WASHINGTON (AP) — President Barack Obama has signed a rescue package for financially strapped Puerto Rico, which is facing more than $70 billion in debt and a major payment due Friday.
Obama signed the bill Thursday, hours after it won final passage in the Senate on Wednesday night.
Obama says the bill isn't perfect but is an important first step to help the U.S. territory and its 3.5 million citizens avoid plunging into an even deeper crisis.
The bipartisan bill crafted after months of work creates an oversight board that will supervise some debt restructuring and negotiate with creditors. It temporarily blocks creditor lawsuits.
Puerto Rico will also be allowed to temporarily lower the federal minimum wage for some younger workers.
The legislation is needed because Puerto Rico, like all U.S. states and territories, cannot declare bankruptcy under federal law. Mainland municipalities and their utilities can, while municipalities and utilities in Puerto Rico cannot.
What's in the package
- CONTROL BOARD: A seven-member board appointed by Congress and the president would help Puerto Rico get its finances in order, similar to a board that helped guide the District of Columbia through a fiscal crisis two decades ago. The territory's government would have to create a fiscal plan and submit budgets to the board. In some cases, the board could override the territorial government.
- FISCAL PLANS: The board and the territorial government would develop detailed fiscal plans intended to achieve fiscal responsibility and eventual access to markets. The plan would direct the territory to fund public services and improve accountability. Through the fiscal plans, the board would have to figure out how to maintain the legal rights of creditors and also shore up pension shortfalls. The island has underfunded public pension obligations by more than $40 billion.
- DEBT RESTRUCTURING: Like all U.S. states and territories, Puerto Rico cannot declare bankruptcy under federal law. But mainland municipalities and their utilities can, while municipalities and utilities in Puerto Rico cannot. The bill does not allow the island full bankruptcy authority, but gives the control board oversight authority over negotiations with creditors and the courts over reducing some debt.
- MINIMUM WAGE: Puerto Rico would be allowed to temporarily lower federal minimum wage requirements for some younger workers, but that authority would expire with the termination of the oversight board.