PPD Pyne March 14, 2016, ‘The Honorable Paul Ryan ‘The Honorable Nancy Pelosi Speaker Democratic Leader US House of Representatives Us House of Reprosontatives 1-232, The Capitol H-204, The Capitol Washington, DC 20515 ‘Washington, DC 20535 ‘The Honorable Mitchell McConnell ‘The Honorable Harry Reid ‘Majority Leader Democratic Leader US Senate Us Senate 5-230, The Capito! 5-221, The Capito! ‘Washington, DC 20510 Washington, DC 20510 Dear Speaker Ryan, Leaders McConnell, Reid, and Pelosi | am Dr, David Berni, former Secretary of State of Puerto Rico, as wall as current candidate for Governor ofthe Popular Democratic Party (PPO, fr its Spanish acronym), which | preside. As you may know, the PPD is the governing party, controlling the Executive and Legislative branches in Puerto Rico, I write to you today regarding the urgent need for federal action to address Puerto Rico's severe ‘economic and fiscal crisis. We fiely believe that Congress has a shared responsibilty, along with the federal Executive branch, to provide tools for the people of Puerto Rico to resolve this situation, Given the real possibility ofa disastrous defauit by the Commonwealth in the coming months, Speaker Ryan appropriately set March 31 as the deadline for a legislative plan to be ready that would help solve this problem. | have previously called for federal action to help address the Isiand’s fiscal crisis. | would now like to address you directly and share our perspective on how we artived at such a complicated financial situation, and propose some of the essential elements of what a federal response should include ‘As you hum, Puestu Rico's economy has been in dite straits for several years now, dating back to.a recession that started In 2006, and has not abated since, One of the chief causes ofthis persistent lack of econamic growth is the decision taken by the federal government in 1996 to phase out Section 936 ofthe Internal Revenue Code, which resulted inthe loss of over 100,000 ‘manufacturing jobs in Puerto Rico. Congress and federal Executive branch agencies have also decided to treat Puerto Rio In an unfair manner when it comes to the Medicare and Medicaid programs, which has also strained our budget. These, along with other unfair and unreasonable federal legsiative and regulatory decisions have no doubt contributed to our current delicate fiscal position.{wll not mince words with you. Puerto Rican government administrations were irresponsible in their borrowing and fiscal management, especially after Section 936 phased out in 2006. In order to compensate forthe lack of economic activity this caused, the Commonwealth spent more than itshould have and made unfortunate decisions that have helped lead to the criss we are facing today. However, there is no denying that unwise and often arbitrary Congressional decisions, such as removing Puerto Rico from Chapter 9 ofthe US Bankruptcy Code, in addition to others mentioned above, have let our island without the means to address this matter in an orderly fashion. Therefore, the federal government har ae much of 2 role te play In addressing this problem as the government ofthe Commonwealth, ur government has already taken the tough but necessary decisions to put our fiscal house in order, such as enacting painful pension reforms, cutting our budget by more than $2 billion, Increasing certain taxes and levies, suspending payments to suppliers, delaying tax refunds, and temporary stopping some debt payments of moral obligation bonds, among many other politically unpopular measures. tis abundantly clear that Puerto Rico cannot cut its way out of this problem without substantial debt restructuring, Thatis why the bil currently makingits way through the House Natural Resources Committe Isso crucial. et in order for itt truly tackle the problem head on, it must be done carefully and include certain key provisions for economic evelopment. Several wellintentioned federal officials, members of Congress, and Puerto Rican politicians have concluded that the only way to salve the situation isto Impose a federal financial control or ‘oversight board to “rein” the Commonwealth’s budget. The argument goes that thls boar, if coupled with debt restricting authority, isthe only way to ensure a long-lasting solution to our trisis. Though restructuring is definitely a crucial component, we do not believe that a federally imposed financial control or oversight board that overrides the decisions of our duly elected officials by having the last say over our budget process isthe right way to proceed. Puerto Rico does not need less democracy; it needs additional tools to solve its own problems. You should also be aware thatthe main intention of many of those pushing for such a federal financial control ‘or oversight board is to embarrass and deal a blow to Commonwealth status and thus advance, in their eves, a movement towards having Puerto Rico become the 51st State, by default. The people of Puerto Rico can ill afford such politcal motivations. We need to come together to address urgent solutions, now, and not capitalize on our current situation in order to pursue other agendas. Aside from the inevitable debt restructuring, an important tool Is providing additional economic incentives for US manufacturing companies in Puerto Rico. Over 50% of Puerto Rico's GDP depends on the economic activity and jobs created by Controlled Foreign Corporations (CFCs) on four bland, After the demise of Section 936, many US manufacturing companies that stayed incorporated as CFCs and they are responsible for close to 80,000 good paying jobs. Given that unlike CFCS in other jurisdictions these companies employ US citizens in Puerto Rico, these tax incentives must be maintained and enhanced in order to keep these jobs under the US flag, and bring additional investment to the Commonwealth. 2Bills that focus on debt restructuring, and economic development, such as the ones being Introduced by Senators Robert Menéndez and Kisten Gilibrand, are steps in the right direction. Sen, Menénder’s bill would aso provide oversight while ensuring thatthe duly elected leaders ‘of the Commonwealth have the lat say over our budget approval processes. This is exactly type ‘of approach that Congress needs to take In addition, another area that Congressional legislation should address is the inequitable ‘treatment our sland receives und federal health care programs, Federal health care funding cuts caused by this unjust treatment will soon provoke a “health care cliff" that will cost close to 53 billion over the next 2 years. There Is simply no justification for these severe disparities in federal health care policies towards Puerto ico, ‘Many of these proposals have been supported by our Resident Commissioner in Congress, Pedro Pierluisi and our Governor, Alejandro Garcia Padila, In this time of criss, it ls important for al Puerto Ricans to unite and work together on common sense measures to solve these vexing problems, and 1 will continue to support their efforts in promoting these policy recommendations. ‘There are of course other valid proposals that have been brought to the table. Some of the measures Puerto Rico needs and deserves can be taken by the federal Executive Branch, atleast ‘to address the Island's problems now, even if they may be short-term solutions. | am also calling, forthe Obama Administration to do more than ithas done for Puerto ico, \what is clear, is that this sa shared problem, which requires shared solutions by Congress, the federal Executive branch, and the Commonwealth government, The solutions need to include the essential elements of restructuring, economic grovth, and respect for Puerto Rico's constitutional and democratic order. Anything less, would not only exacerbate the humanitarian situation in ouristand, but would also impact taxpayers and bondholders that reside inthe states. ’s tens of thousands of our compatriots continue to leave the island and a large scale default by the Commonwealth looms, the lack of federal action to address Puerto Rico's fiscal crisis i as unacceptable as itis untenable. ‘Thankyou for your consideration ofthese proposals. | look forward to working with you and your staff on measures that can address the critical economic and financial crisis ofthe US ckizens of Pusrto Rico. sweet 19 wouter President Poplar Democratic Party