(Bloomberg) A senior Republican senator said lawmakers need better data on Puerto Rico’s financial situation before helping the island, as the Obama administration and the territory’s governor stepped up their warnings about the depths of its crisis.
“We do want to be helpful, but in order to be helpful we need verifiable data,” Alaska Senator Lisa Murkowski, chairman of the Senate Energy and Natural Resources Committee, said at a hearing Thursday in Washington.
Antonio Weiss, counselor to U.S. Treasury Secretary Jacob J. Lew, said in testimony that congressional action is required to “avert further crisis” and that without such action, the situation could develop into a humanitarian crisis.
Governor Alejandro Garcia Padilla said the island’s Government Development Bank “is not expected to be able to make” a $355 million debt payment due Dec. 1, while the Puerto Rico Electric Power Authority probably won’t be able to repay almost $1.5 billion of debt in the first half of 2016, absent a restructuring. Puerto Rico’s cash deficit may balloon to $512 million by June, he said.
“With no independent audited financial report of Puerto Rico’s Government Development Bank—the island’s fiscal agent and financial adviser—since June 2013, it leads to uncertainty over the true level of Puerto Rico’s financial situation,” Murkowski said.
The governor said prior administrations hid information in the past to retain market access.
Fiscal Crisis
Weiss said that while Puerto Rico needs to make an investment in its financial-reporting system, there is “no doubt in our judgment” that the island is facing a fiscal crisis and the lack of audited financial data shouldn’t be used as an excuse not to act.
The Obama administration on Wednesday called for Congress to give Puerto Rico sweeping powers to reduce its $73 billion debt burden through bankruptcy. Puerto Rico would be provided with a form of bankruptcy protection not now available to American territories. Administration officials also called for lawmakers to increase health-care funding for Puerto Rico, extend tax credits to the poor and put independent oversight in place to monitor the government’s budget.
The proposals suggest the crisis has reached a point where federal officials, who had vowed not to extend a financial bailout, can’t wait for the commonwealth and creditors to work out a compromise after talks broke down Wednesday. The proposals are likely to face resistance in Congress, where Republicans have blocked a bill that would extend more limited bankruptcy powers to the island.
Senator John Barrasso, a Wyoming Republican, said that exclusion from bankruptcy protection gave Puerto Rico access to cheap financing, echoing concerns Republicans have previously expressed about changing rules for debt that has already been issued.
