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EXAMINING PROCEDURES REGARDING PUERTO RICO’S POLITICAL 

STATUS AND ECONOMIC OUTLOOK 

OVERSIGHT HEARING 

BEFORE THE

SUBCOMMITTEE ON INDIAN, INSULAR AND 

ALASKA NATIVE AFFAIRS 

OF THE

COMMITTEE ON NATURAL RESOURCES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

Wednesday, June 24, 2015 

Serial No. 114–13 

Printed for the use of the Committee on Natural Resources 

( 

Available via the World Wide Web: http://www.fdsys.gov 

or 

Committee address: http://naturalresources.house.gov 

(II) 

COMMITTEE ON NATURAL RESOURCES 

ROB BISHOP, UT, Chairman 

RAU ́ L M. GRIJALVA, AZ, Ranking Democratic Member 

Don Young, AK 

Louie Gohmert, TX 

Doug Lamborn, CO 

Robert J. Wittman, VA 

John Fleming, LA 

Tom McClintock, CA 

Glenn Thompson, PA 

Cynthia M. Lummis, WY 

Dan Benishek, MI 

Jeff Duncan, SC 

Paul A. Gosar, AZ 

Rau ́l R. Labrador, ID 

Doug LaMalfa, CA 

Jeff Denham, CA 

Paul Cook, CA 

Bruce Westerman, AR 

Garret Graves, LA 

Dan Newhouse, WA 

Ryan K. Zinke, MT 

Jody B. Hice, GA 

Aumua Amata Coleman Radewagen, AS 

Thomas MacArthur, NJ 

Alexander X. Mooney, WV 

Cresent Hardy, NV 

Vacancy 

Grace F. Napolitano, CA 

Madeleine Z. Bordallo, GU 

Jim Costa, CA 

Gregorio Kilili Camacho Sablan, CNMI 

Niki Tsongas, MA 

Pedro R. Pierluisi, PR 

Jared Huffman, CA 

Raul Ruiz, CA 

Alan S. Lowenthal, CA 

Matt Cartwright, PA 

Donald S. Beyer, Jr., VA 

Norma J. Torres, CA 

Debbie Dingell, MI 

Ruben Gallego, AZ 

Lois Capps, CA 

Jared Polis, CO 

Vacancy 

Jason Knox, Chief of Staff 

Lisa Pittman, Chief Counsel 

David Watkins, Democratic Staff Director 

Sarah Parker, Democratic Deputy Chief Counsel 

SUBCOMMITTEE ON INDIAN, INSULAR AND ALASKA NATIVE AFFAIRS 

DON YOUNG, AK, Chairman 

RAUL RUIZ, CA, Ranking Democratic Member 

Dan Benishek, MI 

Paul A. Gosar, AZ 

Doug LaMalfa, CA 

Jeff Denham, CA 

Paul Cook, CA 

Aumua Amata Coleman Radewagen, AS 

Rob Bishop, UT, ex officio 

Madeleine Z. Bordallo, GU 

Gregorio Kilili Camacho Sablan, CNMI 

Pedro R. Pierluisi, PR 

Norma J. Torres, CA 

Rau ́l M. Grijalva, AZ, ex officio 

(III) 

CONTENTS 

Page 

Hearing held on Wednesday, June 24, 2015 ......................................................... 1 

Statement of Members: 

Grijalva, Hon. Rau ́l M., a Representative in Congress from the State 

of Arizona, Prepared statement of ............................................................... 25 

Sablan, Hon. Gregorio, a Delegate in Congress from the Territory of 

the Northern Mariana Islands ..................................................................... 4 

Prepared statement of ............................................................................... 5 

Young, Hon. Don, a Representative in Congress from the State of Alaska . 1 

Prepared statement of ............................................................................... 3 

Statement of Witnesses: 

Barcelo ́, Carlos Romero, Former Governor of Puerto Rico 1977–1985 

(PNP), San Juan, Puerto Rico ...................................................................... 30 

Prepared statement of ............................................................................... 33 

Berrı ́os, Rube ́n, Former Senator in the Puerto Rican Senate, President 

of the Puerto Rico Independence Party (PIP), San Juan, Puerto Rico ..... 15 

Prepared statement of ............................................................................... 17 

Fortun ̃ o, Luis G., Former Governor of Puerto Rico, 2009–2011 (PNP), 

Washington, DC ............................................................................................ 35 

Prepared statement of ............................................................................... 37 

Pierluisi, Pedro R., Resident Commissioner of Puerto Rico, Presidente 

of New Progressive Part (PNP), Washington, DC ...................................... 6 

Prepared statement of ............................................................................... 8 

Ramirez, Miriam J., M.D., Former Puerto Rico State Senator, 2001– 

2004 (PNP), Founder, Puerto Ricans in Civic Action, Orlando, Florida .. 46 

Prepared statement of ............................................................................... 47 

Rodrı ́guez, Ce ́sar R. Miranda, Attorney General of Puerto Rico, Testifying 

on Behalf of Governor Alejandro Garcı ́a Padilla, San Juan, 

Puerto Rico ................................................................................................... 10 

Prepared statement of ............................................................................... 11 

Soto, Carmen Yulin Cruz, Mayor of San Juan, 2013–Present (PPD), 

San Juan, Puerto Rico ................................................................................. 44 

Prepared statement of ............................................................................... 45 

Vila ́, Anı ́bal Acevedo, Former Governor of Puerto Rico, 2005–2009 (PPD), 

San Juan, Puerto Rico .................................................................................. 40 

Prepared statement of ............................................................................... 41 

Additional Materials Submitted for the Record: 

List of documents submitted for the record retained in the Committee’s 

official files .................................................................................................... 72 

(1) 

OVERSIGHT HEARING ON EXAMINING PROCEDURES 

REGARDING PUERTO RICO’S POLITICAL STATUS 

AND ECONOMIC OUTLOOK 

Wednesday, June 24, 2015 

U.S. House of Representatives 

Subcommittee on Indian, Insular and Alaska Native Affairs 

Committee on Natural Resources 

Washington, DC 

The subcommittee met, pursuant to notice, at 2:24 p.m., in room 

1324, Longworth House Office Building, Hon. Don Young [Chairman of the Subcommittee] presiding. 

Present: Representatives Young, Benishek, LaMalfa, Radewagen; 

Ruiz, Bordallo, Sablan, Pierluisi, and Torres. 

Also present: Representatives Serrano and Grijalva. 

Mr. YOUNG. The committee will come to order. I do apologize for 

the delay. Strange as the Congress may be, we have burning questions and we had to talk about the baseball game. They already 

knew who won and who lost, but then it was beside the point. 

Anyway, the Subcommittee on Indian, Insular, and Alaska 

Native Affairs will come to order. The subcommittee is meeting 

today to hear testimony on the following oversight topic: ‘‘Examining Procedures Regarding Puerto Rico’s Political Status and 

Economic Outlook.’’ 

Under Rule 4(f), any oral statements on the hearing are limited 

to the Chairman and the Ranking Minority Member, and this allows us to hear from the witnesses. We do have two panels here 

today. Therefore, I ask unanimous consent that all Members’ opening statements be made part of the hearing record if they are submitted to the Subcommittee clerk by 5:00 p.m. today, or at the 

close of the hearing, whichever comes first. 

[No response.] 

Mr. YOUNG. Hearing no objections, so ordered. 

I also ask unanimous consent that the gentleman from 

New York, Mr. Serrano, be allowed to join us on the dais to be recognized and participate in today’s hearing. 

[No response.] 

Mr. YOUNG. Hearing no objection, so ordered. 

STATEMENT OF HON. DON YOUNG, A REPRESENTATIVE IN 

CONGRESS FROM THE STATE OF ALASKA 

Mr. YOUNG. Some time around the turn of this last century, over 

100 years ago, John Green Brady, the fifth territorial governor for 

the District of Alaska, before Alaska was even a territory, was reflecting upon the vain struggle of Alaskans to obtain more initial 

self-government. The struggle of those Alaskans had lasted for 

nearly 40 years up to that point, leaving Governor Brady to remark, ‘‘We are graduates of the school of patience.’’ 

2 

Even today the words of Governor Brady still ring true when 

referring to American citizens who call the island of Puerto Rico 

home. 

While the plight of Alaska being charted from its humble beginnings as a Department in 1867 to its progression as a District, then 

as a Territory, then ultimately its admission as the 49th state of 

the Union in 1959, the overall journey that citizens had to endure 

lasted for roughly 92 years. 

For the past 117 years, another clock has been keeping time on 

the relationship between the United States and an exotic land off 

its shores, that of the island of Puerto Rico. Since 1898, the United 

States of America has held in its possession the island of Puerto 

Rico. 

Since establishing self-governance with the passage of the 

Federal Relations Act of 1950 and the ratification of the Puerto 

Rican Constitution in 1952, the United States has allowed Puerto 

Ricans to govern themselves on internal matters. However, 

Congress has maintained plenary powers over the islands through 

the territorial clauses of the U.S. Constitution, Article IV, Section 

3, Clause 2. 

Today’s hearing will aim to continue the discussion on the issue 

of Puerto Rico’s political status, an important discussion given the 

current economic crisis the island faces today. 

For the last 8 years, the island’s economy has been mired by recession, a result of misguided management policies from within the 

public utilities and irresponsible debt trading practices. 

As Puerto Rico struggles to solve an economic and financial crisis 

that is causing a migration of residents off the island to the mainland, Congress must consider how the island’s unresolved political 

status is related to its economic and fiscal problems, and what legislative measures are necessary to restore Puerto Rico’s financial 

stability. 

The discussion of political status for the island always sparks 

lively debate from Puerto Rico and among my colleagues here in 

Congress and on this committee. I anticipate the same here today, 

and I welcome it; such spirited debate is healthy. 

Holding hearings such as this will further the discussion and 

drive the point home that Congress maintains its duty to serve the 

Americans of the island, just as we do to the Americans here on 

the mainland. We must show the 3.7 million Americans living in 

Puerto Rico that although they may not have voting representation 

in the House or the Senate, those of us tending this Nation will 

hear them when they speak. It is our duty and we honor that duty 

to listen today. 

On a personal level, I have been involved in this project since 

1994. I believe very strongly, right up front with you, in statehood. 

That is no hidden secret. But that is up to the decision of the 

Puerto Rican people. But the status quo cannot exist—the unfairness to Americans not being listened to by this Congress, and I 

think the responsibility to the people of Puerto Rico. 

A little history about this. Puerto Rico was supposed to become 

a state first, and Alaska slipped in. I apologize for that. We did a 

good job. 

[Laughter.] 

3 

Mr. YOUNG. Then the next was supposed to be Puerto Rico, and 

it became Hawaii. Puerto Rico is still waiting, 117 years later, to 

be recognized with full rights, as Americans—not being punished, 

not being set aside and have higher health rates and, really, frankly, putting a great group of Americans that fought in more wars 

per capita than any other group of people from any other state. 

It is my goal, and always has been, to make a decision. The status quo today will not work. Some will disagree with me, and I 

know that, and you have your right to that disagreement. But I 

know what is occurring does not work. The out-migration of what 

I call the more talented people in Puerto Rico into the mainland 

is devastating. So, we have to figure something out in this 

Congress, and my goal is—frankly, stir the pot up—to get things 

moving. 

I want to congratulate my Resident Commissioner, Mr. Pierluisi. 

He has done an outstanding job presenting his points of view. I admire his other piece of legislation, Chapter 9, that we have to look 

at. Every other state has that right, only Puerto Rico does not. And 

we will discuss that in this legislation. 

[The prepared statement of Mr. Young follows:] 

PREPARED STATEMENT OF THE HON. DON YOUNG, CHAIRMAN, SUBCOMMITTEE ON

INDIAN, INSULAR, AND ALASKA NATIVE AFFAIRS

Sometime around the turn of the last century, over 100 years ago, John Green 

Brady, the fifth territorial governor of the District of Alaska, before Alaska was even 

a territory, was reflecting upon the vain struggle of Alaskans to obtain more initial 

self-government. 

The struggle of those Alaskans had lasted for nearly 40 years up to that point, 

leaving Governor Brady to remark, ‘‘We are graduates of the school of patience.’’ 

Even today the words of Governor Brady still ring true when referring to the 

American citizens who call the island of Puerto Rico home. 

While the plight of Alaska can be charted from its humble beginnings as a 

Department in 1867 to its progression as a District, then to a Territory and then 

ultimately to its admission as the 49th state of the Union in 1959, the overall journey its citizens had to endure lasted for roughly 92 years. For the past 117 years, 

another clock has been keeping time on the relationship between the United States 

and an exotic land off its shores—that of the island of Puerto Rico. Since 1898, the 

United States of America has held in its possession the island of Puerto Rico. 

Since establishing self-governance through the passage of the Federal Relations 

Act of 1950 and the ratification of the Puerto Rican Constitution in 1952, the United 

States has allowed Puerto Ricans to govern themselves on internal matters; however, Congress has maintained plenary powers over the island through the 

Territorial Clause of the U.S. Constitution, Article IV, Section 3, Clause 2. 

Today’s hearing will aim to continue the discussion on the issue of Puerto Rico’s 

political status, an important discussion given the current economic crisis the island 

finds itself in. 

For the last 8 years, the island and its economy have been mired by recession, 

a result of misguided management policies from within the public utilities and 

irresponsible debt trading practices. 

As Puerto Rico struggles to solve an economic and fiscal crisis that is causing a 

migration of residents to the mainland, Congress must consider how the island’s 

unresolved political status is related to its economic and fiscal troubles, and what 

legislative measures are necessary to restore Puerto Rico’s financial stability. 

A discussion of political status for the island always sparks lively debate from 

within Puerto Rico and among my colleagues here in Congress and on the committee. I anticipate the same here today, and I welcome it—such spirited debate is 

healthy. 

Holding hearings such as this will further the discussion and drive the point home 

that Congress maintains its duty to serve the Americans of the island just as we 

do the Americans here on the mainland. 

4 

We must show the 3.7 million Americans living in Puerto Rico, from San Juan 

to Guayama, that although they may not have voting representation in the House 

or in the Senate, those of us attending today’s hearing still hear them when they 

speak. It is our duty and we honor that duty here today. 

Mr. YOUNG. With that, I will recognize the Minority Member. 

STATEMENT OF THE HON. GREGORIO SABLAN, A DELEGATE 

IN CONGRESS FROM THE TERRITORY OF THE NORTHERN 

MARIANA ISLANDS 

Mr. SABLAN. Thank you very much, Mr. Chairman. And buenos 

tardes, everyone. I apologize that it took me, from the Northern 

Marianas, a little over 500 years before we—I got to see my fellow 

people from Puerto Rico. At one time we all owed allegiance to a 

queen. It has been a long time after that allegiance to the queen 

that you became a part of the United States. 

I want to begin by welcoming the witnesses to the hearing, particularly those who traveled from the Island of Puerto Rico to be 

with us today. I also want to recognize my good friend and colleague, Ms. Gutierrez from Illinois. And I think I saw Ms. Nydia 

Velazquez here earlier. 

I want to especially welcome the leaders of Puerto Rico’s three 

major political parties, as well as our former Natural Resources 

Committee colleagues, Congressmen and former governors, Luis 

Fortun ̃ o, Anı ́bal Acevedo Vila ́, and Carlos Romero Barcelo ́. Today’s hearing will examine the link between the current economic conditions on Puerto Rico and the unresolved issue of the island’s political status. I believe such an examination is fitting, 

given the severe fiscal difficulties the island is facing. Currently, the government of Puerto Rico is $73 billion in debt, 

and there are real concerns that the central government, or one of 

its instrumentalities, may soon default on its bond payment. 

I am from the Northern Mariana Islands, which is a commonwealth that has a permanent relationship with the United States. 

When Puerto Rico becomes a state, we are next in line, because we 

start first with the commonwealths, and then we do the others. 

That is a joke, OK? It is a joke. We have to lighten up the room. 

[Laughter.] 

Mr. SABLAN. But that makes sense. The commonwealth status in 

the Marianas was derived from looking at the Puerto Rico status 

model. Puerto Rico and the Northern Marianas have a long history, 

like I have alluded earlier. We were a part of Spain, just prior to 

the Spanish-American War. 

But prior to the covenant approval between the United States 

and the Northern Mariana Islands, the political status commission 

had to decide the future political status for all the people of the 

Northern Mariana Islands. And this was no easy feat for a group 

of Pacific Islanders who had been colonies for hundreds of years, 

and by an act of political self-determination, we chose a permanent 

relationship with the United States. 

We also had a plebiscite to decide whether we wanted to vote for 

commonwealth status or reject it with the caveat to participate in 

the determination of an alternative future political status. We had 

one. Puerto Rico will have five or six to reach that decision. 

5 

I strongly believe that the people of Puerto Rico should similarly 

be given the opportunity to exercise their right to establish a permanent, unalterable relationship with the United States, or to become an independent country, controlling their own political and 

economic affairs. 

Puerto Ricans have voted in at least five plebiscites since they 

ratified their local constitution in 1952. The most recent in 2012 

saw statehood winning a majority for the first time. In view of this 

result, which saw statehood receiving 62 percent of the vote and 

the current status being rejected by 54 percent of voters, my colleague, Congressman Pierluisi, introduced H.R. 727, the Puerto 

Rico Statehood Admission Process Act. 

H.R. 727 would authorize a federally-sponsored vote to be held 

in Puerto Rico by the end of 2017, with a ballot containing a single 

question: ‘‘Shall Puerto Rico be admitted as a state of the United 

States’’ ? As a co-sponsor of the Puerto Rico Statehood Admission 

Act, I am persuaded that the island’s territorial status is a cause 

of its economic conditions. 

The unequal treatment in Federal funding currently experienced 

by Puerto Rico would be transformed into billions of dollars every 

year under statehood, which would be used to bolster and transform the Puerto Rican local economy for the people of Puerto Rico. 

Puerto Rico’s status is also the reason its municipalities, such as 

the Puerto Rico Electric Power Authority, cannot adjust their debts 

under Chapter 9 of the Federal Bankruptcy Code if they become insolvent. States can choose to allow the municipalities to file for protection under Chapter 9; however, Puerto Rico’s government was 

not authorized to permit its municipalities to seek Chapter 9 

bankruptcy relief when Chapter 9 was established by Congress in 

1982. 

Mr. Chairman, I look forward to working with you to pursue a 

solution to the unfair and unequal situation that our fellow 

Americans in Puerto Rico face. It is high time we reached a consensus on a path forward for Puerto Rico to permanently resolve 

their political status. I thank you, Mr. Chairman. 

[The prepared statement of Mr. Sablan follows:] 

PREPARED STATEMENT OF THE HON. GREGORIO KILILI CAMACHO SABLAN, A

DELEGATE IN CONGRESS FROM THE TERRITORY OF THE NORTHERN MARIANA ISLANDS

Thank you Mr. Chairman. I want to begin by welcoming the witnesses to the 

hearing, particularly those who traveled from the island of Puerto Rico to be with 

us today. I want to especially welcome the leaders of Puerto Rico’s three major political parties as well as our former Natural Resources Committee colleagues, 

Congressmen and former governors, Luis Fortun ̃ o, Anı ́bal Acevedo Vila ́ and Carlos 

Romero Barcelo ́. 

Today’s hearing will examine the link between the current economic conditions on 

Puerto Rico and the unresolved issue of the island’s political status. I believe such 

an examination is fitting given the severe fiscal difficulties the island is facing. 

