Oversight Hearing on: “Puerto Rico’s Fiscal Recovery Under PROMESA and the Road Ahead”
House Subcommittee on Indian and Insular Affairs
2025-07-16
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Source: Congress.gov
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Good morning, everyone. The Subcommittee on Indian and Insular Affairs will come to order. Without objection, the chair is authorized to declare recess of the subcommittee at any time. The subcommittee is meeting today to hear testimony for an oversight hearing entitled Puerto Rico's Fiscal Recovery under PROMESA and the Road Ahead. Under Committee Rule 4F, any oral opening statements at hearings are limited to the chairman and the ranking minority member. I therefore ask unanimous consent that all other members' opening statements be made part of the hearing record if they are submitted in accordance with Committee Rule 3-0. Without objection, so ordered. I ask unanimous consent that the gentleman from Florida, Mr. Soto, the gentlewoman from New York, Ms. Ocasio-Cortez, and the gentleman from New York, Mr. Torres, be allowed to sit and participate in today's hearing. Without objection, so ordered. I will now recognize myself for an opening statement. Today, the Subcommittee on Indian and Insular Affairs is meeting to discuss Puerto Rico's fiscal recovery under the Puerto Rico Oversight Management and Economic Stability Act, also known as PROMESA. We'll explore the next steps in resolving Puerto Rico's debt crisis and work to ensure that proper safeguards are in place to prevent future financial risk. Almost a decade ago, Congress enacted PROMESA to address the island's fiscal collapse. At the time, Puerto Rico had more than $100 billion in liabilities and had lost access to capital markets. PROMESA was put in place by Congress as a comprehensive financial oversight and restructuring framework for the island. PROMESA established the Fiscal Oversight and Management Board, or FOMB, to oversee Puerto Rico's financial recovery. Because Puerto Rico is not eligible to declare bankruptcy, Title III of PROMESA introduced a court-supervised bankruptcy-like debt restructuring process. Under Title III, only the FOMB acting as representative for the Puerto Rican government can propose plans of adjustment.
Plans of adjustment serve as debt restructuring petitions to a federal court. Today, FOMB has overseen the restructuring of roughly 80% of Puerto Rico's outstanding debt under Title III. It has been the largest public debt restructuring in United States history. The Puerto Rico Electric Power Authority, or PREPA, is the last major bond issuer with unresolved debt. In 2016, PREPA owed over $9 billion to creditors. This massive debt was the result of decades of political interference, mismanagement, and natural disasters that all left the public utility financially unstable and operationally inadequate. Restructuring PREPA's debt has been slow. This is due to multiple factors, perhaps most significantly because of its sheer complexity. Negotiations continue to this day. However, once PREPA's obligations are resolved, all major outstanding debt on the island will have been restructured. Beyond debt restructuring, the FOMB also encourages fiscal discipline and economic growth through annual certification of comprehensive fiscal plans for Puerto Rico. These plans paint a blueprint for the Puerto Rican government to operate within. Aided by the FOMB's budgetary control enforcement, a decrease in overall expenditures, increase in net revenue, and emphasis on funding essential services on the island have been realized. Additionally, I would like to commend the Puerto Rican government for its role in this recovery, as shown by their adoption of formal debt management policies. Notably, the government now limits the annual debt service to no more than 8% of its own source revenues. The government also created the Office of the Budget of Legislative Assembly, which is modeled loosely after the Congressional Budget Office and informs the legislature of the fiscal impacts of policy proposals. These are all positive developments. It signals productive collaboration between FOMB and Puerto Rico's government.
Under PROMESA, the FOMB is set to terminate after four consecutive years of balanced budgets and the restoration of market access to the island. Notably on June 25th, 2025, Jennifer Gonzalez Colon signed Puerto Rico's first certified balanced budget into law. This is an important step toward fulfilling Promesa's conditions for FOMB termination. The FOMB has made clear that it intends to sunset once Puerto Rico's finances meet Promesa's statutory conditions. I look forward to hearing more about that from our witnesses. Challenges to Puerto Rico's full financial recovery remain, But to be clear, significant progress has been made. With continued political resolve, transparency, and fiscal responsibility, the goals of PROMESA can be fully realized. Today's hearing is an opportunity for Congress to assess the FOMB's progress and help determine the best path forward for Puerto Rico's long-term fiscal viability. I want to thank each of our witnesses for being with us, and I look forward to today's conversation. With that, the chair now recognizes the ranking minority member for any statement.
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