PUERTO RICO

the chamber is waiting for the House to move first.

Puerto Rico, which has struggled to overcome a lengthy recession, has missed several payments to creditors and faces a $2 billion installment on July 1. Two government agencies have been under a state of emergency, and the economic crisis has forced businesses to close, driven up the employment rate and sparked an exodus of hundreds of thousands of people to the U.S. mainland. Schools lack electricity and some hospitals have said they can’t provide adequate drugs or care.

But like U.S. states, Puerto Rico cannot declare bankruptcy. The legislation would allow the control board to oversee negotiations with creditors and the courts over reducing some debt.

It would also require the territory to create a fiscal plan. Among other requirements, the plan would have to provide “adequate” funds for public pensions, which the government has underfunded by more than $40 billion.

During negotiations, the Obama administration pushed to ensure that pensions are protected in the bill, while creditors worried they would take a back seat to the pension obligations. Bishop says the control board is designed to ensure all are paid.

While some bondholders have backed the legislation, others have lobbied forcefully against it.

“If passed, this bill will serve as a landmark moment in American municipal finance — the moment when Congress made clear that it will not hesitate to rewrite rules and override contracts so that bondholders are forced to foot the bill for the pension systems that negligent governments have bled dry and refused outright to fund,” the Main Street Bondholders Coalition said in a statement released before the committee vote.

Republicans who voted against the bill echoed those concerns and said the legislation could set a precedent for financially ailing states. Rep. Tom McClintock of California, a Republican on the committee, offered an amendment that would have exempted some bonds from the bill.

“If Congress is willing to undermine a commonwealth’s constitutionally guaranteed bonds today, there is every reason to believe it would be willing to undermine state guarantees tomorrow,” McClintock said.

The amendment was rejected, 27-12.

The legislation survived several other attempts to try and derail it, including additional amendments by Republicans that would have explicitly protected certain bondholders and allowed bondholder lawsuits to continue.

Most Democrats on the committee supported the bill, though they tried to remove a provision that would allow the governor of Puerto Rico to cut the minimum wage temporarily for some younger workers. Unions have also lobbied against the legislation for that reason.