Puerto Rico will take another stab at statehood on Sunday, marking the second attempt in five years to become the U.S.’s 51st state.
If voters approve the statehood measure, it may only be symbolic. There is little support stateside for the territory to join the union. Furthermore, Puerto Rico is bankrupt, and the thought of being financially responsible for covering its debts is just about dead on arrival for many U.S. taxpayers.
What Puerto Rico wants
Puerto Rico’s governor Ricardo Rosselló has led the charge for the territory to become a state. His logic is threefold. It would bring Puerto Rico:
- Equal political power to other states, which Rosselló says is critical.
- Economic development projects because other markets that want to invest in Puerto Rico will see it as more stable. Rosselló says being a colonial territory shows instability.
- Fiscal resources that Puerto Ricans would be responsible for just as regular U.S. citizens in other states are.
Puerto Rico’s fiscal woes have pressured it being able to cover its Medicaid program.
Rosselló sent a letter to Florida Gov. Rick Scott in March explaining this situation. In his plea, Rosselló said projections on the Medicaid expenditures for Florida could top $6 billion.
No bailout wanted, but…
Rosselló blames the territory’s fiscal crisison it being a territory, not a state. He notes that Puerto Rico doesn’t print its own money, nor does it have access to the markets.
“I’m no fan of bailouts, but I want an equal playing field for U.S. citizens that reside on the island,” Rosselló told CNBC on Friday.
The concern is that Puerto Rico is seeking statehood for the sole purpose of receiving a U.S. government bailout. Rosselló has said he is no fan of a bailout, but the idea has been bandied about. Also, President Trump has said flat out that it is not going to happen.it has been flat out said as not going to happen by President Trump.
Even if Puerto Rico became a state, it wouldn’t help it relieve its $73 billion of defaulted debt. In the U.S., states can’t file for bankruptcy. In addition to the $73 billion of debt, Puerto Rico also has $50 million of unfunded pension obligation debt.
Much of this debt is held in U.S. municipal bond portfolios. Debt holders could receive only pennies on the dollar for their investments in the territory because of the bankruptcy filing. Observers say the island’s financial recovery plan the territory has come up with covers less than a quarter of the debt payments due over the next decade.
It’s bankruptcy proceedings began in May.
Puerto Rican lawmaker Jennifer Gonzalez-Colon also said she wasn’t in favor of a bailout.
“We wouldn’t want a bailout,” she said. “Keep the money, let us express ourselves and that’s what we are going to have on Sunday.”