Tuesday, December 6, 2022

Supreme Court Decision Unmasks Stark Reality for Puerto Rico

By on June 5, 2020

(Photo by Sebastian Pichler on Unsplash)

Reaffirms OBoard Power Over Island’s Affairs 

SAN JUAN — When the Supreme Court of the United States (SCOTUS) delivered its decision this week that the members of the Financial Oversight & Management Board (FOMB) “were local officers with primarily local duties” and therefore not in violation of the Appointments Clause of the U.S. Constitution, hopes were dashed on many fronts.

Front and center, the respondents in Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment LLC, Et. Al., were hoping that the high court would uphold the claim by the First Circuit Court of Appeals in Boston that the selection of the members of la junta, as the board is referred to locally, violated the Appointments Clause because these were federal officers. 

The unanimous decision delivered by Justice Stephen Breyer explaining that the members of the board were not federal officials, but rather local officers, reaffirmed the status quo and threw in the trash bin of history any hopes of invalidating the territorial board’s actions to date. 

More than a bath of cold water on the respondents, the SCOTUS decision ran headlong against proposed changes to the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) contained in a bill, the “Amendments to Promesa Act,” filed by House Natural Resources Committee Chairman Raul Grijalva (D-Ariz.), and co-sponsored by Reps. Nydia M. Velázquez (D-N.Y.), Alexandria Ocasio-Cortez (D-N.Y.), José E. Serrano (D-N.Y.) and Darren Soto (D-Fla.).

U.S. House Natural Resources Committee Chairman Raúl Grijalva (Screen grab of https://naturalresources.house.gov)

“The decision allows the Oversight Board to continue overseeing the island’s debt restructuring, which needs to happen more quickly and aggressively to provide adequate public debt relief in a relevant time frame,” asserted Grijalva in part of a statement sent to Caribbean Business.  “It also reinforces the need to transfer Oversight Board funding responsibility to the federal government, as my recently introduced Amendments to PROMESA Act would do. The people of the island don’t have the billions of dollars the oversight project is expected to cost, and we should be realistic about that.” 

Among the amendments proposed are defining public healthcare, education, safety and pensions as essential public services; assigning federal funds for the operation of the board and the University of Puerto Rico; auditing the public debt; and giving the commonwealth the option to discharge certain unsecured debt.

Grijalva has publicly admitted that although the bill could pass in the House of Representatives it is likely to face opposition in the Republican-led Senate.

His sense of the Senate is correct. “It is irresponsible to continue to play with the people of Puerto Rico, offering false hopes and expectations just to put out a messaging bill,” a Washington source with insider access to discussions on Capitol Hill told Caribbean Business. “This is called a messaging bill. This is not really intended, nor expected to pass into law, but it is a way for the Democrats to say: ‘Here is our vision of what the Puerto Rico relationship ought to look like.’”

Supremely Insular

In his statement, Grijalva stressed the high court’s pass on redressing Puerto Rico’s relationship with the United States. “It’s unfortunate the Supreme Court passed over a clear opportunity in its ruling to reject the Insular Cases, which rely on racist and imperialist language when referring to people from the U.S. Territories,” the House committee chairman affirmed. “I and my colleagues will continue advocating with national organizations for the repeal of the Insular Cases and the legal doctrine emanating from these badly flawed decisions.”

The Arizona lawmaker was referring to the nearly century-old rulings starting with Downes v. Bidwell, which defined incorporated and unincorporated territories, followed by Balzac v. Porto Rico, the foundational jurisprudence holding that Puerto Rico is “a territory appurtenant to and belonging to the United States, but not a part of the United States within the revenue clauses of the Constitution.”

Plaintiffs who had hopes that the Supremes would revisit the validity of the Insular Cases were disappointed that the high court would not bite.

“Given the conclusion reached here, there is no need to consider whether to overrule the Insular Cases and their progeny…to consider the application of the de facto officer doctrine or to decide questions about the application of the Federal Relations Act and Public Law 600,” Justice Breyer wrote.

Article IV of the U.S. Constitution puts Puerto Rico under the plenary powers of Congress. Public Law 600 enabled a Constitutional Convention for Puerto Rico to draft its own magna carta, which was amended and ratified by U.S. Congress in attempts to achieve consent of the governed.

“The issue the Democrats are dealing with internally and as a matter of principle is the use of Article IV to prescribe action for Puerto Rico. So they don’t want to do that. They don’t want to do what was done in D.C.—to demand a law to transform the board from Oversight to Control,” the federal source added. 

Some people have mentioned that Puerto Rico could become the Singapore of the Caribbean but it seems unlikely that the island could achieve that lofty perch it once held because U.S. Congress seems disinclined to legislate in favor of changes to tax policy that would make it attractive for multinational manufacturing stalwarts to relocate to Puerto Rico.

Falcon Cyber Investments partner Javier Ortiz

“It is impossible for Congress to legislate economic development disconnected from federal tax policy,” said Falcon Cyber Investments Partner Javier Ortiz, who heads the Puerto Rico Economic Recovery Initiative. “We now know—post the 936 debacle—that as much as Congress would like to legislate from afar and not get into the details on Puerto Rico’s economic issues and how different they are from the rest of the nation, that it is easy to say that Puerto Rico should just be the Singapore of the Caribbean. This is something people have said before; it is just not possible to do in the framework where Puerto Rico is mostly, if not fully dependent on federal laws while nobody is really paying attention to how those laws either create jobs or eliminate jobs in this jurisdiction.” 

At this writing, there are politicians such as Puerto Rico Resident Commissioner Jenniffer González advocating for a return of pharmaceutical and medical device companies to the island, which was once a manufacturing powerhouse. That initiative will be difficult to achieve unless incentives are legislated that could make the island attractive to Big Pharma, to make it worthwhile to return to the one time “Shining Star of the Caribbean.” Instead, a territorial board with absolute control over Puerto Rico’s affairs—the right to subpoena, to overrule government budgets and restructure the island’s debt—has had its powers reaffirmed. Economic development measures for the island remain far afield.

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