciary and Natural Resources Committees, and I have 
introduced a bill that would provide some tax relief and fully offset 
funds to Puerto Rico for transition assistance as well as an oversight 
authority to help ensure that Puerto Rico establishes credible budgets 
and future fiscal plans. Our bill provides the platform needed for 
sustained economic growth and a return of access to credit markets.
  However, neither the administration nor any of my friends on the 
other side of the aisle have shown much interest in discussing the 
substance of our bill. One would think they would want me to bring it 
up, and if they wanted to amend it, they could amend it. We have to do 
this. We can't just play around with this. Instead, we have seen the 
aforementioned proposals to send tens of billions of dollars in health 
funds to Puerto Rico, no questions asked, and a proposed bankruptcy 
scheme that my colleagues have misleadingly claimed would simply give 
Puerto Rico access to chapter 9 debt relief--the same access we give to 
every municipality in the country.
  Of course, as I have made clear on a number of occasions, the so-
called chapter 9 access they are seeking for Puerto Rico doesn't really 
resemble the actual chapter 9 of the current Bankruptcy Code. In 
reality, their proposal would create, for lack of a better word, a 
super chapter 9 specifically for Puerto Rico and grant the territory 
unprecedented authority to restructure its debt. And that is the 
territory not having a special supervisory board to make sure they do 
restructure its debt.
  Before I say more about the super chapter 9 proposal, I just want to 
make clear that I and others have been working for quite some time now 
to find an agreeable solution to these problems. We have done so even 
while the Government of Puerto Rico refuses to provide anything 
resembling a complete picture of its finances, which, it seems to this 
Senator, ought to be the first thing that is done.

  I have been working with colleagues in both the House and the Senate 
to explore legislative options. And while I don't want to speak for 
anyone else at the moment, I will say we have been willing to consider 
various debt restructuring mechanisms for Puerto Rico, balancing the 
need for fairness and equal treatment for similarly situated parties.
  However, as we consider various approaches, I want to make three 
things perfectly clear.
  First, the Government of Puerto Rico must negotiate in good faith 
with its creditors, and creditors must do the same with Puerto Rico. It 
would be a mistake for officials in Puerto Rico to hold out or drag 
their feet on good-faith bargaining efforts in an anticipation of 
congressional action.
  Second, contrary to claims made by some of my colleagues, none of us 
have any interest in helping out the ``vultures'' or ``speculators'' 
looking to profit out of the misery created in Puerto Rico. If anyone 
uncovers illegal actions taken by investors in Puerto Rico, then by all 
means they should be prosecuted. If anyone can identify any investors 
whose actions are clearly predatory and unethical, we should all rain 
shame upon them. And, if former Federal Government officials who travel 
through the revolving door of the administration are found to be unduly 
enriching themselves off of Puerto Rico's plight, their actions should 
be brought to light. I have no qualms with any of that because my goal 
and the goal of my Republican colleagues is to provide sensible and 
reasonable solutions to help the people living in Puerto Rico.
  However, this does bring me to my third point. Innocent and ethical 
investors from Utah, New York, New Jersey, and every other State in the 
Union, as well as good-faith investors in Puerto Rico, should not be 
casually labeled as ``vultures'' or ``speculators'' and should be 
treated as any other similarly situated investor. A retiree or near-
retiree in Sandy, UT, who invested part of her retirement savings in 
Puerto Rican debt instruments, which carry Federal tax preferences, is 
no less deserving of repayment than any other similarly situated 
claimant. It is easy to make exaggerated claims that the bondholders 
are all rich people; they are not. Thousands and thousands, if not 
hundreds of thousands, are average people who have trusted the bonds.
  Teresa and Julio Garcia, who are residents of Puerto Rico, along with 
other middle-class Puerto Ricans who own a significant share of Puerto 
Rico's debt, are certainly not vultures and don't deserve unequal 
treatment. Residents of Puerto Rico who are retired or near retirement 
and who are numbered among Puerto Rico's bondholders, but don't happen 
to receive public pensions, do not deserve to see their savings 
depleted in order to favor certain public pension benefits in Puerto 
Rico. To some, that last example may seem oddly specific; however, if 
you look at the super chapter 9 proposals put forward by Democrats, the 
intent to favor public pensions over private bondholders--even those 
whose retirement savings are invested in those bonds--is explicit. What 
is wrong with worrying about private bondholders who are like Julio and 
his wife?
  Regarding those public pensions, it is true that Puerto Rico tried to 
reform the retirement systems for its government employees and did end 
up making some lasting changes from one of its programs. Nonetheless, 
the territory has not followed through on some aspects of the reforms 
it did make, and even in the face of dire fiscal conditions, some of 
Puerto Rico's major public pension systems remain unchanged. And for my 
friends on the other side, it appears that any effort to encourage 
Puerto Rico to substantially improve its public pension systems as the 
island restructures some of its debt would be out of the question. That 
just can't be.
  Madam President, as we see increasingly large municipal bankruptcies 
and States with mounting fiscal pressures, severely underfunded public 
pensions almost always seem to be lurking in the background. Until now, 
Detroit was probably the biggest municipal bankruptcy in U.S. history, 
with a debt of around $18 billion. Now Puerto Rico is coming to 
Congress for help to deal with $73 billion of debt and $43 billion of 
shockingly unfunded public pension obligations, bringing the total to 
more than $115 billion.