Currently the government of Puerto Rico is $73 billion in debt and there are real 

concerns that the central government or one of its instrumentalities may soon default on its bond payments. 

I am from the Northern Mariana Islands, which is a Commonwealth that has a 

permanent relationship with the United States. The commonwealth status in the 

Marianas was derived from looking at Puerto Rico’s status. Puerto Rico and the 

Northern Mariana Islands have a long history. We were a part of Spain just prior 

to the Spanish-American War, but prior to the covenant approval between the 

United States and the CNMI, the Political Status Commission had to decide the future political status for all the people of the Northern Mariana Islands. This was 

6 

no easy feat for a group of Pacific Islanders who had been colonies for hundreds of 

years, and by an act of political self-determination, we chose a permanent relationship with the United States. We also had a plebiscite to decide whether we wanted 

to vote for commonwealth status or reject it with the caveat to participate in the 

determination of an alternative future political status. 

I strongly believe that the people of Puerto Rico should similarly be given the opportunity to exercise their right to establish a permanent unalterable relationship 

with the United States or to become an independent country controlling their own 

political and economic affairs. 

Puerto Ricans have voted in at least five plebiscites since they ratified their local 

constitution in 1952. The most recent in 2012, saw statehood winning a majority 

for the first time. In view of this result—which saw statehood receiving 62 percent 

of the vote and the current status being rejected by 54 percent of voters—my 

colleague, Congressman Pierluisi introduced H.R. 727, the Puerto Rico Statehood 

Admission Process Act. H.R. 727 would authorize a federally-sponsored vote to be 

held in Puerto Rico by the end of 2017, with the ballot containing a single question: 

‘‘Shall Puerto Rico be admitted as a state of the United States? ’’ As a co-sponsor 

of the Puerto Rico Statehood Admission Act, I am persuaded that the island’s territorial status is a cause of its economic conditions. 

The unequal treatment in Federal funding currently experienced by Puerto Rico 

would be transformed into billions of dollars every year under statehood which 

would be used to bolster and transform the Puerto Rican local economy. 

Puerto Rico’s status is also the reason its ‘‘municipalities’’—such as the Puerto 

Rico Electric Power Authority, (PREPA)—cannot adjust their debts under Chapter 

9 of the Federal Bankruptcy Code if they become insolvent. States can choose to 

allow its municipalities to file for protection under Chapter 9, however Puerto Rico’s 

government was not authorized to permit its municipalities to seek Chapter 9 bankruptcy relief when Chapter 9 was established by Congress in 1982. 

Mr. Chairman, I look forward to working with you to pursue a solution to the unfair and equal situation that our fellow Americans in Puerto Rico face. It is high 

time that we reach a consensus on a path forward for Puerto Rico to permanently 

resolve their political status. 

Thank you. 

Mr. YOUNG. I thank the gentleman. And now, I believe our first 

panel has been seated. 

We have the Honorable Pedro Pierluisi, Resident Commissioner; 

Ce ́sar Miranda, Attorney General for Puerto Rico; and the Honorable Rube ́n Berrı ́os, President of the Puerto Rican Independence 

Party. 

Honorable Commissioner, you are up. 

STATEMENT OF PEDRO R. PIERLUISI, RESIDENT COMMISSIONER OF PUERTO RICO, PRESIDENTE OF NEW PROGRESSIVE PART (PNP), WASHINGTON, DC 

Mr. PIERLUISI. Thank you, Chairman Young, Mr. Ranking 

Member, and members of the subcommittee. The facts are as 

follows. 

Puerto Rico is a territory. If it does not wish to remain a territory, it can become a state or a sovereign nation, either fully independent or with the compact of free association with the United 

States. However, if Puerto Rico becomes a sovereign nation, future 

generations of island residents would not be American citizens. 

My constituents have made countless contributions to this 

Nation in times of peace and war, serving in every military conflict 

since World War I. Many have made the ultimate sacrifice. When 

they do, their casket is flown back to this country, draped in the 

American flag. It takes real patriotism to fight for a nation you 

love, but one that does not treat you equally. 

7 

Puerto Rico has more U.S. citizens than 21 states, but my constituents cannot vote for President, have no Senators, and have a 

non-voting delegate in the House. Moreover, the Constitution gives 

Congress license to treat territories worse than states, and 

Congress often uses that license. 

Territory status is the root cause of the crisis in Puerto Rico, because Puerto Rico is treated unequally under Federal programs. It 

is deprived of critical economic support. To compensate, the Puerto 

Rico government has borrowed heavily, which helps explain why 

the government and its instrumentalities have $72 billion in debt. 

In recent years, 250,000 island residents have relocated to the 

states, and these numbers are only growing. Once in the states 

they are entitled to full voting rights, and equal treatment under 

the law, rights they lack in Puerto Rico. 

Let me mention two of the many ways that Puerto Rico’s status 

hurts the quality of life of my constituents. First, Puerto Rico is 

treated unequally under Medicaid and Medicare. The impact on our 

healthcare system and on our fiscal health has been severe. Second, Congress has authorized each state government to permit its 

insolvent municipalities to adjust their debts under Chapter 9 of 

the Bankruptcy Code, but has not authorized Puerto Rico to do so. 

Thus, territory status is a significant reason why Puerto Rico has 

excessive debt, and the sole reason why it lacks a critical tool to 

manage that debt. 

I have introduced bills to give Puerto Rico equal treatment under 

Federal health programs and Chapter 9. While I appreciate that 

the governor of Puerto Rico has endorsed these efforts, it is ironic 

that an anti-statehood administration is seeking state-like 

treatment for the territory in key policy areas. I seek equal treatment for Puerto Rico in all respects. 

If you give us the same rights and responsibilities as our fellow 

American citizens, and let us rise or fall on our merits, we will rise. 

But if you continue to treat us like second-class citizens, don’t profess to be surprised when we fall. 

This is now the predominant view in Puerto Rico. In a 2012 referendum, a majority of voters rejected territory status, and more 

voters expressed a desire for statehood than any other option. At 

my initiative, Congress approved funding for a federally-sponsored 

referendum. Once I have the opportunity, I will use this funding 

to hold a vote on whether Puerto Rico should be admitted as a 

state, just like Alaska and Hawaii did. This is logical. Statehood 

won the 2012 referendum. So we should now vote on statehood, 

itself. 

This is also fair. Those who support statehood can vote yes, and 

those who oppose it can vote no. This approach has brought support in Congress. I have introduced a bill to authorize a vote in 

Puerto Rico on whether the territory should be admitted to the 

Union. If a majority of voters say yes, Puerto Rico would become 

a state within 5 years. The bill has 109 co-sponsors from 39 states 

and territories, and more bipartisan backing than 99 percent of 

bills filed this year. Each co-sponsor refutes the single argument 

that the United States would not accept Puerto Rico as a state. 

8 

Puerto Rico’s status is intolerable, and my constituents will no 

longer tolerate it. We want equality under the American flag, and 

we will settle for nothing less. Thank you. 

[The prepared statement of Mr. Pierluisi follows:] 

PREPARED STATEMENT OF THE HON. PEDRO R. PIERLUISI, RESIDENT COMMISSIONER

OF PUERTO RICO

Chairman Young, Mr. Ranking Member, and members of the subcommittee: 

Puerto Rico has been a territory of the United States since 1898. As this committee 

has made clear many times, if Puerto Rico does not want to remain a territory, it 

can follow one of two paths. The territory can become a state or it can become a 

sovereign nation, either fully independent from the United States or with a compact 

of free association with the United States that either nation can terminate. If Puerto 

Rico becomes a sovereign nation, future generations of island residents would not 

be American citizens. 

Those are the options: remain a territory, become a state, or become a sovereign 

nation. 

As the members of this committee are aware, residents of Puerto Rico have made 

countless contributions to this Nation in times of peace and war, serving in every 

military conflict since World War I. They fight today in Afghanistan and other dangerous locations, side-by-side with young men and women from the states. Many of 

them have made the ultimate sacrifice in battle. And when they do, their casket is 

flown back to this country, draped in the American flag. 

It takes a special kind of patriotism to fight for a nation that you love, but one 

that does not treat you equally. Although Puerto Rico is home to more American 

citizens than 21 states, my constituents cannot vote for president, are not represented in the Senate, and have one non-voting delegate in the House—a position 

I have held since 2009. Moreover, the Constitution gives Congress a license to treat 

Puerto Rico worse than the states under Federal law, and Congress often uses that 

license. 

Every informed observer understands that territory status is the root cause of the 

economic, social and demographic crisis in Puerto Rico that you have been reading 

about in the newspapers. As the GAO noted in a recent report requested by the 

former chairman of the full Natural Resources Committee, Puerto Rico is treated 

unequally under Federal spending and tax credit programs and is therefore deprived of billions of dollars every year that would otherwise flow to our local economy, which—not surprisingly—has been mired in a deep recession. To compensate 

for the shortfall in Federal funding, the Puerto Rico government has borrowed heavily in the bond market, which is the main reason why the territory government and 

its instrumentalities have $72 billion in outstanding debt. In the last 4 years alone, 

upwards of 250,000 island residents have relocated to the states in search of better 

economic opportunities for themselves and their families, and these staggering 

numbers are only getting worse. When my constituents arrive in the states, they 

are entitled to vote for their national leaders and to equal treatment under Federal 

law—the same rights they were denied while living in Puerto Rico. How any 

American with a conscience could support this shameful situation is, I confess, beyond my comprehension. 

There are many concrete examples of how Puerto Rico’s territory status harms the 

quality of life in Puerto Rico, but allow me to mention just two. 

Puerto Rico has always been treated in discriminatory fashion under Federal 

health programs. This is the result of action or inaction by presidents and Members 

of Congress, both Democrat and Republican, over many decades. The adverse impact 

on doctors, hospitals, insurance providers and—most importantly—patients in the 

territory has been as severe as it was predictable. This disparate treatment has also 

decimated Puerto Rico’s fiscal health, since the territory government must cover the 

costs of services the Federal Government should be covering—and that it would be 

covering if Puerto Rico were a state. Thus, I have introduced a comprehensive bill 

to essentially provide Puerto Rico with state-like treatment under Medicaid and 

Medicare. 

Another example—Congress has empowered each state government to authorize 

its ‘‘municipalities’’ to adjust their debts under Chapter 9 of the Federal Bankruptcy 

Code if they become insolvent. A state government may choose to allow its municipalities to file for protection under Chapter 9, or it may decline to do so. The power 

to decide rests with the state government. However, for reasons that are clear to 

nobody, Congress in 1984 chose not to permit the government of Puerto Rico to authorize its municipalities to seek relief under Chapter 9. In other words, Puerto 

9 

Rico’s territory status is the primary reason why Puerto Rico has so much debt and 

is the sole reason why Puerto Rico does not possess a critical tool that could help 

the island manage this debt. I have introduced a bill in Congress to give Puerto Rico 

state-like treatment under Chapter 9. It is opposed by a handful of investment firms 

for specious and self-interested reasons, but otherwise has remarkably broad 

support. 

Now I appreciate that the governor of Puerto Rico has endorsed my legislative initiatives with respect to both Federal health programs and Chapter 9. I will continue 

to fight alongside him in pursuit of these goals. We both want to help Puerto Rico 

because we both love Puerto Rico. However, I don’t know whether to laugh or cry 

at the irony of the Governor’s anti-statehood administration seeking state-like treatment for Puerto Rico in these and other critical policy areas. The fact is that politicians in Puerto Rico who defend or rationalize our territory status are complicit in 

the terrible treatment this status brings. That may be a tough statement, but it is 

a true statement. 

What I desire for Puerto Rico is simple. I don’t need to resort to tortured legal 

or policy arguments to explain it. I don’t seek special, different or unique treatment. 

I don’t ask to be treated any better than the states, but I won’t accept being treated 

any worse either. I want only for Puerto Rico to be treated equally. Give us the 

same rights and opportunities as our fellow American citizens, and let us rise or 

fall based on our own merits. Because I know that we will rise. 

To be clear, this is not only my personal view. To the contrary, this is now the 

predominant view among the Puerto Rico public. In 2012, the government of Puerto 

Rico sponsored a referendum in which a majority of voters rejected Puerto Rico’s 

current territory status and more voters expressed a desire for statehood than for 

any other status option, including the current territory status. In the wake of that 

historic vote, I conveyed the results to you—my colleagues in Congress—and to the 

Obama administration. I did this because, for a territory to become a state, 

Congress must approve legislation known as ‘‘an admission act’’ and the President 

must sign that legislation into law, just like any other bill. 

At my initiative, the Obama administration in April 2013 requested—and 

Congress in January 2014 approved with bipartisan support—an appropriation of 

$2.5 million to fund the first federally-sponsored status referendum in Puerto Rico’s 

history. We wrote the provision, which is contained in Public Law 113–76, so that 

this funding will remain available until it is used. While the law does not prescribe 

the exact format of the ballot, leaving those details to the Puerto Rico government, 

it does require the U.S. Department of Justice to certify that the ballot and voter 

education materials are consistent with U.S. law and policy. This will ensure that 

the ballot contains only real status options, as opposed to fanciful proposals. 

It is now clear that the governor of Puerto Rico will not use this funding before 

his term in office ends next year—and I hope the members of this subcommittee will 

ask the Governor’s representative at this hearing why not. When I am in a position 

to utilize this funding, I will do so without hesitation. My proposal is to use the 

funding to hold a simple yes-or-no vote on whether Puerto Rico should be admitted 

as a state. This approach is logical and fair. First, it is deeply rooted in precedent. 

Alaska and Hawaii each conducted federally-sponsored yes-or-no votes prior to 

statehood. Second, because statehood obtained the most votes in the 2012 referendum, it makes sense to now hold a vote on statehood itself. Third, the format 

is inclusive. Those who support statehood can vote ‘‘yes’’ and those who oppose it 

for any reason can vote ‘‘no.’’ Fourth, the vote would yield a definitive result that 

nobody could reasonably question. Politicians in Puerto Rico who favor the status 

quo have perfected the dark art of seeking to undermine the legitimacy of any vote 

they lose; the process I have proposed will make it impossible for them to do so 

again. 

This approach has broad support in Congress. In February, I introduced 

H.R. 727, the Puerto Rico Statehood Admission Process Act. Consistent with my 

philosophy, the bill would authorize a federally-sponsored vote to be held in Puerto 

Rico by the end of 2017, with the ballot containing a single question: ‘‘Shall Puerto 

Rico be admitted as a state of the United States? ’’ To conduct this vote, the Puerto 

Rico government could use the $2.5 million that Congress already approved in 

Public Law 113–76. If a majority of voters affirm their desire for admission, the bill 

provides for an automatic series of steps to occur that would culminate in Puerto 

Rico’s admission as a state in the year 2021. 

H.R. 727 is forceful and ambitious, because the days of half-steps and halfmeasures on this issue are over. Yet the bill already has 109 co-sponsors from 39 

states and territories, and more bipartisan support than 99 percent of the nearly 

3,000 bills that have been introduced in Congress this year. Co-sponsors include the 

Chairman and Ranking Member of this subcommittee; 7 of the 12 members of this 

10 

subcommittee; the Ranking Member of the full committee; all 10 Democrats and 4 

Republicans from the critical state of Florida; and a majority of the members of the 

Congressional Hispanic Caucus. Each co-sponsor helps refute the false and cynical 

argument that the United States would not accept Puerto Rico as an equal member 

of the American family. Each co-sponsor endorses the proposition that, if a majority 

of my constituents confirm in a federally-sanctioned vote that they want Puerto Rico 

be admitted as a state, then Congress should act to implement that democratically 

expressed desire on a reasonable but rapid timetable. In my view, this is the only 

morally acceptable position, and I thank those Members who have taken it. You are 

on the right side of history. 

Chairman Young, thank you for scheduling this hearing and for everything you 

have done over the years to support Puerto Rico’s quest for equality through statehood. I know that one day, not too far off, Puerto Rico will follow in Alaska’s 

footsteps. 

Mr. YOUNG. Well done. Ce ́sar Miranda, Attorney General of 

Puerto Rico, you are up. 

STATEMENT OF CE ́ SAR R. MIRANDA RODRI ́GUEZ, ATTORNEY 

GENERAL OF PUERTO RICO, TESTIFYING ON BEHALF OF 

GOVERNOR ALEJANDRO GARCI ́A PADILLA, SAN JUAN, 

PUERTO RICO 

Mr. RODRI ́GUEZ. Thank you, Chairman Young. 

Mr. YOUNG. Turn that microphone on. 

Mr. RODRI ́GUEZ. Thank you, Chairman Young, members of the 

subcommittee. My name is Ce ́sar Miranda, I am the Secretary of 

Justice of Puerto Rico. I am appearing today representing the 

Governor of Puerto Rico. I am not representing the Popular 

Democratic Party, but the Governor in his executive capacity. 

We have been invited to discuss an issue over which there is no 

consensus in Puerto Rico. Puerto Rico’s political status is a divisive 

matter, both in Puerto Rico and in this Congress. I recognize the 

importance of this historical debate. However, given today’s fiscal 

and economic crisis in Puerto Rico, I prefer to direct my testimony 

to address other matters of urgent importance to our island. 

The fiscal and economic situation in Puerto Rico has reached a 

tipping point. We are in a state of fiscal emergency, as we have no 

access to the capital markets, and our public institutions face a liquidity crisis. The situation is truly dire. Puerto Rico has been experiencing an unemployment crisis. Unemployment remains twice 

that of the mainland, and the loss of employment opportunity has 

cost an increasing number of residents to move to the mainland. 

Nearly half of all residents in Puerto Rico qualify for low-income 

health insurance subsidies, and the average personal income per 

capita was only $17,000 in Fiscal Year 2013. 

Puerto Rico’s unprecedented economic difficulties have contributed to rising budget deficits that have turned into large debts. 

Puerto Rico owes approximately $73 million in debt, and it has no 

ability to refinance it. 

I believe that there are certain issues that this Congress can explore to address Puerto Rico’s fiscal crisis and put Puerto Rico on 

a path of long-term fiscal sustainability. 

First, the Congress can approve H.R. 870, which was introduced 

by Resident Commissioner Pierluisi earlier this year. H.R. 870 

would amend the U.S. Bankruptcy Code and extend Chapter 9 to 

Puerto Rico. Extending Chapter 9 would provide significant 

11 

benefits to all involved. Chapter 9 would provide a process that is 

understood by creditors, prospective lenders, and suppliers. It 

would facilitate market access by offering debtor-in-possession financing. There is no good reason to deny Puerto Rico Chapter 9, 

in what has been proven time and again to be a vital tool for recovering from dire economic consequences. Detroit is the last of those 

examples. 

Second, Congress can provide Puerto Rico with relief from the 

Jones Act, which drives up the cost of all goods in Puerto Rico and 

depresses the Puerto Rican economy. Congress could even grant 

Puerto Rico a temporary extension of the Jones Act, in order to 

evaluate its impact on the economy before granting a permanent 

extension. 

Third, Congress needs to fix future reductions in Federal health 

care funding that will harm Puerto Rico residents. These reductions are not in line with the funding treatment received by the 50 

states, and they threaten the health and welfare of Puerto Ricans. 

It also threatens economic stability. Specifically, I understand that 

a further reduction will occur when the 2016 Center for Medicaid 

and Medicare Services rate structure becomes effective. This would 

cut Medicare funding by 11 percent in Puerto Rico, while increasing by 3 percent in the states on the mainland. This cut will compound the financial difficulty for Puerto Ricans who pay the same 

Social Security and Medicare taxes as residents. 

