SAN JUAN (Reuters) - President Barack Obama’s proposed budget for fiscal year 2017 would let Puerto Rico restructure debts and boost healthcare on the island, garnering some support from island advocates on Monday.
As part of a proposed $4.1 trillion budget released on Monday, the Obama Administration called for “a broad legal framework” to allow Puerto Rico to restructure debt, as well as fiscal oversight for the island’s finances.
The budget would provide Puerto Rico with an earned income tax credit, and improve healthcare funding by expanding Medicaid eligibility and increasing federal support for it on the island.
Puerto Rico, a U.S. commonwealth, is mired in economic crisis, with $70 billion in bond debt, a 45 percent poverty rate and a dwindling tax base as its people increasingly flock to the mainland United States.
In a statement on Monday, Pedro Pierluisi, the island’s non-voting representative in Congress, lauded the healthcare elements of the proposed budget.
“Puerto Rico’s shameful treatment under Medicaid harms quality of life in the territory and has compelled the Puerto Rico government to over-borrow…to compensate,” Pierluisi said.
The island’s financial problems are a source of division in Washington, where Democrats have demanded letting it restructure its debts through passing laws akin to U.S. bankruptcy protections, though possibly broader. Republicans are skeptical of debt restructuring, preferring to bring the island’s finances under federal control.
Puerto Rico has lobbied heavily for some sort of debt restructuring, saying it is necessary to secure much-needed concessions from bondholders who have resisted repayment cuts. The island has begun defaulting on minor debt payments over the last several months.
The Puerto Rico Federal Affairs Administration, a Puerto Rican government agency that represents the island before the U.S. government, said the proposed budget would “help level the fiscal playing field” for Puerto Rico.
“The President is providing the hard working and innovative people of Puerto Rico with the ability to address the crisis of today while also moving forward to the prosperity of tomorrow,” Juan Hernandez, PRFAA’s director, said in a statement.
The proposals are not shoo-ins, as the plan is primarily a political document unlikely to be embraced by the Republican-controlled Congress.
Reporting by Nick Brown; Editing by David Gregorio