[[Page S1573]]

  It would be beyond irresponsible to offer aid to Puerto Rico without 
taking at least some action to improve public pension reporting and 
transparency. Given the growing crisis of underfunded public pensions 
around the country, which I have been warning my colleagues about for 
years now, taking no action will ensure that States and municipalities 
that have been responsible with their pensions and their fiscal 
planning will see their costs go up as a result of the bad and 
imprudent actors. On this point, officials of the Securities and 
Exchange Commission and municipal market analysts overwhelmingly agree: 
Increased transparency on public pension liabilities is clearly 
necessary.
  Earlier this week, while our bicameral work to produce passable 
legislation to address the problems in Puerto Rico has progressed, some 
of my friends on the other side of the aisle decided to chime in once 
again with another round of implausible policy proposals and fresh 
political attacks. The latest group of bills introduced by Democrats 
includes a number of repackaged ideas from last year, including 
unscored and unsound proposals to allocate funds and direct aid as well 
as a renewed effort to grant unprecedented debt resolution authority 
for Puerto Rico. The only real difference between the ideas we have 
seen already and those that were included in the bills this week is 
that Democrats are apparently now willing to be upfront about the fact 
that the debt resolution authority they are seeking isn't just the same 
chapter 9 everyone else has, but an entirely new animal altogether.