There are some other examples in which Puerto Rico can be assisted by Congress. There is widespread consensus in Puerto Rico 

on the approval of H.R. 870 to amend the U.S. Bankruptcy Code. 

In addition, there is consensus in crafting an extension from the 

Jones Act, and amending the sunset provisions of certain health 

care funding. 

This basically summarizes my positions regarding my 

appearance today. 

[The prepared statement of Mr. Rodrı ́guez follows:] 

PREPARED STATEMENT OF CE ́SAR R. MIRANDA RODRI ́GUEZ, TESTIFYING ON BEHALF OF

GOVERNOR ALEJANDRO GARCI ́A PADILLA OF PUERTO RICO

Chairman Young, Ranking Member Ruiz, and members of the subcommittee: My 

name is Ce ́sar R. Miranda Rodrı ́guez, and I am the Secretary of Justice of Puerto 

Rico. I am the chief legal officer of Puerto Rico and the chief executive of the 

Department of Justice (the ‘‘DOJ’’). Prior to my appointment as Secretary of Justice 

in January 2014, I served as Chief of Staff under former Governor Sila M. Calderon 

and in many other posts as a public servant. I am appearing today before this subcommittee representing the Governor of Puerto Rico. 

We have been invited today to discuss an issue over which there is no consensus, 

but quite the opposite either in Puerto Rico or in Congress. The status of Puerto 

Rico is a debate in which we have been perpetually immersed for well over a century. It has always been a divisive matter in Puerto Rico as in Congress. Recognizing the importance of such a historical debate but taking into consideration the 

extreme fiscal and economic crisis that we are facing in Puerto Rico, I honestly prefer to direct my participation to address other matters of the utmost importance for 

our Island, in which there is a common understanding and consensus. 

The first of these issues is the approval of H.R. 870, which was introduced by our 

Resident Commissioner. H.R. 870 would amend the U.S. Bankruptcy Code to treat 

Puerto Rico like a ‘‘state’’ for purposes of Chapter 9. Its approval is supported 

among all political parties in Puerto Rico and among informed experts and intellectuals in the United States. In addition to passing H.R. 870, and as I discuss below, 

there are other uncontroversial measures Congress can take to assist Puerto Rico, 

including crafting a limited exemption for Puerto Rico from the Jones Act, fixing the 

automatic sunset provisions of health care funding, and providing much-needed 

12 

certainty on creditability of certain taxes paid in Puerto Rico. These are just a few 

of the ways in which Congress can assist Puerto Rico. 

ECONOMIC CRISIS IN PUERTO RICO

I would like to begin by emphasizing that the fiscal and economic situation in 

Puerto Rico has reached a tipping point. The Legislative Assembly has declared a 

fiscal emergency, the credit markets have closed their doors, and many of Puerto 

Rico’s public institutions face liquidity crises. The situation is truly dire, and it is 

important to tell why it is so. 

Puerto Rico’s economy is closely tied to that of the United States but was disproportionately and adversely impacted by the U.S. financial crisis and the ‘‘Great 

Recession.’’ The Commonwealth has experienced high unemployment rates, steady 

population decline, loss of industry, consecutive budget deficits, and truly unprecedented levels of debt and unfunded pension obligations. A number of significant economic and legal factors have contributed to this fiscal crisis. An example of this is 

the repeal and phase-out by Congress of Section 936 of the Internal Revenue Code, 

which, until its phase-out in 2005, provided tax benefits for certain businesses (including large pharmaceutical companies) operating in Puerto Rico. The elimination 

of these tax benefits led to a significant loss of employment in Puerto Rico’s manufacturing sector, and generated strong headwinds for economic growth. Other factors 

include the decline in the local housing sector, the failure of a number of local banking entities, and the doubling in oil prices between 2005 and 2012 (this posed a 

major problem for the Commonwealth given its dependence on oil for virtually all 

of its power generation). 

The Commonwealth has also been experiencing an unemployment crisis. In fact, 

unemployment remained above 15 percent for many years following the financial 

crisis, suggesting continued weakness in Puerto Rico’s economy. Unemployment 

dropped to a still-elevated rate of 12.1 percent at the end of 2014 while unemployment in the rest of the United States dropped to 5.6 percent. The loss of employment opportunities in the Commonwealth has caused an increasing number of 

residents to seek opportunities in the mainland. Many residents that are leaving are 

those with the greatest earnings potential, while many who remain strain existing 

resources at a time when the Commonwealth is least able to meet such demands. 

In fact, nearly half of all residents in Puerto Rico qualify for low-income health insurance subsidies, and the average personal income per capita, including transfer 

payments, was approximately $17,000 in Fiscal Year 2013. 

Puerto Rico’s unprecedented economic difficulties have contributed to rising budget deficits at all levels of government, including at Puerto Rico’s public corporations. 

Historically, these entities have relied on access to the credit markets, interim financing from the Government Development Bank for Puerto Rico (the ‘‘GDB’’), and 

private-sector banks to cover budget shortfalls and provide essential services. Today, 

these entities have been closed out of the credit markets and are unable to refinance 

any portion of their nearly $73 billion in outstanding public debt. In addition, 

Puerto Rico’s public pension funds, though subject to a major overhaul during Fiscal 

Year 2014 that reduced future annual cash-flow needs, still face significant unfunded liabilities, which will require increased governmental contributions in the 

coming years. 

Governor Alejandro Garcı ́a Padilla has taken unprecedented fiscal measures in an 

effort to achieve long-term fiscal sustainability in Puerto Rico. Within 2 years of taking office, for example, the Padilla administration reduced budget deficits, imposed 

unprecedented cost-control measures at the central government and public corporation levels, established limits on government payroll (as of November 2014, there 

were 92,842 government employees, compared to 139,640 in 2008), implemented 

comprehensive pension reform, imposed loan origination discipline at the GDB, reformed rates at certain public corporations, and completed and is actively exploring 

public-private partnerships. 

One critical component of achieving fiscal sustainability is ensuring that Puerto 

Rico’s governmental instrumentalities are self-sufficient. In Puerto Rico, public services, including water and wastewater services, electric power, and transportation are 

performed by state-owned public corporations. The most critical public corporations 

in Puerto Rico are: (1) the Puerto Rico Electric Power Authority (often referred to 

as ‘‘PREPA’’), which provides substantially all of the electricity to residents, businesses and governmental units in Puerto Rico; (2) the Puerto Rico Aqueduct and 

Sewer Authority (often referred to as ‘‘PRASA’’), which provides 97 percent of the 

water and 59 percent of the wastewater services to residents in Puerto Rico; and 

(3) the Puerto Rico Highways and Transportation Authority (often referred to as 

13 

‘‘PRHTA’’), which is responsible for highway construction and maintenance on the 

island. 

The fact that Puerto Rico is an island exacerbates its already high cost of providing these services. In November 2014, for example, utility customers in Puerto 

Rico paid more than twice the national average per kilowatt hour for electricity. 

Nonetheless, these public corporations have had chronic budget deficits in recent 

years resulting, in part, from population and economic decline. In 2012–2013 alone, 

the combined deficit of PREPA, PRASA, and PRHTA was over $800 million. Public 

corporations have historically financed their deficits by relying on capital market 

financings or the central government, which has provided loans through the GDB 

or private sector banks. These deficits, combined with borrowings for infrastructure 

projects, have left these three public corporations with over $20 billion in debt. 

PREPA

I would like to provide additional detail on the fiscal crisis at PREPA because it 

provides an example that illuminates some of the challenges that Puerto Rico faces 

more generally in the absence of a legal regime like Chapter 9. 

PREPA supplies virtually all of the electricity in Puerto Rico and carries a debt burden of over $9 billion, including approximately over $1.1 billion that is due on 

or before July 1, 2015. PREPA has been facing a financial crisis since the summer 

of 2014 when nearly $700 million in revolving credit lines was set to expire and 

PREPA was unable to access the capital markets or secure financing from other 

sources. In response, the Legislative Assembly adopted the Public Corporation Debt 

Enforcement and Recovery Act (the ‘‘Recovery Act’’) to provide a framework for a 

consensual resolution of PREPA’s liquidity and debt crisis that would have been negotiated between PREPA and its creditors. Because Puerto Rico is precluded from 

invoking Chapter 9 of the U.S. Bankruptcy Code, such a measure was seen as vital 

to bringing the necessary parties to the negotiating table. Following enactment of 

the Recovery Act, PREPA succeeded in executing forbearance agreements with its 

revolving credit-line lenders and the insurers and bondholders controlling more than 

60 percent of PREPA’s $8.3 billion of outstanding power revenue bonds. 

The forbearance agreements enabled PREPA to conserve cash, thereby improving 

its liquidity and stabilizing its operations, while also providing PREPA with muchneeded time to develop a long-term recovery plan. Under those agreements, PREPA 

was authorized to use funds for ordinary operational expenses that would otherwise 

have been required to pay debt service and was temporarily excused from making 

hundreds of millions of dollars in payments into reserve accounts for the payment 

of debt service. PREPA’s ongoing ability to operate today is due in large part to the 

relaxation of these financial obligations during the forbearance period that may not 

have been possible but for the existence of the Recovery Act. In fact, the forbearance 

agreements expire at the end of June 2015, and PREPA faces imminent default and 

an uncertain future beyond June. As the sole provider of electricity in Puerto Rico, 

this is really not a tenable situation. Unfortunately, many other government entities 

in Puerto Rico could find themselves in similar positions in the future. 

THE RECOVERY ACT

Research and experience makes clear that investors, creditors and anyone doing 

business in or with Puerto Rico need to have more clarity on how the Commonwealth’s financial crisis might be resolved before investing in or transacting business with Puerto Rico. The establishment of an orderly and consensus-based process 

for addressing outstanding debt at the public corporations is absolutely vital to providing this clarity. Our public corporations are not eligible to reorganize under 

Chapter 11 of the U.S. Bankruptcy Code because they are governmental units, and 

they are not eligible to adjust their debts under Chapter 9 because Puerto Rico is 

expressly—and inexplicably—excluded from the U.S. Bankruptcy Code’s definition of 

‘‘State’’ for purposes of Chapter 9 eligibility. Prior to the enactment of the Recovery 

Act in June 2014, Puerto Rico was in the unique position of having no means for 

authorizing a legal regime under which its public corporations could adjust their 

debt or address creditor claims in an orderly manner. 

The Legislative Assembly’s adoption of the Recovery Act in 2014 was a response 

to the legislative gap in the U.S. Bankruptcy Code. The Recovery Act was designed 

to allow public corporations to adjust their debt in an orderly process—with creditor 

input and court supervision—while protecting the collective interest of their constituents, including bondholders and other creditors, as well Puerto Rico’s residents 

and businesses who depend on them for the essential services they provide. The 

Recovery Act ensured that the provision of essential public services to Puerto Rico’s 

residents would not be interrupted in the event of a fiscal emergency. 

14 

Immediately after the passage of the Recovery Act, two groups of PREPA bondholders filed suit, seeking judgments declaring the Recovery Act unconstitutional. 

On February 6, 2015, the U.S. District Court for the District of Puerto Rico enjoined 

enforcement of the Recovery Act, holding that the Recovery Act is unconstitutional 

because it is pre-empted by Section 903 of the U.S. Bankruptcy Code. Specifically, 

the court concluded that Puerto Rico cannot pass a law allowing its public corporations to adjust their debts through a method of composition. The Commonwealth 

and the GDB have appealed the ruling and the matter is under advisement. It is 

not appropriate for me to comment on the specifics of the appeal, or the reasons why 

we believe the Recovery Act is lawful, but I can say that we are hopeful that the 

court will uphold the legality of the Recovery Act as a means of addressing Puerto 

Rico’s fiscal crisis. 

More recently, the Commonwealth’s Resident Commissioner, the Hon. Pedro 

Pierluisi, who joins me on the panel, introduced legislation that would amend the 

U.S. Bankruptcy Code’s definition of ‘‘State’’ to include Puerto Rico for purposes of 

Chapter 9. See H.R. 870, 114th Cong. § 2 (2015). If enacted, the Commonwealth’s 

political subdivisions, public agencies, and instrumentalities would be treated like 

every other municipality in the United States. There would no longer be a need for 

the Recovery Act. 

In the end, the practical and unfortunate result of the District Court’s decision 

enjoining enforcement of the Recovery Act is that there is currently no available 

legal regime for Puerto Rico’s public corporations to adjust their debts through a 

consensus-based, court-supervised process. In this respect, Puerto Rico is treated differently than every state in the Nation. 

THE CONSEQUENCES OF TREATING PUERTO RICO DIFFERENTLY UNDER THE

BANKRUPTCY CODE ARE SIGNIFICANT, BUT EXTENDING CHAPTER 9 TO PUERTO RICO

PROVIDES SIGNIFICANT BENEFITS

The absence of any legislative tools to adjust the debts of Puerto Rico’s public corporations has exacerbated Puerto Rico’s fiscal challenges by creating an environment of uncertainty that makes it more difficult to address these challenges. It has 

increased Puerto Rico’s cost of borrowing; it may require Puerto Rico to take extraordinary liquidity measures to ensure the continued performance of essential 

public services; it may encourage creditors to race to the courthouse and exercise 

remedies that include attempting to appoint a receiver; and it will ultimately depress economic growth in Puerto Rico, making long-term investment and capital 

expenditure plans at the public corporations impossible. 

Extending Chapter 9 to Puerto Rico, however, would provide significant benefits 

to all stakeholders. 

First, Chapter 9 provides an orderly process for debt adjustment that is understood by the capital markets, creditors, prospective lenders, and suppliers. Specifically, it provides a framework that requires the public corporation to negotiate in 

good faith, creating an ideal environment to reach consensus under the supervision 

of an experienced court. Chapter 9 has also been tested many times, including, most 

recently, in Detroit, Michigan, Stockton, California, and Jefferson County, Alabama, 

to name a few. These municipalities are now on their way to recovery and renewed 

prosperity. 

Second, public corporations in Chapter 9 would be permitted to obtain debtor-inpossession financing and use cash collateral under well-tested procedures, permitting the continuation of normal operations and the provision of essential public 

services to Puerto Rico’s residents. Third, oversight by a U.S. Bankruptcy Judge 

with expertise in insolvency matters will also ensure that all parties in interest 

have recourse to an independent arbiter and no party is denied its rights. 

In short, the virtue of Chapter 9 can be seen in the successes of its most recent 

graduates, including the city of Detroit, whose adjustment proceedings lasted less 

than 18 months, and Stockton, whose adjustment proceedings lasted less than 2 

years. There is simply no good reason to deny the residents and creditors of Puerto 

Rico what has proven time and again to be a vital tool for recovering from dire 

economic straits. 

CONGRESS CAN TAKE OTHER MEASURES TO ASSIST PUERTO RICO IN NAVIGATING

THROUGH THIS CRISIS

There are a number of other measures Congress can take to assist Puerto Rico 

during this financial crisis. For example, Congress could provide Puerto Rico with 

a limited exemption from the Merchant Marine Act of 1920, which is more commonly known as the ‘‘Jones Act,’’ to significantly reduce the cost of doing business 

and delivery services in Puerto Rico. The Jones Act imposes significant restrictions 

15 

on shipping between U.S. ports, thereby significantly driving up the cost of all goods 

in Puerto Rico and depressing the Puerto Rican economy. The Jones Act requires 

that all goods shipped, or passengers conveyed, by water between ports in the 

United States, including ports in Puerto Rico, be carried in U.S.-flagged ships, 

which are primarily constructed in the United States and owned and crewed by U.S. 

citizens and permanent residents. Because Puerto Rico is an island economy, the 

Jones Act disproportionately harms the local economy. Specifically, the Jones Act 

severely limits the supply and increases the costs of shipping services, imposing a 

substantial burden on local productivity (this is particularly pronounced in Puerto 

Rico’s energy sector—including PREPA—because nearly all of the electricity is generated by oil that is shipped to Puerto Rico). Congress could even grant a temporary 

exemption from the Jones Act in order to evaluate its impact on Puerto Rico’s economy and assess the costs and benefits of a permanent exemption. 

Moreover, Congress needs to fix the significant reductions in Federal health care 

funding that will harm Puerto Rico’s residents in the near future. Puerto Rico has 

begun experiencing significant reductions in Federal health care funding. These reductions are not in line with funding treatment received by the 50 states and they 

threaten the health and welfare of Puerto Ricans, as well as Puerto Rico’s financial 

and economic stability. I understand that a further reduction will occur when the 

2016 Center for Medicaid and Medicare Services rate structure becomes effective 

and cuts Medicare Advantage funding by 11 percent in Puerto Rico while increasing 

it by 3 percent on the mainland. This cut compounds the difficulties that Puerto 

Ricans—who pay the same Social Security and Medicare taxes as mainland residents, but receive significantly lower reimbursement rates—face. It also threatens 

the viability of Medicare Advantage on a going-forward basis, and should Medicare 

Advantage collapse, patients may move to Mi Salud, Puerto Rico’s Medicaid program, which already receives 70 percent lower reimbursement rates than any mainland state and faces a funding shortfall within the next few years, when a grant 

provided under the Affordable Care Act is exhausted. 

Finally, Congress and the U.S. Department of the Treasury can provide clarity 

on the creditability of certain taxes paid in Puerto Rico pursuant to a local law 

known as Act 154 on Federal income tax returns. Act 154, which was enacted in 

2010, imposed a special temporary excise tax and has become one of Puerto Rico’s 

principal sources of tax revenue. Act 154 revenues accounted for approximately 20 

percent of Puerto Rico’s General Fund revenues in 2012, 2013, and 2014. The Act 

154 tax base is very small (only 27 groups of affiliated taxpayers paid the special 

temporary excise tax in Fiscal Year 2015), and six of these groups accounted for approximately 75 percent of collections. The GDB has noted that any action the U.S. 

Department of the Treasury to reduce or eliminate the Federal income tax credit 

available with respect to the Act 154 temporary excise tax is likely to reduce Act 

154 revenues. 

In conclusion, I believe that we should focus our attention to these matters of critical importance to our Island, around which there is common understanding and 

consensus. There is widespread consensus on the approval of H.R. 870, which was 

introduced by our Resident Commissioner, to amend the U.S. Bankruptcy Code to 

treat Puerto Rico like a ‘‘state’’ for purposes of Chapter 9. In addition, Congress can 

take other measures, including crafting an exemption from the Jones Act, amending 

the automatic sunset provisions of much-needed health care funding, and providing 

certainty on creditability of certain taxes paid in Puerto Rico. Of course, these are 

just a few of the ways in which Congress can assist Puerto Rico, but they would 

be a good start. 

Mr. YOUNG. Thank you, sir. Rube ́n Berrı ́os, former Senator, 

Puerto Rican Senate Independence Party, you are up. 

STATEMENT OF RUBE ́ N BERRI ́OS, FORMER SENATOR IN THE 

PUERTO RICAN SENATE, PRESIDENT OF THE PUERTO RICO 

INDEPENDENCE PARTY (PIP), SAN JUAN, PUERTO RICO 

Mr. BERRI ́OS. Mr. Chairman and members of the subcommittee, 

the virtual bankruptcy of Puerto Rico’s economy is a self-evident 

reality. Puerto Rican voters have repudiated the territorial status 

that is the root cause of our economic and social problems. The 

16 

territorial status was never democratic and has now become 

tyrannical. 

Internationally, the community of Latin American and Caribbean 

states has recently reaffirmed its support for the right of Puerto 

Rico to its self-determination and independence. And yet Congress 

refuses to comply with its decolonizing obligation toward Puerto 

Rico. 

