As deadline looms, Senate to consider Puerto Rico rescue

WASHINGTON — Treasury Secretary Jacob Lew is warning of widespread consequences, from layoffs of police officers to a hospital closure, if the Senate fails to act before Friday on a rescue package for debt-stricken Puerto Rico.

The U.S. territory is in a decade-long recession, and the island owes a $2 billion debt payment to creditors on July 1. The House already passed legislation to create a new control board and restructure some of the U.S. territory’s $70 billion debt.

In a letter to Senate Majority Leader Mitch McConnell on Monday, Lew said the crisis in Puerto Rico “will ratchet up to an even higher level” if the Senate doesn’t pass the House bill in the next four days. He said that if the island defaults on the July 1 payment, the government may be forced to shut down public transit, close a hospital or send police officers home.

“We know for certain that it is the 3.5 million American citizens who live in Puerto Rico who will be further harmed,” Lew said.

McConnell, R-Ky., has said the Senate will consider the House bill this week, but he will need support from both parties to surmount a certain 60-vote threshold to advance legislation. Votes could come as soon as Wednesday.

The House bill would create a seven-member control board to oversee the island’s financial recovery, similar to a board that oversaw the District of Columbia two decades ago. The board could negotiate with creditors and the courts over reducing some debt, but the bill does not provide any taxpayer funds to reduce that debt.

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.

The House is out of session until July 5, so the Senate will have to pass the House bill unchanged for it to head to the president’s desk for his signature before the Friday deadline.

The legislation enjoys rare bipartisan support from the White House and Republican leaders in Congress. House Speaker Paul Ryan, R-Wis., helped negotiate the House bill.

The governor of Puerto Rico is backing the bill, even though he says the control board would have too much power over the territorial government.

Senate Democratic Leader Harry Reid of Nevada is so far withholding his support from the bill, partially over the minimum wage provision.

Democratic Sen. Bob Menendez of New Jersey and Sen. Bernie Sanders, I-Vt., are both strongly opposed to the bill, saying the control board would be too favorable to creditors.