(Bloomberg) — U.S. lawmakers agreed to extend some health care aid to Puerto Rico as part of a $1.1 trillion spending bill that would avert a government shutdown, a step that fell far short of the lifeline the Caribbean island was seeking to rescue it from its escalating debt crisis.
The legislation, which marks Congress’s first step to assist Puerto Rico, failed to include any of the island’s key priorities, opting instead for measures that would increase health funding by about $900 million over a decade and allow the Treasury Department to provide technical assistance. The bill may be the last chance this year for the commonwealth to receive help from the federal government.
The bill doesn’t provide “any meaningful provision to help Puerto Rico address its economic and fiscal challenges,” Pedro Pierluisi, the territory’s non-voting House member, said in a statement. “Leaders in Congress missed a major opportunity to do the right thing.”
Puerto Rico Governor Alejandro Garcia Padilla has been pleading with lawmakers for assistance as it runs out of cash and struggles to pay its $70 billion of debt. The commonwealth this month narrowly averted a default on government-guaranteed debt for the first time and may be unable to cover $957 million due to investors on Jan. 1.
The bill’s text didn’t include a provision to grant Puerto Rico agencies access to Chapter 9 bankruptcy, one of the island’s key requests.
Puerto Rico had also been prodding lawmakers to give it the same funding that states receive under the Medicaid and Medicare health care programs, saying the disparity has helped create the government’s chronic fiscal strain. The spending bill didn’t address the full scope of that disparity. Instead, it would increase Medicare payments to hospitals and provide bonuses to doctors and facilities that adopt electronic record keeping.
It also includes a provision allowing the Treasury to provide technical assistance to Puerto Rico, which may include money for economic forecasting, cash management and other planning, according to Pierluisi.
The legislation caps a last-ditch lobbying effort by the island before lawmakers leave for the Christmas holiday. Republican Senator Orrin Hatch, who heads the finance committee, and two other Senate committee chiefs last week introduced legislation to direct as much as $3 billion to Puerto Rico through a newly-created authority that would help oversee the island’s budget, which is now virtually certain to languish until next year.
‘We’ve done enough’
Hatch said the spending bill will get the debt-ridden island through February and buy time for lawmakers to craft a broader fix. He declined to say how the provisions would provide such immediate assistance.
“We’ve done enough that we think if they can handle it properly they can get through February,” Hatch said in an interview in the Capitol. He said he hopes “in the interim time” that lawmakers can “work out a solution that will be long-term.”
Garcia Padilla says the island can’t afford to repay debt built up from years of borrowing to paper over budget shortfalls brought on by its faltering economy.
Puerto Rico’s bond prices tumbled this year as the governor said said the island’s debts can’t be paid, and some investors expressed skepticism that a U.S. lifeline will be sufficient to stave off a major default. Puerto Rico general-obligation bonds due in 2035 traded Tuesday for an average of 72.5 cents on the dollar, down from 74.6 cents on Dec. 9, when the Republican bill was released.
“It’s not exactly a game changer for Puerto Rico,” Matt Fabian, a partner at Municipal Market Analytics, said of the spending-bill provisions. “I don’t think it will have any effect on bond prices or the ultimate resolution. Puerto Rico needs far more than that.”
With his government rapidly draining its cash, Garcia Padilla told senators this month that he’s running out of ways to avert a default on government-guaranteed debt, which is given the top legal priority. His administration has started diverting revenue earmarked for some securities to ensure that the island doesn’t skip payments on general-obligation bonds.
—With assistance from Michelle Kaske, William Selway and Martin Z. Braun.