This subcommittee is well aware of Puerto Rico’s status problem. 

For decades it has held hearings on the issue, and many in Puerto 

Rico can reasonably wonder whether this oversight hearing pursues a legitimate legislative purpose, or is merely a pro forma, 

partisan, quid pro quo. Only time will tell. 

I shall utilize this hearing to publicly propose a route map toward the solution of Puerto Rico’s status problem. The relationship 

between Puerto Rico’s territorial status and our economic and social problems has been well summarized by Senator Ron Wyden, 

Chairman of the Committee on Energy and Natural Resources. I 

quote, ‘‘Puerto Rico faces huge economic and social challenges. . . . 

The lack of resolution of Puerto Rico’s status not only distracts 

from addressing these and other issues, it contributes to them. As 

the most recent reports from the President’s Task Force on Puerto 

Rico’s status found—and I quote—‘identifying the most effective 

means of assisting the Puerto Rican economy depends on resolving 

the ultimate question of status’.’’ 

Senator Wyden further added, ‘‘The present relationship 

undermines our moral position in the world.’’ 

To say that Puerto Rico should first decide what it wants, as 

President Obama has proposed, is merely an excuse to evade the 

legal responsibility of the United States as a colonial power, particularly when the President insists that the territorial relationship 

already repudiated by the Puerto Rican electorate should be one of 

the options. Colonialism is the problem, not the solution. 

We, therefore, propose the following process to resolve Puerto 

Rico’s status problem. Puerto Rico and the U.S. Congress should 

engage in a collaborative process of self-determination for Puerto 

Rico. 

In Puerto Rico, various proposals have been advanced to initiate 

the process. The party I preside, for example, has proposed a status 

assembly in which each status option, proportionately represented, 

would formulate a proposal for its desired non-colonial, nonterritorial option, requiring a response by the U.S. Government by 

a date certain. Ultimately, only realistic, non-territorial options negotiated with the U.S. authorities would be submitted to the Puerto 

Rican electorate. 

Unfortunately, the present government of Puerto Rico refuses to 

move in this direction. However, Congress could jump start a process directed toward the same end. Bipartisan representatives of the 

congressional leadership, in coordination with the executive 

branch, could convene representatives of the different status alternatives to present their respective decolonizing status proposals. In 

response, Congress would then specify which alternatives, and 

under what conditions it would be willing to consider. The Puerto 

Rican people could then cast a meaningful vote for the available 

non-colonial, non-territorial options. 

17 

If Congress takes no action, and the colonialist PPD prevails in 

Puerto Rico’s 2016 election, the democratic bankrupt territory of 

extreme dependency will continue to breed support for statehood. 

If the pro-statehood party prevails, Congress will then be faced 

with a statehood petition as a consequence of a statehood yes-orno vote. That vote would be totally uninformed as to the conditions 

that Congress would impose, and driven principally by the widespread notion that statehood represents an endless cornucopia of 

Federal funds. You would then be faced not only with the economic 

crisis in Puerto Rico, but with a political crisis of unforeseeable 

consequences to the United States. The rational way to avoid such 

a scenario would be to start a collaborative process of selfdetermination. 

Time is running out. To conclude, I must urge and demand of the 

President of the United States the immediate release of political 

prisoner Oscar Lo ́pez Rivera, who has been in prison for more than 

34 years here in the United States. Thank you very much. 

[The prepared statement of Mr. Berrı ́os follows:] 

PREPARED STATEMENT OF RUBE ́ N BERRI ́OS MARTI ́NEZ, PRESIDENT, PUERTO RICAN

INDEPENDENCE PARTY

Mr. Chairman and members of the subcommittee: The virtual bankruptcy of 

Puerto Rico’s economy is a self-evident reality. 

Puerto Rican voters have repudiated the territorial status that is the root cause 

of our economic and social problems. A territorial status that was never democratic 

has now become tyrannical. 

Internationally the community of Latin American and Caribbean states (CELAC) 

which includes all the heads of states of the region has recently reaffirmed its 

support for the right of Puerto Rico to its self-determination and independence. A 

similar position has been adopted by the U.N. Decolonization Committee. 

And yet Congress refuses to comply with its decolonizing obligation toward Puerto 

Rico. 

What more is needed for Congress to act? 

It is my duty as President of the Puerto Rican Independence Party to utilize any 

forum available to demand an end to colonial rule. Furthermore I shall utilize this 

hearing to publicly propose a route map toward the solution of Puerto Rico’s status 

problem. 

The relationship between Puerto Rico’s territorial status and our economic and social problems is by now a recognized reality. In the words of Senator Ron Wyden, 

Chairman of the Committee on Energy and Natural Resources at an oversight hearing on August 1, 2013, ‘‘Puerto Rico faces huge economic and social challenges. Per 

capita income is stuck at about half that the poorest U.S. state. The violent crime 

rate is well above the national average and raising. The lack of resolution of Puerto 

Rico’s status, not only distracts from addressing these and other issues, it contributes 

to them. As the most recent reports from the president’s Task Force on Puerto Rico’s 

status found and I quote, ‘‘identifying the most effective means of assisting the Puerto 

Rican economy depends on resolving the ultimate question of status’’.’’ [The emphasis 

is mine] 

The real question before Congress is therefore what will you do to bring about 

a resolution to Puerto Rico’s undemocratic political subordination? 

To say that Puerto Rico should first decide what it wants, as President Obama 

has proposed, is merely an excuse to evade the legal obligations of the United States 

as a colonial power; particularly when the President insists that the territorial relationship—already repudiated by the Puerto Rican electorate—should be one of the 

options. Colonialism is the problem, not the solution. 

Furthermore for there to be a meaningful choice among viable alternatives, the 

U.S. Government must clarify what the decolonizing options are, what each would 

entail, and under what conditions it would commit to a process to achieve them. 

We therefore propose the following process to resolve Puerto Rico’s status problem: Puerto Rico and the U.S. Congress should engage in a Collaborative Procedure 

for the Self-Determination of Puerto Rico. 

It is the rational way out. 

18 

In Puerto Rico various proposals have been advanced to initiate the process. The 

party I preside, for example, has proposed a Status Assembly in which each status 

option proportionately represented would formulate a proposal for its desired noncolonial, non-territorial option requiring a response by the U.S. Government by a 

date certain. In the demand for a response all delegations would stand united. 

Ultimately only realistic non-territorial options negotiated with U.S. authorities 

would be submitted to the Puerto Rican electorate. 

Unfortunately the present government of Puerto Rico refuses to move in this 

direction. 

However, Congress could jump start a process directed toward the same end. An 

appropriate mechanism could be established to operate within a limited time frame. 

Bipartisan representatives of the congressional leadership in coordination with the 

executive branch would convene representatives of the different status alternatives 

to present their respective decolonizing status proposals. In response Congress 

would then specify which alternatives and under what conditions it would be willing 

to consider. The Puerto Rican people could then cast a meaningful vote for the available non-colonial, non-territorial options. Naturally any alternative other than independence involves a process of mutual self-determination. 

If Congress takes no action and the colonialist PPD prevails in Puerto Rico’s 2016 

election, the undemocratic bankrupt territory of extreme dependency will continue 

to breed support for statehood. If the pro-statehood PNP prevails Congress will then 

be faced with a statehood petition as a consequence of a Statehood Yes or No vote 

which that party has pledged to implement. That vote would be totally uninformed 

as to the conditions that Congress would impose and driven principally by the widespread notion that statehood represents an endless cornucopia of Federal funds. You 

would then be faced not only with an economic crisis in Puerto Rico, but with a 

political crisis of unforeseeable consequences in the United States. The rational way 

to avoid such a scenario would be to start a Collaborative Process of Selfdetermination. 

The choice is yours. Time is running out. 

I have included an addendum which is a detailed exposition of the relationship 

between Puerto Rico’s territorial status and our economic and social problems. 

Addendum 

La economı ́a de Estados Unidos ha estado creciendo, luego de la crisis de 2008, 

desde el tercer trimestre del an ̃ o 2009. Su desempleo, que llego ́ hasta un 10 por 

ciento, se ubica en alrededor de 5.5 por ciento. En contraste, la economı ́a de Puerto 

Rico, cuya ‘‘recesio ́n’’ se inicio ́ oficialmente en marzo de 2006 –antes de la crisis 

financiera de Estados Unidos y de otros paı ́ses- continu ́ a en franca contraccio ́n. Este 

desfase entre Puerto Rico y Estados Unidos hace patente el hecho de que el 

agotamiento de la economı ́a de nuestro paı ́s no es un feno ́meno cı ́clico o pasajero 

sino que, como han sen ̃ alado tantos economistas del patio como extranjeros (entre 

otros el premio Nobel de Economı ́a Joseph Stiglitz), se trata de un problema 

estructural e institucional. 

En sı ́ntesis, Puerto Rico carece de los instrumentos institucionales (fiscales, 

monetarios, comerciales, regulatorios, etc.) para desarrollarse sanamente. Por lo 

tanto, ante la crisis lo u ́nico que hace es manifestar su impotencia. 

Los titulares de los perio ́dicos destacan diariamente la indefensio ́n polı ́tica, la 

contraccio ́n econo ́mica, el descalabro social, el peso del endeudamiento y la 

insuficiencia fiscal del gobierno. Ya los hechos son ma ́s elocuentes que las palabras. 

Del an ̃ o 2006 al presente la ruta que ha transitado la economı ́a de Puerto Rico 

solo puede caracterizarse como catastro ́fica. Segu ́n los datos de la Junta de 

Planificacio ́n el Producto Nacional Bruto sobre bases reales se ha reducido en ma ́s 

de 13 por ciento. Esta contraccio ́n se refleja drama ́ticamente en el mercado de 

empleo. Del an ̃ o fiscal 2006 al an ̃ o fiscal 2014 el nu ́mero de personas empleadas se 

redujo en 20 por ciento. Puerto Rico cuenta con una de las tasas de empleo –la 

proporcio ́n de empleados respecto a la poblacio ́n de 16 an ̃ os o ma ́s- ma ́s baja del 

mundo. En el an ̃ o 2006 era de 43.2 por ciento. Eso es bajo. Hoy no sobrepasa el 35 

por ciento. En otras palabras, el 65 por ciento de la poblacio ́n de 16 an ̃ os o ma ́s no 

esta ́ empleada. Esto, aparte del desempleo, se traduce en dos grandes problemas: 

dependencia y desarrollo de la economı ́a informal o subterra ́nea, con el consecuente 

azote de la criminalidad y de la creciente inseguridad social que todo esto genera. 

Estos problemas no deben despacharse como si fueran expresio ́n de una fase 

pasajera del mercado o reflejo de la crisis financiera en otros paı ́ses. La contraccio ́n 

econo ́mica comenzo ́ en marzo de 2006 –hace nueve an ̃ os-, mucho antes que la debacle financiera que precipitara la recesio ́n en la economı ́a estadounidense y en otras 

19 

economı ́as. Adema ́s, fue precedida por un largo periodo de relativo estancamiento, 

a partir de la de ́cada de 1970, que ni la Seccio ́n 936, ni las transferencias Federales 

ni el endeudamiento pu ́ blico pudieron evitar. A este periodo le precedio ́ un tramo 

de alto crecimiento del enclave industrial en funcio ́n de privilegios fiscales que no 

pudo conjurar los altos niveles de desempleo y que se acompan ̃ o ́ de un enorme flujo 

emigratorio y de una creciente remisio ́n de ganancias hacia el exterior. 

En el siglo 21 la emigracio ́n masiva ha reaparecido con mayor intensidad, hasta 

el extremo que la poblacio ́n total del paı ́s acusa reduccio ́n continua. Por otro lado, 

aunque resulte inconcebible, los rendimientos de capital (ganancias, dividendos e 

intereses) remitidos al exterior sumaron $36,052.2 millones en el an ̃ o fiscal 2014. 

Esto refleja una mezcla perversa de exenciones tributarias y precios de transferencia 

que han permitido la instalacio ́n de enclaves econo ́micos cuyos beneficios no se 

traducen en desarrollo sustentable para el paı ́s. Ahora, la agudizacio ́n de todos los problemas citados coincide con un gobierno 

cuyos grados de libertad de operacio ́n parecen reducidos al mı ́nimo: sus finanzas 

‘‘agonizan’’ y su margen de endeudamiento ha llegado pra ́ cticamente al lı ́mite. El 

escenario fiscal luce tra ́gico: de ́ficit presupuestario, deuda insostenible, anuncio de 

recortes, inseguridad de empleo, deterioro de servicios, impuestos improvisados, 

sistemas de retiro en crisis, medidas de corto plazo (como la transferencia de fondos 

del Fondo del Seguro del Estado al Fondo General) que agravarı ́an la situacio ́n en 

el futuro inmediato y sume y siga. Y todo esto acompan ̃ ado por un sector corporativo 

pu ́ blico, encabezado por la Autoridad de Energı ́a Ele ́ctrica, igualmente lastrado por 

deudas e insolvencia. 

Ante tal panorama econo ́mico au ́n los defensores de la colonia han reconocido que 

hay que realizar reformas institucionales, como es el caso, por ejemplo, de las Leyes 

de Cabotaje y la Ley de Quiebras donde se hace patente el hecho de que Puerto Rico 

es una colonia. Pero para superar los graves problemas que Puerto Rico enfrenta 

no basta con reformar una que otra ley. Puerto Rico necesita una completa caja de 

herramientas polı ́ticas y econo ́micas para llevar a cabo los profundos cambios 

institucionales y estructurales que le permitan encarar sus problemas 

efectivamente. La condicio ́n indispensable para la articulacio ́n del nuevo 

ordenamiento institucional es pues, la superacio ́n del coloniaje a trave ́s de la 

independencia que es la u ́nica que provee la caja de herramientas que necesitamos. 

Vivimos en un mundo en el que los cambios institucionales y tecnolo ́gicos se han 

acelerado. Estamos rodeados de nuevos arreglos polı ́ticos y de nuevas redes de 

relaciones econo ́micas cobijadas por complejos tratados multilaterales, regionales y 

bilaterales. Puerto Rico no puede permanecer al margen. Le va la vida. 

La dimensio ́n polı ́tica y la econo ́mica esta ́n inextricablemente unidas. Mientras 

ma ́s se intente eludir el problema del status de Puerto Rico ma ́s evidente se tornara ́

la necesidad de enfrentarlo. 

Mr. YOUNG. I thank the gentleman. Are you ready? Questions? 

I will recognize the Minority leader for questions. 

Mr. SABLAN. I will yield to—— 

Mr. YOUNG. You have questions? 

Mr. SABLAN. I will yield to Mrs. Torres. 

Mr. YOUNG. Mrs. Torres, go ahead. You are getting closer. You 

keep it up, we will be hugging soon. 

Mrs. TORRES. I know. 

Mr. YOUNG. Oh, that sounds good. 

Mrs. TORRES. Anything that gets me closer to you, Chairman, 

would be a wonderful thing. And thank you for allowing me to 

come before my colleagues. 

My question would be to Mr. Miranda. Do you think that Puerto 

Rico’s territory status is a cause of Puerto Rico’s economic and fiscal problems, or just a contributing factor? Or do you think that the 

issues are totally distinct? 

Mr. RODRI ́GUEZ. First, let me qualify the concept of territorial 

status, that the present government does not accept as so. And 

‘‘commonwealth’’ has been defined in other legal and constitutional 

relationships with the United States. But, nonetheless, I do not 

20 

want to expand too much on that. The critical economic circumstances that we are facing in Puerto Rico are the consequence 

of many years of perhaps overspending. We have to admit that, in 

some cases, we should have been much more careful. But, nonetheless, in some way the island has been dealing with some difficulties 

in dealing with that sort of economic condition. 

For instance, every state has a right to resort to a law that allows Chapter 9 to be implemented. Therefore, any municipality in 

any state can resort to it. Somebody has said that Puerto Rico 

wants to have a bail out. Puerto Rico is not interested in having 

a bail out by approving H.R. 870, and extending Chapter 9 to 

Puerto Rico. 

Mrs. TORRES. I have one more question, so let me stop you there. 

My next question would be to Mr. Berrı ́os. I want to make sure I 

get both of my questions on the record. We can follow up. 

Puerto Ricans are leaving the island in huge numbers, and they 

are immigrating to the states. They are not necessarily leaving to 

other countries. In light of this, do you believe Puerto Rico’s economy would perform better as a sovereign nation, or as a state? 

Mr. BERRI ́OS. It is Mr. Berrı ́os. 

Mrs. TORRES. Oh, Berrı ́os. 

Mr. BERRI ́OS. Yes. 

Mrs. TORRES. Disculpa. 

Mr. BERRI ́OS. No hay problema. Of course, I think the island 

economy will be much better off as a republic, because we would 

then have the tools necessary and the powers necessary to diversify 

our economy, to protect our production, to enter into commerce 

with other nations, to buy in cheaper markets. For a number of 

reasons—I could keep on enumerating them. 

Now in Puerto Rico, we have been under depressive conditions 

since 2006. We have gone down 13 percent in our gross domestic 

product—13 percent. We have shrunk. And since 1970, we have 

been practically stagnated. This political status does not produce 

prosperity for the people of Puerto Rico, and we need the necessary 

tools to enter into the world market, keep up with the commerce 

with the United States, but have in our hands the means, as every 

other nation in the world does, including the United States, to promote its own economy. And the only way to do that is through the 

powers of independence. 

Mrs. TORRES. As a sovereign nation? 

Mr. BERRI ́OS. As a sovereign nation, of course. I would pose the 

following rhetorical question to you—If independence is so bad, 

why do we have more than 200 and some-odd independent countries, including the United States, and only one territory? 

Mrs. TORRES. Thank you, sir. I am not here to answer questions, 

I am here to ask them. 

Mr. YOUNG. Thank you. Ms. Radewagen, you are up. 

Mrs. RADEWAGEN. Thank you, Mr. Chairman. 

I, too, want to welcome the panel of distinguished witnesses, the 

first panel. 

I have a question for Congressman Pierluisi. Some pro-statehood 

advocates in Puerto Rico argue that Puerto Rico already voted for 

statehood in 2012, and should not have to vote again. You have 

pointed out the following: when Alaska and Hawaii were terriVerDate Mar 15 2010 08:25 Dec 15, 2015 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6602 J:\114TH CONGRESS\INDIAN, INSULAR & ALASKA NATIVE AFFAIRS\06-24-15\95300.TXT
21 

tories, they each held votes sponsored by the local government in 

which voters expressed a desire for statehood. Ultimately, Congress 

approved an Admission Act for Alaska in July 1958, and an 

Admission Act for Hawaii in March 1959. Those Acts of Congress 

provided for admission to occur once a majority of voters affirmed 

in a federally-sponsored vote that they desired statehood. 

So you are essentially proposing the same procedure for Puerto 

Rico as was used in Alaska and Hawaii, right? 

Mr. PIERLUISI. You are absolutely right, Madam Congresswoman. 

That is exactly what we are doing. We are following the path of 

Alaska and Hawaii. In both former territories, there were locally 

organized plebiscites—if I recall correctly, in Alaska, about 57 percent of the population supported statehood. And many years later, 

they finally got it. Alaska finally became a state. 

But when Congress decided to legislate it, the admission of 

Alaska, it was conditioned upon a vote by the people of Alaska, basically ratifying the admission. And the vote happened, and to no 

surprise, then a much bigger majority of voters in Alaska supported the admission, and became a state. 

