Following Supreme Court decision, Puerto Rico Oversight Board free to continue debt restructuring process
In 2016, the Puerto Rico Oversight, Management and Economic Stability Act (PROMESA) created the Financial Oversight and Management Board in an effort to restructure the territory’s debt. Natural disasters like Hurricane Maria and a series of earthquakes have left Puerto Rico in a financial crisis and large debt.
The devastating storm destroyed the islands’ infrastructure, including homes, schools, businesses, and more. The cost of rebuilding alone contributed billions of dollars to the debt crisis. Another large amount of this debt goes to bondholders, as the value of government bonds fell immensely after Hurricane Maria.
President Obama appointed the Oversight Board’s seven members without needing the Senate’s input or approval. Since this appointment, the Oversight Board has worked towards restructuring the territory’s debt, starting by filing for bankruptcy. However, this progress was threatened when a hedge fund claimed the appointment of federal officers as the board’s members violated the Appointment Clause in the Constitution. The clause suggests that the President needed to have the consent of the Senate to appoint officers of the United States.
The case was originally argued on October 15, 2019, and finally decided on June 1, 2020. The Supreme Court ruled that the members of the Oversight Board were constitutionally appointed. The basis behind the unanimous ruling was that the officers exercised primarily local officers, and therefore consent from the Senate was not necessary. With this ruling, the board can continue to restructure finances in Puerto Rico and bring the territory out of the financial crisis.
The Oversight Board released a statement following the ruling, welcoming the decision and stating, “PROMESA’s appointment process has established a bipartisan Oversight Board, ensuring balanced decisions to help Puerto Rico recover and prosper”. The board continues to work on reducing Puerto Rico’s debts from $129 billion to $86 billion. The plan for bankruptcy includes reorganizing the government finances, negotiating with bondholders, and reforms to ensure these efforts result in long term fiscal growth.