Puerto Rico Legislation: An Update

Tuesday, June 28, 2016

Early this year, GFOA provided support for legislation aimed at addressing Puerto Rico’s current financial and humanitarian emergency. GFOA, along with other local government associations, provided support for House-side legislation known as PROMESA, while specifying that support would be withdrawn if any extraneous provisions affecting state and local government financial or pension matters were added. PROMESA passed the House on June 9, 2016, and is being considered by the Senate. The bill creates an oversight board that enforces balanced budgets, the provision of audited financial statements from the government of Puerto Rico, and actions to promote financial stability and economic growth, as well as accelerated processes for the review and permitting of infrastructure projects. Another provision would put a moratorium on creditor lawsuits filed between December 2015 and the date the bill is enacted. Ultimately, the timing of PROMESA is important, as a default that will occur on July 1, 2016, could lead to court orders that would force Puerto Rico’s government to pay its creditors before funding essential services.

Because timing is so important and PROMESA goes before the Senate as early as this week, GFOA continues to keep a watchful eye on the legislation to ensure that any provisions outside the scope of a Puerto Rico assistance package are not included and that swift action is made to ensure Puerto Rico’s solvency can be achieved over the long term.