The same happened in Hawaii. In Hawaii, if my recollection 

serves me right, the plebiscite result was about 67 percent or so. 

And years later, the same process happened. It was, coincidental, 

very close to the time when Alaska came in—— 

Mr. YOUNG. Would the gentleman cease for a moment? Whoever 

has that cell phone in this room, you better shut it off, or I will 

ask you to leave. It is impolite to have a cell phone on at any time. 

You may proceed. 

Mr. PIERLUISI. So, why am I proposing an up-or-down vote on the 

admission of Puerto Rico as a state? Simple. In 2012, a majority 

of the people of Puerto Rico, 54 percent, rejected the current status. 

And more people voted for statehood than any other option, including the current status. Given that scenario, the next logical step 

should be a vote on statehood. We had a yes or no in 2012, with 

respect to the current territory. Why not have one with respect to 

statehood? Anybody supporting statehood could vote yes. 

My colleagues here, probably in all likelihood, would vote no, for 

whatever reasons. If you support independence for Puerto Rico, you 

would vote no. If you want Puerto Rico to be a sovereign nation 

with a compact of association with the United States, you could 

vote no. 

So that is what I am proposing. It is fair. Nobody can say they 

would be excluded. All the voters in Puerto Rico could express 

themselves. And that is my position. Thank you. 

Mrs. RADEWAGEN. Thank you, Mr. Chairman. I yield back. 

Mr. YOUNG. My good lady friend from Guam. 

Ms. BORDALLO. Thank you very much, Mr. Chairman, and I 

thank you for your leadership on addressing these issues that are 

so very important to the territories. 

I welcome our former colleagues, the governors and the mayors 

and the other leaders from Puerto Rico. It is very nice to have you 

here with us in this very important hearing. I also commend Mr. 

Pierluisi, who has worked diligently to advance self-determination 

efforts, and who champions Puerto Rico’s issues here in Congress. 

22 

Like our brothers and our sisters in Puerto Rico, the people of 

Guam aspire to determine our political future, and fully exercise 

our right to self-determination. I commend Puerto Rico’s local leadership for their efforts to determine their political status, and I 

have urged local leaders on Guam to make similar efforts, so that 

we can move forward with our self-determination. 

But this process is two-fold. Congress holds the institutional obligation to address the political status of Puerto Rico and the other 

territories under Article 4 of the Constitution. So I urge this committee to give due consideration to the views of the people of 

Puerto Rico on this issue. 

My first question is to you, Mr. Pierluisi. You have argued that 

Puerto Rico’s economic challenges make self-determination even 

more urgent now. You are an ardent advocate for statehood for 

Puerto Rico. If statehood vote were selected by the voters, and 

Congress approves it, how could statehood address Puerto Rico’s 

difficult economic situation, which is the case now? 

Mr. PIERLUISI. Well, the fact is that Puerto Rico has been lagging 

the states now for over four decades. Ever since the 1970s, Puerto 

Rico’s unemployment, on average, has been 4 or 5 percent more 

than on the mainland. Ever since the 1970s, our growth has been 

lagging the one in the mainland. We have been behind. Income per 

capita, the GDP per capita in Puerto Rico, consistently has been 

about one-third the average in the states, and one-half the one for 

the poorest state, Mississippi. 

So, it is pretty obvious to me—and let me add one thing, an additional fact which is very important. The debt that we are talking 

about, $72, $73 billion, it piled up under the current status. So it 

is pretty obvious to me that the common element here is that the 

current status is not working as a platform for Puerto Rico’s economic development, for our quality of life. 

To add insult to injury, our island is losing population like never 

before: 250,000 American citizens hopping on a plane and moving 

to the states to have the rights and the opportunities and the jobs 

they don’t find in Puerto Rico. Actually, they are voting with their 

feet—because once they move to the states, they can vote for the 

President, they can elect Members of Congress, and they have 

equal rights in Federal programs, which we don’t have in Puerto 

Rico. 

Now, why would statehood be good for Puerto Rico? Well, let’s 

talk about Hawaii and Alaska. In both Hawaii and Alaska you had 

growth, additional growth, once they became states. Let’s talk 

about the fact that Puerto Rico’s status, by its very nature, is not 

stable. It is insecure. There is political risk in Puerto Rico. So 

statehood is a permanent status. It is a stable status which will be 

very attractive, in terms of attracting additional investment to the 

island. 

When we talk about Federal funding, because of the disparities 

we face, Puerto Rico would be receiving billions of additional funding that would flow into our economy if we become a state. 

The bill I have introduced proposes basically a 4-year transition 

period, because the parity in Federal programs would happen 

gradually, as well as the taxes that would have to apply in Puerto 

Rico. You could phase them in, as well. So this wouldn’t happen 

23 

overnight, but I am sure that, once we put Puerto Rico on the path 

to statehood, we will grow, we will have a better quality of life, and 

our people will stay in Puerto Rico. 

Ms. BORDALLO. Thank you very much. Mr. Chairman, I have 

another question. Are we going to make a second round? 

Mr. YOUNG. I will let you ask it now. 

Ms. BORDALLO. Good. Thank you, Mr. Chairman. This one is for 

Mr. Miranda. 

Last year, Congress appropriated $2.5 million to Puerto Rico for 

a new plebiscite to resolve Puerto Rico’s political status. Now I understand that the DOJ must approve the expenditure plan, ensuring that the plan is compatible with the Constitution and laws and 

policies of the United States. Has a plan been submitted? And 

would such a plan be compatible with the U.S. laws and policies? 

Mr. RODRI ́GUEZ. The plan seems compatible with the U.S. law, 

as you just said. My understanding is that there was a process for 

defining the status that we are going to be participating on a referendum. That definition had to be approved by the Secretary—by 

the Attorney General of the United States. 

Where the due process stands now I really do not know, but I 

understand that at some point the Governor of Puerto Rico was 

getting involved in some conversations with the Department of 

Justice to address that point, and to have organized the process in 

Puerto Rico for that event to take place. I cannot assure you at this 

moment what is the actual state of that initiative that was very 

much welcome in Puerto Rico. 

Ms. BORDALLO. Thank you very much for the information, and I 

yield back, Mr. Chair. 

Mr. YOUNG. Do you want to ask questions? I recognize the 

Ranking Member. 

Mr. SABLAN. Thank you very much, Mr. Chairman. And welcome 

again, everyone. 

Now, this panel, let me get something straight. This panel consists of the heads of three political parties in Puerto Rico. Is that 

correct? Mr. Pierluisi is the President of the New Progressive 

Party; the Minister of Justice was the Popular Democratic Party; 

and Mr. Berrı ́os is the President of Puerto Rico Independence 

Party? Is that correct? 

Mr. RODRI ́GUEZ. Yes, Mr. Chairman, but let me clarify. I am appearing here as a representative of the Governor in his executive 

functions. The Governor is also the President of the Popular 

Democratic Party in Puerto Rico, but I am not representing him on 

that particular position. So, therefore, I am not here representing 

the Popular Democratic Party. I am here appearing just as a representative of the Governor in his executive level. 

Mr. SABLAN. So what, then, are you doing here, if you didn’t get 

invited? We invited the President of the Popular Democratic Party. 

Mr. RODRI ́GUEZ. I understand that—— 

Mr. SABLAN. Why are you here? 

Mr. RODRI ́GUEZ. I am here because the Governor was invited in 

two different categories. He was invited as Governor, and he was 

invited as President of the Popular Democratic Party. 

Mr. SABLAN. We made the invitation. We should know who we 

invited—and I think maybe you misunderstood, but we certainly 

24 

don’t misunderstand who we invited. Can I ask you a political 

question, then? 

Mr. RODRI ́GUEZ. You invited the Governor of Puerto Rico, and I 

am appearing here, representing the Governor of Puerto Rico in his 

capacity as governor, not in his capacity as president of the 

Popular Democratic Party. 

Mr. SABLAN. I am confused now, because my questions are 

directed to you—— 

Mr. RODRI ́GUEZ. You can direct the question to me, and I can 

decide if there is a—— 

Mr. SABLAN. You don’t have to decide when to answer, sir. If you 

came here, I am assuming you came here as the head of a party. 

But you don’t just come here—I mean this is by invitation only. 

Mr. RODRI ́GUEZ. I understand that. 

Mr. SABLAN. So let me ask you—because the Governor was invited to testify. You agree with that, at least, right? About Puerto 

Rico’s political status, and the connection between that party, the 

island’s territorial status, and its economic problems—and let me 

ask you something, because—let me make it very clear. You want 

Chapter 9 for Puerto Rico, right? You think it benefits Puerto 

Rico—— 

Mr. RODRI ́GUEZ. I view Chapter 9 of the bankruptcy law for 

Puerto Rico—— 

Mr. SABLAN. You agree with that, right? 

Mr. RODRI ́GUEZ. As the Attorney General, I assure you that that 

will be—— 

Mr. SABLAN. That Chapter 9 is allowed for states. 

Mr. RODRI ́GUEZ. Well—— 

Mr. SABLAN. States—the 50 states have the privilege of Chapter 

9—— 

Mr. RODRI ́GUEZ. Right. That is—— 

Mr. SABLAN. So you don’t want to be a state, but you want what 

belongs to a state. 

Mr. RODRI ́GUEZ. Well, I will tell you. 

Mr. SABLAN. All right. 

Mr. RODRI ́GUEZ. That could happen. Puerto Rico, as a commonwealth, can be treated differently from states. But, again, there are 

many other rights exercised by states that are also being granted 

to Puerto Rico. So why is there a difference regarding Chapter 9? 

Mr. SABLAN. That is not just Puerto Rico—— 

Mr. RODRI ́GUEZ. I do not understand that difference—— 

Mr. SABLAN. That is not exclusive to Puerto Rico, that is also to 

the other territories, including the Northern Marianas. But you 

want something that is a privilege extended to the 50 states, and 

you want that for Puerto Rico, but you don’t want Puerto Rico to 

be a state. 

You are holding on also—I understand your government—— 

Mr. RODRI ́GUEZ. No, excuse me one second—— 

Mr. SABLAN [continuing]. You are holding on to $2.5 million that 

we appropriated for a plebiscite, a straight up or down question on 

whether Puerto Rico should favor statehood, Puerto Ricans favor 

statehood. You haven’t had that plebiscite. We gave you the money, 

so it is no longer a question of money. So why don’t you have that 

plebiscite? 

25 

Mr. RODRI ́GUEZ. I explained, sir, that I am appearing here 

just—— 

Mr. SABLAN. Mr. Chairman, he is not going to answer my 

question. I yield back. 

Mr. YOUNG. Thank you. Mr. Grijalva—I’ve got the Ranking 

Member and the Ranking Member. Which one is the rankest? He 

is the rankest? 

Mr. GRIJALVA. We are both—— 

Mr. YOUNG. OK, you are both rankest? All right, Mr. Grijalva. 

Mr. GRIJALVA. Thank you, Mr. Chairman. Very kind of you. And 

thank you for holding the hearing, and welcoming all the witnesses 

and former colleagues that are here with us today. And the sponsor 

of two pieces of legislation, our colleague on the committee, Mr. 

Pierluisi, who has worked long and hard in dealing with both the 

economic reality and challenges that are facing Puerto Rico now, as 

well as a piece of legislation that calls for a vote on the status and 

the statehood status—the Puerto Rico Statehood Admission Act, 

using the money that was appropriated previously, as the source 

for the election cost and the promotion of that. 

The other one I think is very important, the submitted H.R. 870, 

because it is about equal treatment. And until the other issue, in 

terms of status and jurisdiction are settled, I think it is an important piece of legislation, because it talks about status. The 11 percent cut in Medicare only on the island, that is not an appropriate 

response to the economic crisis. Allowing Chapter 9 bankruptcy for 

state-owned—whether it be power or other authorities, and allowing the government-owned companies, as well as municipalities, to 

use Chapter 9, as would be the availability to any community or 

publicly-owned company here on the mainland. 

So I want to thank the gentleman for that. I have a long, beautiful statement—10 pages—Mr. Chairman, that I will submit for 

the record. 

Mr. YOUNG. I gladly have you submit it for the record. 

Mr. GRIJALVA. Thank you. 

[The prepared statement of Mr. Grijalva follows:] 

PREPARED STATEMENT OF THE HON. RAU ́ L GRIJALVA, RANKING MEMBER, 

COMMITTEE ON NATURAL RESOURCES

Thank you, Mr. Chairman, and thank you for holding this hearing. I want to welcome all of the witnesses, particularly our former colleagues, Governors Fortun ̃ o, 

Acevedo Vila ́ and Romero. Today’s hearing will look at the relationship between 

Puerto Rico’s political status and the economic challenges they are facing. 

The Island of Puerto Rico has been a territory of the United States since 1898. 

In all that time, the island’s economy has seen its ups and downs. It became one 

of the great post-war economic success stories as a manufacturing powerhouse with 

a thriving middle class. But in the 1990s the Puerto Rican economy slowed with the 

repeal of the popular possession tax credit, which allowed U.S. corporations to defer 

paying U.S. income taxes on income earned in Puerto Rico. Since 2006, the economy 

has been in and out of recession. Today the unemployment rate is around 14 percent; 45 percent of the population lives below the Federal poverty line; and there’s 

a fiscal crisis—a scramble to restructure debts of $73 billion. The Puerto Rico 

Electric Power Authority (PREPA) is said to be close to defaulting on approximately 

$8.6 billion in municipal bond debt. 

Compounding the crisis is the fact that the territory has been losing population 

at a level not seen in decades. According to the Washington Post, ‘‘Puerto Rico lost 

54,000 residents—1.5 percent of its population—between 2010 and 2012 alone. Since 

recession struck in 2006, the population has shrunk by more than 138,000 to 3.7 

million, with the vast majority of the outflow headed to the mainland.’’ 

26 

Additionally, because doctors practicing in Puerto Rico receive much smaller 

Medicare and Medicaid reimbursement rates than their counterparts on the U.S. 

mainland, the territory is facing a medical crisis. The Center for Medicaid and 

Medicare Services’ (CMS) plans an 11 percent cut in Medicare Advantage reimbursements because of the rate formula. This has caused a steady drain of doctors 

on the island. This funding gap and exodus of trained professionals is expected to 

grow larger. 

Representative Pierluisi believes that as long as Puerto Rico remains a territory— 

without equal treatment under Federal programs, forced to borrow heavily to make 

up the difference and without the ability to vote for the national leaders who regulate our economy—the island will not be in a position to overcome its economic problems. He has introduced H.R. 727, the Puerto Rico Statehood Admission Act, to 

address the question of the island’s status. 

He has also introduced a second bill, H.R. 870, to amend the U.S. Bankruptcy 

Code to enable Puerto Rico to authorize PREPA and other Puerto Rico governmentowned corporations to adjust their debts under plans filed as debtors in Chapter 9 

of the Bankruptcy Code. Governor Garcia Padilla and Congressman Pierluisi are in 

agreement that swift passage of H.R. 970 would go a long way in easing the 

pressure of default on PREPA and the other Puerto Rican government-owned 

corporations. 

Mr. Chairman, I join the New York Times and other major publications in calling 

on Congress to pass H.R. 870 to allow Puerto Rican government-owned companies, 

as well as municipalities, to use Chapter 9. 

Thank you again, Mr. Chairman. I yield back the balance of my time. 

Mr. YOUNG. Are you through? 

Mr. GRIJALVA. I am through and I yield back. Thank you. 

Mr. YOUNG. Now Dr. Ruiz. 

Dr. RUIZ. Thank you so much, Mr. Chairman. Mr. Chairman, our 

territories are a part of our Nation. Their residents are a part of 

our Nation. And, in fact, by an Act of Congress, they are American 

citizens. And yet, too often, our territories are left behind in major 

Federal legislation. The result of this inequality comes in the form 

of health disparities, severe income inequality, and in some cases, 

substandard living conditions. 

For example, territory residents who have paid into the Medicare 

system do not have access to the same benefits they would be due 

as a state. The statistics on the disparities in Puerto Rico specifically are appalling. According to Puerto Rico’s Medical Licensing 

and Studies Board, the number of physicians in Puerto Rico has 

dropped by 13 percent in the last 5 years, contributing to the severe primary health professional shortage in 34 medical underserved areas across Puerto Rico. 

Compared to the states, Puerto Rico has less than half the per 

capita rate of emergency medicine physicians, which oftentimes 

serve as the individual’s last safety net resource. And the reimbursement rate for physicians practicing on the island is said to go 

down even further, exacerbating these disparities. The people of 

Puerto Rico deserve to have access to the health care services that 

they have paid for, and deserve the opportunity to lead a healthy, 

full life. So I would like to ask you a question if we have enough 

time. 

This question is for my colleague, Representative Pierluisi. How 

does Puerto Rico’s territory status specifically harm the health and 

wellness of Puerto Rico’s residents? 

Mr. PIERLUISI. Thank you so much, Mr. Ruiz. And I will try to 

be brief and get to the point. 

27 

Actually, the situation we are facing is very similar when we talk 

about all the territories. The life of a territory is the life of 

American citizens in most—I understand that in American Samoa 

we are talking about nationals—unfortunately so. But we do not 

get equal treatment in Federal programs, including in Federal 

health programs. And that translates into worse quality of life for 

our people, particularly our vulnerable population. 

What happens, for example, in the Medicaid program is that for 

years the U.S. Government was assuming roughly about 18 to 20 

percent of the cost of Puerto Rico’s Medicaid program, up to the 

Affordable Care Act. When the Affordable Care Act came about, I 

worked hard, as well as my fellow delegates from the territories, 

so that the Federal Government would enhance the funding we get. 

But we are still short at the moment, Puerto Rico basically—the 

U.S. Government is assuming 50 percent of the cost of our 

Medicaid program, but not resembling your Medicaid program. 

In Puerto Rico, to give you an example, we afford health insurance to people up to roughly 80 percent of the U.S. poverty level. 

In the mainland, as you know, the Medicaid expansion is getting 

up to 134 percent of poverty level. So the Federal Government is 

not giving us, not even parity, equal treatment, for the population 

we have under the 100 percent of poverty level. To me, that is atrocious. It is unacceptable. These are American citizens, vulnerable 

American citizens, and the U.S. Government is not even 

funding—— 

Dr. RUIZ. So you have 1 minute. What is the solution? 

Mr. PIERLUISI. The solution—I have a bill before this Congress 

proposing to fix all these disparities we have in Medicaid, 

Medicare, which you refer to, in a pragmatic, realistic way. 

Let’s say that just the Medicaid disparity is fixed. You are talk- ing about roughly $1.2 billion that the government of Puerto Rico, 

is spending right now that the Federal Government would be 

spending. When we talk about fiscal issues in Puerto Rico, that, in 

and of itself, would solve the budget deficits that Puerto Rico has 

been dealing with, and would allow Puerto Rico to make the necessary contributions through its state pension system. 

So, talk about the life of a territory. We are always lacking 

Federal funding, not to talk about lacking voting rights because, as 

I have said before, we don’t vote for the President. Puerto Ricans 

have only me, a Resident Commissioner. I can debate, I can speak, 

but I cannot vote on the Floor—and I represent 3.5 million 

American citizens. That is not democratic, that is embarrassing. 

So that is the situation. It definitely would help for you, for the 

Congress, to treat Puerto Rico fairly—at the very least, in Federal 

health programs. 

Dr. RUIZ. Well, as a physician, I care very much in reducing 

those disparities, and ensuring that the citizens in Puerto Rico 

have the opportunity to live a life of wellness and a long, prosperous life, as well. Thank you. 