  Last year, my friends on the other side had a bill to provide Puerto 
Rico with an ability to apply chapter 9 debt resolution authority on a 
retroactive basis. The reasoning and rhetoric behind the bill was that 
municipalities in every State have access, and so should Puerto Rico--
never mind the retroactivity.
  Now, however, the goalposts are being moved. My friends have now 
introduced their super chapter 9 bankruptcy scheme devised by 
administration officials. Of course, this new super chapter 9 is not 
something available to other municipalities or States. It is, in fact, 
without precedent. It includes virtually all government debt in Puerto 
Rico and blows right through a payout protection afforded to general 
obligation debt that is in Puerto Rico's Constitution. This not only 
steps directly on Puerto Rico's autonomy, but it also sends dangerous 
signals by telling municipal bond markets to no longer regard general 
obligation debt issued by States as being safe, as previously expected. 
That, of course, means higher costs to States for funding things like 
infrastructure projects, and it is something that many State Governors 
have said they worry about and do not support. Needless to say, this 
freshly constructed bankruptcy scheme is extremely risky. Though my 
friends are now being transparent about the relief they want, it 
doesn't make their proposals any more palatable.
  The bills introduced this week include proposals beyond the super 
chapter 9 proposal. While these ideas are not at all new, it is worth 
taking a few minutes to go through them individually.
  First, we have provisions, as poorly constructed this year as they 
were last year, calling for additional Medicare and Medicaid funds for 
Puerto Rico.
  Second, we have proposals to extend parts of the U.S. personal income 
tax system that provide direct aid to U.S. taxpayers to people in 
Puerto Rico, excluding any part that requires positive tax payment. 
Residents of Puerto Rico do not file Federal income tax returns or pay 
any personal Federal income tax, yet my colleagues want the earned-
income tax credit and child tax credits to be paid out to residents of 
Puerto Rico. Of course, the Joint Committee on Taxation--the 
nonpartisan scorekeeper and adviser when it comes to tax policy--has 
already indicated that such a scheme would be rife with administrative 
difficulties and fraud. It is, at the very least, difficult and 
counterintuitive to expect the IRS to properly operate an income tax 
program for people that are not subject to the income system to start 
with. However, that doesn't seem to faze my friends on the other side.
  Third, we have a control board to oversee the restructuring of Puerto 
Rico's debt that under the bill would be populated by Puerto Rican 
political appointees. That is one of the problems--the political 
appointees in Puerto Rico. Why don't they start thinking about all the 
taxpayers in America? Clearly, the structure of this proposed control 
board would subject any financial decisionmaking in Puerto Rico to the 
same political wrangling that got the territory into this mess in the 
first place. Yet the obviousness of these problems seems to have 
escaped my colleagues.
  As with last year, we do not know the precise cost of the health 
funding and refundable tax credit proposals because my friends have not 
been interested in getting them scored or in disclosing how much they 
cost. Essentially, my colleagues want to have a debate about their 
proposals without any real discussion of what they will cost the 
American taxpayers.
  I have been here only about 39 years--actually, 40--but I think that 
is long enough to know that anyone who puts forward legislation 
designed specifically to throw taxpayer funds at a problem without 
disclosing how much they actually want to spend isn't all that 
interested in passing the legislation. Instead, what people tend to 
want in those situations is to send a political message that they care 
about a problem while the other side does not.
  Perhaps I am wrong. Perhaps my friends on the other side do want to 
see their proposals become law. If that is the case, they would be glad 
to know that I have worked with JCT and the Congressional Budget Office 
to get a ballpark figure on the cost of their proposals. All told, the 
provisions put forward in the bill Senator Menendez and some of his 
colleagues introduced this week would cost Federal taxpayers more than 
$45 billion, and probably closer to $50 billion, at least from what we 
can tell from the legislative language, which is not the clearest I 
have ever seen.
  I can only assume that the administration does not support these 
bills, given that, in what little communication we have had with them 
on these issues, they have consistently admonished us to address the 
Puerto Rico problem in a ``fiscally responsible way.'' I have a hard 
time imagining any argument that the approaches proffered by my friends 
this week would satisfy even the loosest definition of fiscal 
responsibility, at least not until they come up with a semireasonable 
way to offset the $50 billion cost.
  Once again, given all these ominous realities, I have to assume that 
these bills are more about politics than solutions. As I said, people 
who are serious about solving a problem typically don't propose tens of 
billions of dollars in spending without actually disclosing the costs 
and talking about offsets. No, people who put out big ideas without a 
plausible path to get them enacted are usually more interested in 
talking about a problem than they are in solving it and more interested 
in political posturing than actually helping people.
  Let me say that again. People who put out big ideas without a 
plausible path to get them enacted are usually more interested in 
talking about a problem than they are in solving it and more interested 
in political posturing than in actually helping people.
  This Senator is not interested in the politics surrounding the crisis 
in Puerto Rico nor in what the polls say on this issue. I have been 
working for some time now to craft a legislative solution that can 
actually pass because I am more interested in enhancing the lives and 
opportunities of our fellow citizens in Puerto Rico than I am on the 
political impact this debate could have between now and November. Since 
last summer, well before almost anyone in Congress really began 
thinking about the challenges facing Puerto Rico and long before we 
sought any outlandish legislative proposal from our friends on the 
other side, I have been calling on my colleagues on both sides of the 
aisle to work with me to find serious and credible solutions to help 
the people, not the politicians, in Puerto Rico.
  I repeat that call today. If there is anyone who wants to put people 
far out in front of politics and frankly address these problems instead 
of merely talking about them, my door remains open--wide open--and I 
hope some will walk through to help us get this done.

[[Page S1574]]

  I want to get this done. I believe the people of Puerto Rico deserve 
having it done, but it has to be done right, and it can't be done by 
gouging everybody else in America for profligacy and improper conduct 
in Puerto Rico.
  With that, Madam President, I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. PETERS. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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