Mr. YOUNG. Thank you, sir. 

Mr. LaMalfa. 

Mr. LAMALFA. I have no questions. 

Mr. YOUNG. Commissioner, in your proposal with the new plebiscite—you say you have 5 years. On that plebiscite, what would 

28 

happen if you had the plebiscite, and if the people of Puerto Rico 

voted for statehood that was automatic, then? 

Mr. PIERLUISI. There are two pieces of legislation at issue. You have the appropriation that we approved, providing $2.5 million for 

a federally-sponsored plebiscite in Puerto Rico. The legislation 

speaks of having a vote to resolve the status issue, and it requires 

that the Attorney General of the United States basically bless 

whatever option is posed before the electorate. We don’t want to 

waste time. We want to make sure that whatever the people vote 

on is something real, something possible. 

Mr. YOUNG. What I am leading up to—— 

Mr. PIERLUISI. Yes. 

Mr. YOUNG. The present legislation doesn’t have—that is not 

finite. If they vote for it, there is another step. What if we were 

able to put something in the legislation so if they vote for it you 

become a state? 

Mr. PIERLUISI. That is what H.R. 727 does. My bill, which has 

108 co-sponsors—including me, 109—basically has a two-step 

process. You have an up-or-down vote on the admission of Puerto 

Rico as a state. And if a majority of the people support the admission, then it triggers the transition into the admission. 

Mr. YOUNG. OK. 

Mr. PIERLUISI. Depending on when the vote takes place, what the 

bill provides for is the admission of Puerto Rico, at the latest, in 

January 2021. We would be voting for President in the elections of 

November 2020, and we would be electing our Members of 

Congress in November 2020. Until then, Congress would be conforming the laws, Federal laws, so that Puerto Rico receives the 

same treatment states do. 

Mr. YOUNG. This is a question for the total panel. And, like I 

said, I have been involved in this for a long time, because we were 

the leaders of the state recently, and then Hawaii, and then, of 

course, I hope Puerto Rico. 

When we first got started in 1994, I warned at that time that 

status quo would not prevail and, in fact, you would be in economic 

problems. If we don’t do something in the Congress, 20 years from 

now—I will start with you, Commissioner—where do you see 

Puerto Rico? 

Mr. PIERLUISI. Quality of life is deteriorating incredibly fast. I 

see a bright future for Puerto Rico, because of the potential, the capacity of our people. But we cannot keep losing them. The current 

status is not providing them with the necessary quality of life, the 

necessary jobs and opportunities. 

Congressman Ruiz was talking about doctors. By the way, the 

top surgeons in Texas, there are lots of Puerto Ricans there. And 

in Florida, they are all over. Not to talk about engineers, scientists. 

They are all over the states. The diaspora, we call. And we are losing them. Why are we losing them? Because they are American 

citizens, and the only thing they have to do to get a better quality 

of life is to hop on a plane and move to a state. 

Mr. YOUNG. OK. 

Mr. PIERLUISI. What are we aspiring to—to become a state. 

Mr. YOUNG. The question was, if nothing occurs, you see a 

devastated island. 

29 

Mr. PIERLUISI. Yes. 

Mr. YOUNG. OK. 

Mr. PIERLUISI. Yes, the permanent solution to Puerto Rico’s 

economic problems, social problems, is equal rights, is equality. All 

nations who have equal rights have prospered. 

Mr. YOUNG. OK. I am just—the gentleman from the Governor’s 

office? 

Mr. RODRI ́GUEZ. We see a brighter future for Puerto Rico. We are 

facing a very difficult financial situation. Actually, a crisis. Nonetheless, I understand that we have the capabilities to come across 

and bring the island to a brighter condition. We need the help that 

I mentioned before. We need to have an instrument to deal with 

the debt that we are carrying now. That is why we support extending bankruptcy Chapter 9 to Puerto Rico. That is a fact. 

But besides that, I understand that all the capabilities are there. 

All the instruments are there in Puerto Rico. If we reorganize our 

debt and we can comply with our compromises, with holders of our 

debt, certainly Puerto Rico can come across and enter into a state 

of parity. 

Mr. YOUNG. All right. Senator? 

Mr. BERRI ́OS. Well, the question is quite easy to answer with just 

the past products of the archives of the United States. The same 

downward spiral that started in 1970, and which has deepened to 

the present crisis since 2006, will continue. That will mean more 

dependence, more and more dependence, because Puerto Rico cannot exercise the potential of its productive capacity. And that will 

mean that the type of argument you have heard today for statehood, that is more and more and—billions of Federal funding as 

the Resident Commissioner said. Yet you will see more people aspiring for statehood for the wrong reasons. 

Puerto Rico would then be on the verge of potentially becoming 

a ghetto state, and that is not the type of future I foresee for my 

land. We need the political powers, in order to develop our own 

economy and have a friendly relationship with the United States 

and with the rest of the world, not more and more dependency— 

more votes for statehood, because people believe statehood is just 

what the Resident Commissioner said, billions of dollars in funding. 

Who aspires to that? We then have 80 percent living off food coupons or food checks, instead of 50 percent? That is the future of 

Puerto Rico if Congress doesn’t act soon with more or less what I 

have proposed. Let’s talk about this. Let’s enter into the mutual 

collaboration process to find a way out for your benefit, and for our 

benefit. 

Mr. YOUNG. I thank the panel. You have done well. I will tell you 

again, I personally don’t believe—I have said all along, and don’t 

get upset with me—if you are not going to be a state, you should 

become an independent nation. Either one. But the status quo is 

not working. We have watched this thing. 

I said 21 years ago, I had the only vote on the House Floor on 

Puerto Rico—by one vote, by the way. I have watched the downward spiral. And these are great Americans, and to have this 

occur—I am just sitting here thinking, if something doesn’t happen, 

if we don’t do something, there is a possibility of revolution in 

30 

Puerto Rico, because you can’t have a group of people that has 

American status and not have the rights that all other Americans 

have, and have a poverty level which is increasing. 

This is a challenge to Congress. And the reason we are having 

these hearings is trying to get somebody to start talking about it, 

because this is a black eye on American soil. And we are going to 

continue to do that. 

I want to thank the panel. You are excused. 

Mr. BERRI ́OS. Thank you very much. 

Mr. YOUNG. Now we will call up the second panel. I have never 

seen so many fine, honorable governors in my life. I love it—the 

Honorable Luis Fortun ̃ o; the Honorable Carlos Romero, one of my 

dear friends, both of them were; the Honorable Acevedo Vila ́; and 

the Honorable Carmen Yulin Cruz, who is a mayor; and 

Dr. Miriam Ramirez, former Puerto Rican State Senator. 

And you all know the rules of the game. As soon as you all sit 

down and quit talking, we will start. 

[Pause.] 

Mr. YOUNG. Is everybody situated? You photographers get 

moving. 

Because you are lined up this way, I am going to call on the 

Honorable Carlos Romero. Carlos, welcome. I can remember when 

I was in the Minority and you were in the Majority. You fought 

this battle then, as you are fighting it now. We may have different 

ideas, but I hope the people of Puerto Rico appreciated your dedication to a cause, and your word—crucially important. 

So, you are up, you are first, you know the rules. I am pretty 

lenient, but you do what you have to do. 

Mr. BARCELO ́. Thank you. 

Mr. YOUNG. Turn that microphone on. 

STATEMENT OF CARLOS ROMERO BARCELO ́ , FORMER 

GOVERNOR OF PUERTO RICO 1977–1985 (PNP), SAN JUAN, 

PUERTO RICO 

Mr. BARCELO ́. Mr. Chairman, members of the committee, good 

afternoon. 

Mr. Chairman, I want to thank you on behalf of my fellow Puerto 

Rican Americans, who, as American citizens, demand equal rights 

and equal participation in the democratic process and the government of our Nation with our fellow citizens in the 50 states, for all 

your efforts and support to our long-time quest for equality. 

Before we continue, I would like to ask you to ask yourselves 

these questions, and ask all the Members of Congress and the 

Senators to ask themselves these three questions: Do you believe 

in our Constitution and in our Nation’s republican form of government? Do you believe, as our Constitution declares, that all men 

are created equal? And, do you believe that all U.S. citizens should 

have the right to vote and the right to representation at all levels 

of government? 

If you answered yes to the third question, you should support 

and join our efforts to enact a bill for admission of Puerto Rico as 

a state. 

I have dedicated 52 years of my adult life in a quest for equality 

for the people of Puerto Rico. We have been disenfranchised 

31 

American citizens for 98 years. We have been denied our right to 

participate in our Nation’s democracy, and we have been denied 

any meaningful participation in our Nation’s government. We have 

also been denied the same economic opportunities which have been 

available to our fellow citizens in the 50 states. We are, as a matter 

of fact, the world’s last colony, with more than 1 million inhabitants. Under our Constitution, we are a U.S. territory. But in 

international, geopolitical terms, we are a colony. 

In spite of the fact that we have been denied equality and participation in our Nation’s democratic process ever since we were 

granted U.S. citizenship in 1917, more than 500,000 Puerto Rican 

Americans have served in our Nation’s armed forces, and tens of 

thousands have shed their blood and lost life and limbs in defense 

of democracy, and in defense of our Nation. Puerto Rican 

Americans have more than earned their right to equal participation 

in our Nation’s democratic process, as well as the right to vote for 

our President and to elect Senators and Representatives to 

Congress. 

We are tired and increasingly upset to have to plead for equality. 

We are tired and increasingly upset to have to plead and beg for 

equal terms in Federal grants for education for our children. We 

are tired of pleading and begging for equal terms in Federal health 

care grants to provide health services to our medically indigent. We 

are tired of pleading and increasingly upset to have to beg for 

equal terms and Federal grants to help families with insufficient 

income to support their children. And we are tired and increasingly 

upset of being told that we don’t qualify for Federal funding because we don’t pay Federal income taxes. 

How can Congress raise the issue of our non-payment of Federal 

income taxes when you know that we don’t have the power to impose Federal income taxes on income earned in Puerto Rico? Only 

Congress has that power. And why doesn’t Congress impose 

Federal income taxes on income earned in Puerto Rico? Because 

Congress knows that if they were to impose Federal income taxes 

on us without granting us equal voting rights and equal rights to 

elect Senators and Representatives to Congress, Congress would be 

invalidating our Nation’s famous ‘‘No taxation without representation’’ battle cry to end the colonial relationship with Great Britain. 

Yes, we are tired and increasingly upset by being denied the 

right to vote for our President, and the right to elect two Senators 

and Members of Congress that we would be entitled to as a state. 

And, we are particularly upset when we see our President and our 

Nation’s Congress spending billions of dollars and sending our 

Nation’s young men and women into harm’s way, to bring democracy to countries such as Iraq and Afghanistan, where they don’t 

understand it and don’t want it. At the same time, they have kept 

and are still keeping 3.6 million U.S. citizens disenfranchised, discriminated against, and denied equality under the laws of the 

Nation for no less than 98 years. 

It is no wonder that the United States is losing credibility and 

moral authority to preach democracy and to talk about strengthening democracy throughout the world. Our Nation is being ridiculed for its hypocrisy in spending billions of dollars and putting 

its young men and women in harm’s way to bring democracy to 

32 

people who don’t want it or don’t understand it, while at the same 

time they deny participation in the Nation’s democratic process to 

3.6 million American citizens because they live in Puerto Rico. 

I have enclosed with my statement a disc containing some very 

insightful and satirical criticism of our Nation’s hypocrisy with 

Puerto Rican Americans made by British comedian John Oliver. 

You will not only be enlightened by it, you will also enjoy it very 

much. And I also made a short editor—3 minutes and 30 seconds, 

that will be available also. 

Yes, we must stop begging for equality and demand it loud and 

clear and belligerently, if need be. It is way past the time when 

Congress and the President should have put an end to our disenfranchisement and to our being denied equal opportunities under 

the laws of our Nation. How can anyone who claims to believe in 

democracy stand idly by without putting an end to the discrimination and the unacceptable inequality between the 3,600,600 

American citizens who live in Puerto Rico and the 360 million fellow citizens in the 50 states? 

Whether we demand equality or not, it is the Congress and the 

President’s duty, as leaders of the world’s greatest democracy, to 

put an end to this inequality and denial to participate in our 

Nation’s democracy. 

We have decided to ask for admission as a state. In November 

2012, we held a referendum in Puerto Rico where the people were 

asked to vote whether they wanted to remain as a U.S. territory 

or not. Fifty-four percent of the voters said no, and 46 percent said 

yes. The referendum ballot had a second question to give the voters 

three options, to wit: statehood, sovereign commonwealth, or independence. A solid majority of 61 percent voted in favor of Puerto 

Rico being admitted as a state. 

The solid majority vote for statehood in 2012 cannot be ignored. 

This Congress must address the issue and consider enacting a bill 

to provide for the admission of Puerto Rico as a state. The bill 

should establish the conditions and the process, as well as the fiscal and economic arrangements that must be implemented for 

Puerto Rico to be admitted as a state. The plebiscite, or referendum, to be held would allow the American citizens who reside 

in Puerto Rico the opportunity to accept or deny the offer. The ballot would be a simple yes-or-no vote. All those who oppose statehood could vote no, so they cannot complain that they were not 

offered an option to exercise the right to vote. 

Of the 37 territories admitted to the Union since the 13 colonies 

joined to establish the United States of America, not a single one 

was disenfranchised for as long a period of time as we have been 

for 98 years. Not a single territory of the 37 admitted to the Union 

were deprived of equal economic opportunities and benefits for as 

long as we have. Not a single territory of the 37 territories who 

were admitted had as many citizens killed or wounded in the 

Nation’s wars as we have had in the 98 years since we became 

American citizens. 

The awareness of the importance and the benefits of being a 

state of the Union has become more obvious to Puerto Rican 

Americans as they suffer the effects of a worsening economic depression. As they increasingly feel they no longer have reasonable 

33 

opportunities to get a job or get ahead economically in the island, 

they are leaving Puerto Rico to look for substantially better opportunities in Florida, Texas, Georgia, New Jersey, New York, 

Connecticut, Pennsylvania, Massachusetts, Illinois, Ohio, and 

many other states. As a result, more and more Puerto Ricans realize that our island’s economic future lies in becoming the 51st 

state. 

We don’t want our sons and daughters, our brothers and sisters, 

our grandchildren, our family and our friends to leave Puerto Rico. 

We want them to stay and enjoy the same opportunities available 

to our fellow citizens in the 50 states. 

Puerto Ricans have also become more cognizant of the importance of having the right to vote for the President, and to elect 

Senators and Representatives to Congress in order to participate in 

our Nation’s sovereignty. The value to our dignity, to our economic 

development, and to our self esteem in having two Senators and at 

least five Members of Congress is much more widely understood 

and sought after than ever before. 

Rube ́n Berrı ́os, the President of the Independence Party, claimed 

that we needed more political power. Definitely we need more political power, and definitely two Senators and five or six Congressmen have much more power than the President of Puerto Rico as 

an independent nation. 

That, and much more is what millions of American citizens in 

Puerto Rico have been denied for 98 years. The time has come, not 

to beg or plead, but to demand equality. The time has come for 

Congress and the President to stop looking for excuses and enact 

a bill to admit Puerto Rico as a state, to be submitted to a vote 

in Puerto Rico. 

Thank you, Mr. Chairman. 

[The prepared statement of Mr. Barcelo ́ follows:] 

PREPARED STATEMENT OF CARLOS ROMERO BARCELO ́, FORMER GOVERNOR OF

PUERTO RICO

Mr. Chairman, members of the committee, good afternoon. Mr. Chairman I want 

to thank you, on behalf of all my fellow Puerto Rican Americans who, as American 

citizens, demand equal rights and equal participation in the democratic process and 

the government of our Nation with our fellow citizens in the 50 states of the Union, 

for all your efforts and support to our longtime quest for equality. 

Before we continue, I would like you to ask yourselves the following questions: 

1. Do you believe in our Constitution and in our Nation’s republican form of 

government? 

2. Do you believe as our Constitution declares, that, ‘‘all men are created equal’’, 

and 

3. Do you believe that all U.S. citizens should have the right to vote for their 

President and to elect Senators and Representatives to Congress? 

If you answered yes to the third question, you should support and join our efforts 

to enact a Bill for Admission of Puerto Rico as a state. 

I have dedicated 52 years of my adult life in a quest for equality for the people 

of Puerto Rico. We have been disenfranchised American citizens for 98 years. We 

have been denied our right to participate in our Nation’s democracy and we have 

been denied any meaningful participation in our Nation’s government. We have also 

been denied the same economic opportunities which have been available to our fellow citizens in the 50 states. We are, as a matter of fact, the world’s last colony 

with more than 1 million (1,000,000) inhabitants. Under our Constitution, we are 

a U.S. Territory, but in international geopolitical terms, we are a colony. 

34 

In spite of the fact that we have been denied equality and participation in our 

Nation’s democratic process ever since we were granted U.S. citizenship in 1917, 

more than 500,000 Puerto Rican Americans have served in our Nation’s armed 

forces and tens of thousands have shed their blood and lost life and limbs in defense 

of Democracy and defense of our Nation. Puerto Rican Americans have more than 

earned their right to equal participation in our Nation’s democratic process, as well 

as their right to vote for our President and to elect Senators and Representatives 

to Congress. 

We are tired and increasingly upset to have to plead for equality; we are tired 

and increasingly upset to have to plead and beg for equal terms in Federal grants 

for education of our children; we are tired of pleading and begging for equal terms 

in Federal health care grants to provide health services to our medically indigent; 

we are tired of pleading and increasingly upset to have to beg for equal terms in 

Federal grants to help families with insufficient income to support their children, 

and we are tired and increasingly upset at being told that we don’t qualify for equal 

funding because we don’t pay Federal income taxes. 

How can Congress raise the issue of our non-payment of Federal income taxes 

when you know that we don’t have the power to impose Federal income taxes on 

income earned in Puerto Rico. Only Congress has that power. And why hasn’t 

Congress imposed Federal income taxes on income earned in Puerto Rico? Because 

Congress knows that if they were to impose Federal income taxes on us without 

granting us equal voting rights and equal rights to elect Senators and Representatives to Congress, Congress would be invalidating our Nation’s famous ‘‘No taxation 

without representation’’ battle cry to end the colonial relationship with 

Great Britain. 

Yes, we are tired and increasingly upset by being denied the right to vote for our 

President and the right to elect two Senators and the number of Members of 

Congress that we would be entitled to as a state. And, we are particularly upset 

when we see our President and our Nation’s Congress spending billions of dollars 

and sending our Nation’s young men and women into harm’s way, to bring democracy to countries, such as Iraq and Afghanistan, where they don’t understand it, nor 

want it. At the same time, they have kept, and are still keeping, 3.6 million U.S. 

citizens, disenfranchised, discriminated against and denied equality under the laws 

of the Nation for no less than 98 years. 

It is no wonder that the United States is losing credibility and moral authority 

to preach democracy and to talk about strengthening democracy throughout the 

world. Our Nation is being ridiculed for its hypocrisy in spending billions of dollars 

and putting its young men and women in harm’s way to bring democracy to people 

in Iraq and Afghanistan who do not understand it nor want it, while they deny participation in the Nation’s democratic process to 3.6 million American citizens because they live in Puerto Rico. I have enclosed with my statement a disk containing 

some very insightful and satirical criticism of our Nation’s hypocrisy with Puerto 

Rican Americans made by British Comedian John Oliver. You will not only be enlightened by it, you will also enjoy it. 

Yes! We must stop begging for equality and demand it loud and clear; and belligerently, if need be. It is way past the time when Congress and the President should 

have put an end to our disenfranchisement and to our being denied equal opportunities under the laws of our Nation. 

How can anyone who claims to believe in democracy stand idly by without putting 

an end to the discrimination and the unacceptable inequality between the 

3.6 million American citizens who live their 360 million fellow citizens in the 50 

states. Whether we demand equality or not, it is the Congress and President’s duty, 

as leaders of the world’s greatest democracy, to put an end to this inequality and 

denial to participate in our Nation’s democracy. 

We have decided to ask for admission as a state. On November 2012, we held a 

referendum in Puerto Rico where the people were asked to vote whether they wanted to remain as a U.S. Territory or not, and 54 percent of the voters said no and 

46 percent said yes. The referendum ballot had a second question which gave the 

voters three (3) options, to wit: Statehood, Sovereign Commonwealth, or Independence. A solid majority of 61 percent voted in favor of Puerto Rico being admitted 

as a state. 

The solid majority vote for statehood in 2012 cannot be ignored. This Congress 

must address the issue and consider enacting a bill to provide for the admission of 

Puerto Rico as a state. The Bill should establish the conditions and the process, as 

well as the fiscal and economic arrangements that must be implemented for Puerto 

Rico to be admitted as a state. The plebiscite or referendum to be held would allow 

the American citizens who reside in Puerto Rico the opportunity to accept or deny 

the offer. The ballot would be a simple Yes or No vote. All those who oppose stateVerDate Mar 15 2010 08:25 Dec 15, 2015 Jkt 000000 PO 00000 Frm 00038 Fmt 6633 Sfmt 6621 J:\114TH CONGRESS\INDIAN, INSULAR & ALASKA NATIVE AFFAIRS\06-24-15\95300.TXT
35 

hood could vote No, so they cannot complain that they were not offered an option 

to exercise their right to vote. 

Of the 37 territories admitted to the Union since the thirteen (13) colonies joined 

to establish the United States of America, not a single one was disenfranchised for 

as long a period of time as we have been for 98 years. Not a single territory of the 

37 admitted to the Union were deprived of equal economic opportunities and benefits for as long as we have. Not a single territory of the 37 territories which were 

admitted had as many of its citizens killed or wounded in the Nation’s wars as we 

have had in the 98 years since we became American citizens. 

The awareness of the importance and of the benefits of being a state of the Union 

has become more obvious to Puerto Rican Americans as they suffer the effects of 

a worsening economic depression. As they increasingly feel they no longer have reasonable opportunities to get a job or get ahead economically in the island; they are 

leaving Puerto Rico to look for substantially better opportunities in Florida, Texas, 

Georgia, New Jersey, New York, Connecticut, Pennsylvania, Massachusetts, Illinois, 

Ohio and many other states. As a result, more and more Puerto Ricans realize that 

our island’s economic future lies in our becoming the 51st state. 

We don’t want our sons and daughters, our brothers and sisters, our grandchildren, our family and our friends to leave Puerto Rico, we want them to stay and 

enjoy the same opportunities available to our fellow citizens in the 50 states. 

Puerto Ricans have also become more cognizant of the importance of having the 

right to vote for the President and to elect Senators and Representatives to 

Congress in order to participate in our Nation’s sovereignty. The value to our dignity, to our economic development and to our self-esteem having two (2) Senators 

and at (5) Members of Congress is much more widely understood and sought than 

ever before. 

That, and much more is what millions of American citizens in Puerto Rico have 

been denied for 98 years. The time has come, not to beg or plead, but to demand 

equality! The time has come for Congress and the President to stop looking for excuses and enact a Bill to admit Puerto Rico as a state, to be submitted to a vote 

in Puerto Rico. 

Mr. YOUNG. Thank you, Carlos. I have to say you said it very 

well—couldn’t be said better. I did give you a little more time. I 

don’t want the rest of you to get the idea I can be that lenient, but 

I might. Depends on how well you are doing. See, I was interested 

in what he had to say. 

Mr. BARCELO ́. Thank you, Chairman. I know you have always 

been very supportive, and I remember the day in the House when 

we won by one vote. 

Mr. YOUNG. Yes, right. 

Luis, former Governor, former colleague. Welcome aboard. 

STATEMENT OF LUIS G. FORTUN ̃ O, FORMER GOVERNOR OF 

PUERTO RICO, 2009–2011 (PNP), WASHINGTON, DC 

Mr. FORTUN ̃ O. Thank you, Mr. Chairman. It is a pleasure to see 

you and so many other friends, and I thank you for your leadership 

on this issue. 

The focus of today’s hearing is on point, because the economic 

outlook of Puerto Rico is directly linked to the historical necessity 

of a permanent, constitutionally-defined political status. The current economic crisis is a cruel manifestation that territorial status 

is not a sustainable model for the political economy of America’s 

last large and populous territory. 

Real people are enduring harsh suffering because Puerto Rico’s 

development is being suppressed by a century of even more severe 

constraints on growth than 32 other territories experienced before 

transitioning to a statehood economy. The dire situation that has 

36 

developed under the commonwealth regime is demonstrated by 

graphs that I have provided to this subcommittee. 

With the exception of a year and a half between 2011 and 2012, 

Puerto Rico’s economy has been in negative territory during the 

last 9 years. The situation has turned critical during the last 30 

months. We must reverse this accelerating decline and restore fiscal discipline, so that people can go back to work and families can 

recover optimism and prosperity. 

But, Puerto Rico’s full potential for economic success and job creation will not be realized until economic uncertainty generated by 

the island’s unresolved political status is replaced by stability and 

full participation in the U.S. national economy. The 3.5 million 

U.S. citizens of Puerto Rico get it. That is why a 54 percent majority voted to end the current status in the plebiscite of 2012. 

With voter turnout exceeding 78 percent, more than 61 percent 

of voters chose statehood over separate sovereign nation, with or 

without a treaty of free association. Results certified by the Puerto 

Rico Elections Commission confirmed that the total number of 

votes cast for statehood was greater than the total vote for the current status. That means the current status was defeated on the 

first ballot question, while statehood won a strong majority on the 

second ballot question. 

There is no legal basis for assigning a meaning to blank ballots 

on the second question in the 2012 vote, while there is a historical 

precedent for a federally-sponsored vote to confirm the results of 

the 2012 plebiscite. That is why Congressman Pierluisi’s bill, will 

empower voters either to confirm or reverse the 2012 vote for 

statehood. 

H.R. 727 is fully consistent with the purpose of the 2014 bipar- tisan legislation in which Congress allocated $2.5 million for a new 

status vote. Its objective can be accomplished pursuant to the 

Pierluisi bill, under which the U.S. Attorney General still must certify the ballot question is legally valid under Federal law. 

Yet, instead of open democratic self-determination, the ideological faction clinging to the status quo insists on obstructing the will 

of the people, as clearly expressed in the 2012 plebiscite. The defenders of the status quo can’t even agree on a legally valid nonterritorial status themselves. 

The status proposals made in the past by the commonwealth 

party have not been constitutionally valid, and there is no indication that this time it will be any different. Meanwhile, as time 

passes, a steady and indeed unprecedented stream of U.S. citizens, 

denied both self-determination and equal economic opportunity in 

the territory, continue the exodus to acquire equal rights secured 

under our Constitution only through residence in a state. 

But vast relocation within our national borders should not be required for U.S. citizens in a territory to attain equal rights. People 

know that in America equality includes government by consent, 

and in the United States that means voting rights in Federal elections secured only for residents of a state under our Constitution. 

The real meaning of the 2012 vote is that decades of false doctrine on political status options have ended. A majority of your fellow citizens in Puerto Rico now understand that the most sacred 

fundamental rights of citizenship can be secured permanently and 

37 

constitutionally only by citizenship in a state of the Union. This 

modern-day diaspora is a direct reflection of the inequities of the 

current territorial status and a direct response to the lack of action 

by Congress to address this flaw in our democratic way of life. 

Every month, thousands of American citizens relocate from the 

island, leaving their homes and families behind, in search of equal 

opportunities, equal rights, and economic freedom that can only be 

attained in one of the 50 states. That is why supporters of statehood are not afraid to put the status we support to the test of an 

up-or-down vote. The most logical and democratic way for Congress 

to know where we stand as Americans is to allow us an up-or-down 

vote to confirm or overturn the 2012 results. 

Thank you, and it is great seeing you again, Mr. Chairman. 

[The prepared statement of Mr. Fortun ̃ o follows:] 

PREPARED STATEMENT OF THE HON. LUIS G. FORTUN ̃ O, FORMER GOVERNOR OF

PUERTO RICO

Chairman Young, Ranking Member Ruiz and other members of this subcommittee: The focus of today’s hearing is on point, because the economic outlook 

for Puerto Rico is directly linked to the historical necessity of a permanent, constitutionally defined political status. 

The current economic crisis is a cruel manifestation that territorial status is not 

a sustainable model for the political economy of America’s last large and populous 

territory. Real people are enduring harsh suffering because Puerto Rico’s development is being suppressed by a century of even more severe constraints on growth 

than 32 other Federal territories experienced before transitioning to a statehood 

economy. 

The dire situation that has devolved under the commonwealth regime is 

demonstrated by graphs from reports released by the Puerto Rico Government 

Development Bank that I have provided to this subcommittee (Exhibit A). With the 

exception of a year and a half between 2011 and 2012, Puerto Rico’s economy has 

been in negative territory during the last 9 years. Said situation has turned critical 

during the last 30 months. We must reverse this accelerating decline and restore 

fiscal discipline so that people can go back to work and families can recover optimism and prosperity. 

But there can no longer be any illusions about one transcendental truth. Puerto 

Rico’s full potential for economic success and job creation will not be realized until 

economic uncertainty generated by the island’s unresolved political status is replaced by stability and full participation in the U.S. national economy. 

The 3.5 million U.S. citizens of Puerto Rico get it. That is why a 54 percent majority voted to end the current status in the plebiscite of 2012. With voter turnout exceeding 78 percent, more than 61 percent of voters chose statehood over separate 

sovereign nationhood, with or without a treaty of free association. 

Results certified by the Puerto Rico Elections Commission confirm that the total 

number of votes cast for statehood (834,191) was greater than the total vote for the 

current status (828,077). That means the current status got an up or down vote and 

was defeated on the first ballot question, while statehood won a strong majority on 

the second ballot question. 

There is no legal basis for assigning a meaning to blank ballots on the second 

question in the 2012 vote, while there is historical precedent for a federallysponsored vote to confirm the results of the 2012 plebiscite. That is why Congressman Pierluisi’s bill (H.R. 727) will empower voters either to confirm or reverse the 

2012 vote for statehood. 

H.R. 727 is fully consistent with the purpose of the 2014 bipartisan legislation 

in which Congress allocated $2.5 million for a new status vote. Its objective can be 

accomplished pursuant to the Pierluisi bill, under which the U.S. Attorney General 

still must certify the ballot question is legally valid under Federal law. 

Yet, here we are in 2015, and instead of open democratic self-determination, the 

ideological faction clinging to the status quo insists on obstructing the will of the 

people as so clearly expressed in the 2012 plebiscite. The simple truth is that defenders of the status quo can’t even agree on a legally valid non-territorial status 

definition. The status proposals made in the past by the commonwealth party have 

not been constitutionally valid, and there is no indication that this time it will be 

any different. 

38 

Meanwhile, as time passes, a steady and indeed unprecedented stream of U.S. 

citizens, denied both self-determination and equal economic opportunity in the territory, continue the exodus to acquire equal rights secured under our Constitution 

only through residence in a state. 

But mass relocation within our national borders should not be required for U.S. 

citizens in a territory to attain equal rights. People know that in America equality 

includes government by consent, and in the United States that means voting rights 

in Federal elections secured only for residents of a state under Article I and Article 

II of the Constitution. 

Thus, the real meaning of the 2012 vote is that decades of false doctrine on political status options have ended. A majority of your fellow citizens in Puerto Rico now 

understand that the most sacred fundamental rights of citizenship can be secured 

permanently and constitutionally only by citizenship in a state of the Union. This 

modern-day diaspora is a direct reflection of the inequities of the current territorial 

status and a direct response to the lack of action by Congress to address this flaw 

in our democratic way of life. Every month, thousands of American citizens relocate 

from the island, leaving their homes and families behind, in search of equal opportunities, equal rights and economic freedom that can only be attained in one of the 

50 states of the Union. 

That is why supporters of statehood are not afraid to put the status we support 

to the test in an up or down vote. As fate would have it, the most logical and democratic way for Congress to know where we stand as Americans is to allow an up 

or down vote to confirm or overturn the 2012 results. 

* The opinions expressed in this testimony are my own and do not necessarily 

represent the opinions of Steptoe & Johnson, LLP, its employees or clients. 

Attachment: Exhibit A 

EXHIBIT A 

39 

Mr. YOUNG. I thank you, Governor. And you are good at this. 

You learned something here. Five minutes, right on the button. 

[Laughter.] 

Mr. YOUNG. Acevedo Vila ́, former Governor of Puerto Rico, 

former Commissioner, you are up. 

40 

STATEMENT OF ANI ́BAL ACEVEDO VILA ́ , FORMER GOVERNOR 

OF PUERTO RICO, 2005–2009 (PPD), SAN JUAN, PUERTO RICO 

Mr. VILA ́. Thank you, Mr. Chairman. Thank you for the 

invitation. 

I will start by saying the title of this hearing is quite revealing, 

since these procedures are not to analyze any pending legislation, 

and there is no prospect of legislative action in the near future. 

On the other hand, the fact that this hearing combines the political relationship between Puerto Rico and the United States and 

the economic situation in the island is quite revealing, too. As far 

as I can remember, this is the first time any institution of any of 

the branches of the Federal Government have implicitly or explicitly recognized the important linkage between these two areas. 

I have written and submitted a well thought-out document and 

a factually accurate testimony about the current economic crisis in 

Puerto Rico and what it means for our political status. I invite you 

to read it carefully. But since this committee has allowed me only 

5 minutes to talk about such a critical point in time for our people, 

I am going to use my time today to request something of you, and 

make a plea for my people and my island. And I am sure that, from 

it, the subcommittee can draft a proper agenda of business to give 

adequate attention to our current economic situation. 

While Puerto Rico first produced sugar and then soldiers, the 

United States told the world we were working together. While 

Puerto Rico provided thousands of our limited acres for military 

training and an open economy where American businesses flourish 

and prospered, you told the world we work together. We have gotten to where we are today together. Yes? A lot of the good and the 

bad were done by our own hands. But a lot of the good and the bad 

were done by your hands, too. Yes, it doesn’t matter how you characterize it. The truth is that we have been in this together. 

Now Puerto Rico is in a deep crisis that is threatening essential 

government services, including safety, education, and health care. 

Our economy has closed the door to hundreds of thousands of 

Puerto Ricans that have left their families and homes behind. But, 

contrary to the good old days, this time the U.S. Government is 

keeping distance. In this crisis, you say now we are not together. 

I have no problem accepting our fault in the current crisis. But 

to pretend it is 100 percent our fault is incorrect and immoral. The 

economic crisis was worsened by the elimination by Congress of 

Section 936 of the Internal Revenue Code, and by fiscal policies 

and actions and lack of actions by the U.S. Government and of this 

Congress. 

Our budget bubble happened at the same time that yours, under 

a monetary policy that fostered billions of dollars of unpayable 

debt. The Federal Reserve recognized its hand in the 2000 mortgage crisis, and set the money printing press to ‘high’ to solve it. 

But we have been left behind in the call. 

Let me tell you, Congressmen and Congresswomen, in this crisis 

we are together. We worked together getting it, and work together 

in the consequences. Together, we will suffer the dislocations of uncontrollable migration. Together we will be hit by rising social programs and needs. Together we will face financial litigation by 

41 

ravenous creditors looking for every penny, and with not even a 

law to organize the process. 

No matter what you may think or want to believe, we are in this 

together. Actually, there is a Supreme Court case solved in 2007, 

which I quote in detail in my written testimony and it is included 

as an annex, that specifically addresses this issue in state—that in 

a situation where a U.S. territory faces economic insolvency, the 

U.S. Government is responsible and might be liable. 

I have no doubt that we can solve our crisis and can come out 

of it stronger, if you realize that we are still together and come to 

the table to work with us. One-sided solutions won’t work, whether 

they come from your side or ours. 

I request of you a joint resolution of Congress, asking the 

Treasury Department and the Federal Reserve to roll up their 

sleeves and do more than just give advice. They need to get involved and be part of the solution. They have the power and the 

tools and the responsibility to do it. We are willing to sacrifice, but 

we need a fighting chance. No country, no state, no jurisdiction has 

gotten out of a crisis like ours without a bankruptcy law, a central 

bank intervention, or help from outside. 

Call our relation a bilateral compact or a colonized territory. At 

this time it all means one thing: we are in this together. Thank 

you. 

[The prepared statement of Mr. Vila ́ follows:] 

PREPARED STATEMENT OF ANI ́BAL ACEVEDO VILA ́, FORMER GOVERNOR OF

PUERTO RICO

I want to thank this subcommittee and its Chairman for holding this hearing and 

for the invitation to testify. The first time I testified before the full Committee on 

Natural Resources was back in 1997 when I first became president of the Popular 

Democratic Party. A few years after that, I became a member of the House and of 

the committee and, as you know, later I was elected Governor of Puerto Rico. One 

thing is clear with the passing of all those years, there has been no action from Congress to deal with the status of Puerto Rico. And regarding the economic situation 

of the Island, the actions taken by Congress in the last 20 years have badly hurt 

our economy. It’s clear we are in a worst situation today and that, yes, the United 

States has failed the people of Puerto Rico despite us being together for so long. 

While Puerto Rico first produced sugar and then soldiers, the United States and 

our island worked together. While Puerto Rico provided thousands of our limited 

acres for military training and an open economy where American businesses flourished and prospered, you told the world we worked together. We have gotten to 

where we are today, together. A lot of the good and the bad were done by our own 

hands moreover a lot of the good and the bad were done by your hands, too. Now, 

Puerto Rico is in a deep crisis that is threatening essential government services, including safety, education and health care. But contrary to the good old times, this 

time the U.S. Government is keeping its distance. 

I must say the title of this hearing is quite revealing. First, it is evident this hearing is not to analyze any pending legislation before this subcommittee, and therefore 

there’s no prospect of actual legislative action in the near future. On the other hand, 

the fact that the hearing combines the issue of the political relationship between 

Puerto Rico and the United States and the economic situation in the island is quite 

revealing, too. As far as I can remember, this is the first time any institution of 

any of the branches of the Federal Government have implicitly or explicitly recognized the important linkage between these two areas. 

For the last 2 years I have written and spoken about these two issues. I have 

submitted for the record a PDF file of a book I published in English in August of 

last year. I invite you to read it carefully, but I’ll briefly explain my conclusions and 

commendations: 

1. It is long past overdue a deep revision of the economic relationship between 

Puerto Rico and the United States. For many years this subcommittee and 

the full committee have approached the issue of that relationship from a 

42 

political perspective, but that has taken us nowhere other than to this major 

economic crisis in our modern history. The problems between Puerto Rico and 

the United States are economic as well as political. 

2. After many decades of economic progress, the island is running out of time 

and the U.S. Government and its people need to know it’s their problem too, 

because we are in this crossroads together. 

3. The economy has been in recession for more that 8 consecutive years; government has been running deficits for more than 20 years and the government 

debt service of a debt surpassing $70 billion is unbearable. As I explain in 

more detail in my book, with the way things are moving, the day Puerto Rico 

will have to default in its payment of the debt is fast approaching and Puerto 

Ricans know that. A recent poll made public shows that 57 percent of the people are convinced ‘‘the debt, as it stands today, cannot be paid, the government should tell so to the bond holders, and a negotiation to restructure the 

debt should start.’’ 

4. This crisis is affecting the capability of the government of Puerto Rico to 

provide basic services to the people, including health. 

5. If the government of Puerto Rico is not able to provide those services, it will 

become a problem for the U.S. Government. If Puerto Ricans continue leaving 

the island, that will become a U.S. problem. If Puerto Rico can’t pay its debts, 

it will definitely become (and almost is) a U.S. problem. And as I will briefly 

explain here, the U.S. Government might even have a legal responsibility for 

that $70 billion debt. 

Although Puerto Rico bears a great part of the blame for its economic crisis, the 

United States is also responsible for it. It’s not only the elimination of Section 936 

of the IRS Code in the 1990s without giving Puerto Rico another tool to compensate 

for that loss. It’s also the indiscriminate application of Federal laws and regulations 

to our Island. The United States is the strongest and most developed economy of 

the world while Puerto Rico is still a developing economy. To impose the economic 

rules and standards of the most developed economy of the world upon a developing 

economy is a recipe for disaster. 

The most recent report on Puerto Rico of the Federal Reserve Bank of New York 

(July 2014), specifically mentions as elements that hinder our economic growth, the 

application of the Federal minimum wage and the Jones Act to Puerto Rico, which 

are both clear examples of economic variables beyond our control. In fact, the Chairman of the Natural Resources Committee, Congressman Rob Bishop, has publicly 

expressed concerns about the negative economic impact the application of certain 

EPA rules can have in Puerto Rico due to our high costs of energy and the need 

we have to move toward more natural gas. 

As someone said sometime ago, ‘‘it’s the economy, stupid.’’ 

Regarding Puerto Rico’s $72 billion public debt, there is also a shared responsibility. All that debt was originally incurred when Puerto Rico had a positive credit 

rating by the American credit agencies, and was all originally sold in the strongly 

regulated Federal municipal bond market. The years in which the amount of money 

being borrowed exploded, was during the time the Federal Reserve Bank carried out 

its expansive monetary policy with near zero interest rates. To that same extent, 

the crisis of the banking system in the United States, which almost collapsed in 

2008, had a similar origin. In our case, if we were incurring in too much debt, it 

was in part because the Feds kept the interest rates artificially low, which in turn 

opened the appetite in Wall Street for higher yielding bonds from Puerto Rico, all 

under the watchful eyes of the various Federal credit rating agencies. 

I firmly believe the United States has to be part of the solution to Puerto Rico’s 

economic and debt crises. I firmly believe we are in this together, and not as a legal 

argument, but because there is a shared responsibility. But at the end of the day, 

it might be the legal responsibility that will move the United States to action. The 

U.S. Supreme Court might decide that the U.S. Government is responsible for 

Puerto Rico’s debt. 

Let’s understand how that debt was incurred. Puerto Rican bonds are regulated 

by Federal law (Section 745 of title 48 of the United States Code). Our bonds have 

been marketed based on a Federal law, playing by the Federal rules. This provision 

was adopted in 1917 as part of the plenary powers of Congress over the territory 

of Puerto Rico. Congress ordered the other states not to tax our bonds, something 

that clearly Congress has no power to do with regards to specific state bonds. 

For the last 25 years or more, the official position of the U.S. Department of 

Justice, the House and Senate committees with jurisdiction over Puerto Rico and 

the White House reports of both presidents, George W. Bush and Barack Obama, 

43 

have established that even after the establishment of the Commonwealth of Puerto 

Rico in 1952, Puerto Rico is still a non-incorporated territory. The most recent report from the White House specifically states: ‘‘under Commonwealth option, Puerto 

Rico would remain, as it is today, subject to the Territory Clause of the 

U.S. Constitution’’ (March 2011). Therefore, it could be argued the powers that 

Congress had to establish Section 745 in 1917 granting triple tax exemption to our 

bonds, are the same powers they have today to keep that exemption and impose it 

upon the 50 states. All this legal and financial history is a clear indication the U.S. 

Government has a shared responsibility over our debt. 

In January 8, 2007, the U.S. Supreme Court ruled on the case of Limtiaco v. 

Camacho (549 U.S. 483 (2007)). The issues are quite particular, but the rationale 

of the decision is very interesting. There was a ‘‘local’’ dispute between the Governor 

of Guam and his attorney general regarding a bond issuance and whether it was 

an infringement of a debt limitation disposition included in the Federal Organic Act 

of Guam. The Governor obtained a declaration from the Guam Supreme Court that 

the issuance of bonds to fund the territory’s continuing obligations, authorized by 

Guam’s legislature, was not in violation of debt limitation disposition contained in 

the Organic Act of Guam, contrary to the contention of Guam’s attorney general. 

The U.S. Court of Appeals for the Ninth Circuit dismissed the attorney general’s 

appeal. The U.S. Supreme Court reversed. It is the last paragraph of the Court’s 

opinion, written by Justice Thomas, that brings some light to the Federal Government’s responsibility in regards to the debt of a territory: 

‘‘It may be true that we accord deference to territorial courts over matters of 

purely local concern. This case does not fit that model, however. The debt-limitation provision protects both Guamanians and the United States from the potential consequences of territorial insolvency. Thus, this case is not a matter of purely local concern.’’ 

For many years during my political life I have argued against the definition of 

Commonwealth as a territory. That was my main argument when I first testified 

before this committee back in 1997. Nevertheless, the official position of this committee and the U.S. Government is that we are still a territory. If that is the case, 

taken together with cited Section 745, there is a strong argument the United States 

might bear ‘‘the potential consequences’’ of Puerto Rico’s insolvency and that the $72 

billion debt ‘‘is not a matter of purely local concern.’’ The Federal Government cannot say that we ‘‘remain, as it is today, subject to the Territory Clause of the U.S. 

Constitution’’ in order to deny Puerto Rico the powers to solve our economic and social crisis, and now turn around and say they have no responsibility regarding our 

debt because the debt crisis is a ‘‘a matter of purely local concern.’’ 

You cannot have your cake and eat it too. 

THE CLOCK IS TICKING. The government of Puerto Rico has entertained many 

important economic, fiscal and government reform initiatives. They were urgent and 

needed, but the crisis is beyond all that. If the U.S. Government and its people do 

not realize soon Puerto Rico is a problem that needs to be addressed with new 

thinking and new approach, the United States will soon wake up with a new domestic crisis with international ramifications. 

I have no doubt that we can solve our crisis and come out of it stronger if you 

realize that we are still together and come to the table to work with us. One-sided 

solutions won’t work whether they come from your side or ours. 

That’s why I request a joint resolution of Congress requesting the Treasury 

Department and the Federal Reserve to roll up their sleeves and do more than just 

give us advice. They need to get involved and be part of the solution. They have 

the power and the tools to help us. We are willing to sacrifice, but we need a fighting chance. No country, no state, no jurisdiction has gotten out of a crisis like ours 

without a bankruptcy law, a central bank intervention or help from outside. 

Call our relation a bilateral compact or a colonized territory. At this time, it all 

means one thing: we are in this together. 

Thank you for inviting me and don’t hesitate to contact me if you want a deeper 

discussion. 

Mr. YOUNG. Thank you, Governor. 

Carmen, the Mayor of San Juan. Beautiful town, great people. 

Haven’t had the privilege of meeting you yet. Thank you. You are 

welcome. 

44 

STATEMENT OF CARMEN YULIN CRUZ SOTO, MAYOR OF SAN 

JUAN, 2013–PRESENT (PPD), SAN JUAN, PUERTO RICO 

Ms. SOTO. Thank you very much, Chairman and members of the 

committee, for the opportunity. Puerto Rico has enjoyed, in the 

past, a commonwealth status responsible for catapulting our economic development. But the world has changed. That which once 

made us successful now lacks the necessary tools to handle today’s 

reality. Ultimately, any viable political status must provide the 

necessary economic tools to engage and sustain an equitable economic growth while strengthening our democracy. 

Puerto Rico has been denied these tools far too long, and as long 

as our options are defined by the powers of this Congress, we will 

always be at your mercy. The measure of our success will always 

be limited by the vastness of your control over our affairs. 

I admit, as did the Governor, that our current financial situation 

has a healthy dose of shared responsibility. For years, we engaged 

in chronic patterns of unhealthy indebtedness, while you denied us 

or took away the few tools we have at our disposal. Sir Winston 

Churchill once said, ‘‘Give us the tools to win this war.’’ It is profoundly evident that our political status will determine the tools we 

have at our disposal to wage and win the economic war we are immersed in. 

Far too long you have benefited from our inability to reach a consensus in the status question. No more—you can no longer use that 

as an excuse to neglect your responsibility. Paraphrasing Gandhi— 

‘‘The time has come for you to recognize that you are masters in 

somebody else’s land.’’ The time has come for you to put in motion 

a true self-determination process which ensures all voices and all 

options have equal access to the formulation and implementation 

of the status resolution issue. 

I come before you as one of the 454,768 Puerto Ricans who, in 

November 2012, voted to transform the present commonwealth relationship into a non-territorial, non-colonial, free associated state, 

to request that Congress include said option in any status-defining 

process in a manner which is distinguishable from other status 

options. 

Said new status is based on the recognition of the sovereignty of 

the people of Puerto Rico and our inalienable right to choose whichever form of government we see fit. The ELA Soberano will be 

forged on a compact of association in accordance with international 

law. We aspire, as the majority of Puerto Ricans, to guarantee for 

present and future generations the common bond of U.S. citizenship. 

Of course, any serious self-determination process—and I must 

clarify I am personally in favor of a status assembly—will take 

time. However, there are matters which may be addressed 

immediately. 

One, we must ensure Resident Commissioner Pedro Pierluisi’s 

bill to include Puerto Rico in Chapter 9 of the U.S. bankruptcy law 

is swiftly approved, so that we have the legal capability to restructure our obligations and pay them in a manner consistent with the 

well-being of our people. We recently tried to deal with this issue 

and the Federal court ruled against us. I fully support this bill. 

45 

Two, give us the authority to enter into commercial agreements 

with other countries, as well as partially or fully exempt us, just 

as the Virgin Islands next to us, from the yoke placed upon us by 

the Jones Act. 

You have the power to help Puerto Rico. Now you must exercise 

it. You have the moral obligation to end the trite pilgrimage of 

Puerto Ricans looking for the status question to be resolved. You 

must move forward. I assure you, you will be met by an alliance 

of relentless people who know how—who have in the past and will 

in the future, once again, overcome adversity. Thank you very 

much, Mr. Chairman. 

[The prepared statement of Ms. Soto follows:] 

PREPARED STATEMENT OF CARMEN YULIN CRUZ SOTO, MAYOR OF SAN JUAN, 

PUERTO RICO

I want to thank the Chairman and members of this subcommittee for today’s 

invitation to share my views regarding Puerto Rico’s political status and economic 

outlook. My name is Carmen Yulin Cruz Soto and I currently serve as Mayor of San 

Juan, Puerto Rico. 

Puerto Rico has enjoyed a Commonwealth status responsible for catapulting our 

economic development. But the world has changed; that which once made us successful now lacks the necessary tools to handle today’s reality. Ultimately, any viable political status must provide the necessary economic tools to engage in sustained 

and equitable economic growth while strengthening our democracy. 

Puerto Rico has been denied these tools far too long and as long as our options 

are defined by the powers of this Congress, we will always be at your mercy. The 

measure of our success will always be limited by the vastness of your control over 

our affairs. 

I admit, our current financial situation has a healthy dose of shared responsibility. For years, we engaged in chronic patterns of unhealthy indebtness, while you 

deny us—or have taken away—the few tools we have at our disposal. Sir Winston 

Churchill once said: ‘‘Give us the tools to win this war.’’ Have no doubt we are in 

the midst of an economic war. It is profoundly evident that our political status will 

determine the tools we have at our disposal to wage and win that war. 

Far too long you have benefited from our inability to reach a consensus in the 

status question. No more: you can no longer use that as an excuse to neglect your 

responsibility. Paraphrasing Gandhi: ‘‘the time has come for you to recognize that 

you are masters in somebody else’s land.’’ The time has come for you to put in motion a true self-determination process which ensures all voices and all options have 

equal access to the formulation and implementation of the status resolution issue. 

I come before you as one of the 454,768 Puerto Ricans who on November 2012 

voted to transform the present Commonwealth relationship into a non-territorial, 

non-colonial Free Associated State to request that Congress includes said option in 

any status defining process in a manner that is distinguishable from the present 

territorial Commonwealth, as well as from statehood and independence. 

Said new status is based on the recognition of the sovereignty of the people of 

Puerto Rico and our inalienable right to choose whichever form of government we 

see fit. 

The ELA SOBERANO will be forged on a compact of association in accordance 

with International Law. The definition presented to voters on 2012 stated that 

‘‘(s)uch agreement would provide the scope of the jurisdictional powers that the 

People of Puerto Rico agree to confer to the United States and retain all other jurisdictional powers and authorities.’’ We aspire, as the majority of Puerto Ricans, to 

guarantee, for present and future generations, the common bond of U.S. citizenship. 

Any serious self-determination process will take time; however there are matters 

which may be addressed immediately: 

1. Ensure Resident Commissioner Pedro Pierluisi’s bill to include Puerto Rico in 

Chapter 9 of the U.S. Bankruptcy Law is swiftly approved so that we have 

the legal capability to restructure our obligations and pay them in a manner 

consistent with the well-being of our people. We recently tried to deal with 

this issue and the Federal Court ruled against us. I fully support this bill. 

46 

2. Give us the authority to enter into commercial agreements with other 

countries as well as partially or fully exempt us from the yoke placed upon 

us by the Jones Act. 

You have the power to help Puerto Rico now; exercise it! You have the moral 

obligation to end the trite pilgrimage of Puerto Ricans looking for the status 

question to be resolved; move forward. 

I assure you, you will be met by an alliance of relentless people who know how 

and will in the future once again to overcome adversity. 

Thank you. 

Mr. YOUNG. I thank the good mayor. Now we have Miriam 

Ramirez, M.D., former Puerto Rican State Senator. 

STATEMENT OF MIRIAM J. RAMIREZ, M.D., FORMER PUERTO 

RICO STATE SENATOR, 2001–2004 (PNP), FOUNDER, PUERTO 

RICANS IN CIVIC ACTION, ORLANDO, FLORIDA 

Ms. RAMIREZ. Yes, Mr. Chairman. It has been a privilege to know 

you and count on your solid and courageous support to advance our 

struggle to achieve equal rights for the almost 4 million 

disenfranchised citizens in Puerto Rico. 

Decades ago you responded with your full support when more 

than 350,000 Puerto Ricans petitioned Congress for statehood. 

Today, you are again giving us an opportunity to obtain our equal 

rights and obligations as U.S. citizens of this great Nation. 

In my testimony here in Washington, on May 22, 1986, Congressman Morris Udall was the Chairman. And I mentioned our full 

rights as citizens being the fundamental reason for the poor economic performance of Puerto Rico. Today I want to focus my testimony on the negative consequences of the Federal tax regime that 

has kept Puerto Rico labeled as a foreign jurisdiction for almost a 

century. 

I have been hearing people here talking about the dire life in 

Puerto Rico, how bad it is. But did you know it is only for a group 

of people? Because we have a big percentage of people in Puerto 

Rico who relocate from the United States, and can live in Puerto 

Rico tax-free from Puerto Rico and for the Federal Government. I 

hate to get away from my testimony. I will continue reading it, but 

I am just too passionate about this issue. 

In 1996, I have been hearing here about how, after Section 936 

was eliminated, the former Section 936 firms used Puerto Rico’s 

foreign tax status and converted to controlled foreign corporations 

(CFCs)—corporate welfare. However, the CFCs in Puerto Rico are 

not obligated to create local jobs or to generate any real investment 

in order to benefit from the Federal tax deferral. Using transfer 

pricing abuses, the CFCs in the island are causing the 

U.S. Treasury to lose billions in Federal tax revenue without creating jobs and investment in the island. 

The Senate Permanent Subcommittee on Investigations identified one company in Puerto Rico—just one—that has come public 

that benefits from a tax saving of $22 million a year per employee, 

and they have about 170 employees. And most of them—I don’t 

have the statistics—are on part-time jobs. The U.S. taxpayer is also 

maybe paying for some of this money that is coming and creating 

this dependence in Puerto Rico. 

47 

Also, to exploit the special Federal tax code of Section 933, the 

pro-statehood administration adopted—the former one—two laws 

in 2012, Act 20 and Act 22, to entice millionaires who reside in the 

50 states to relocate to Puerto Rico by taxing their corporate profits 

from exported services at a flat 4 percent rate, and allowing those 

profits to be paid out to these owners free of Puerto Rico income 

tax. Bring them here and ask them how they feel living in Puerto 

Rico is. 

Thus, the CFC regime in Puerto Rico has become a significant 

drain of tax revenue, and a formidable opponent of statehood for 

Puerto Rico. Keeping Puerto Rico as a foreign country, as we are 

coded in the IRS, inside the United States, undermines the U.S. 

Federal tax base, and creates unfair competition against local communities in the 50 states and in Puerto Rico. But the truth is that 

Puerto Rico is governed by the CFC regime and the economic 

power of the super-billionaires who relocate without paying taxes. 

But that is not the only damage they do. They have the most 

powerful public relations army in the world, ready to lobby and 

fight against anything that endangers this outrageous tax evasion 

scam. The worst concern for them is that Puerto Rico becomes a 

state of the Union, so they throw their lobbyists out here. And you 

will have, enclosed in my written testimony, a letter from one of 

the lobbyists, precisely after the plebiscite, demeaning the results 

of them. 

This is the reason that I find it impossible to fight against the 

CFCs if we want to achieve statehood. We have to make the CFCs 

part of the political status solution. Mr. Chairman, I propose that 

a statehood bill, with the defining terms of admission, and a 20- 

year transition period for maintaining the CFCs in Puerto Rico, 

come out of your committee. 

There is a precedent for previous statehood bills to include temporary tax benefits, and a transition period was included in Senate 

Bill 712 of 1990. 

Please do not hold any more plebiscites with the various options, 

we have been there and done that. We now put the ball in your 

side of the court. Define the admission terms and ask our people. 

And, Mr. Sablan, we are paying for Mr. Ce ́sar Miranda’s testimony, even though he is reporting for the Governor. He is reporting for one of the status options, so we are basically paying for 

that. 

[The prepared statement of Ms. Ramirez follows:] 

PREPARED STATEMENT OF MIRIAM J. RAMIREZ, MD, FORMER PUERTO RICO

STATE SENATOR

Honorable Chairman Young and members of the committee: My name is Miriam 

Ramirez, I am a medical doctor, former Senator of the New Progressive Party in 

Puerto Rico, and founder of a non-partisan grassroots movement, called Puerto 

Ricans in Civic Action, which gathered more than 350,000 individually signed petitions for statehood and delivered them to Congress in the 1980s. 

Mr. Chairman, it is has been a privilege to know you and count on your solid and 

courageous support to advance our struggle to achieve equal rights for the almost 

4 million disenfranchised U.S. citizens in Puerto Rico. Decades ago you responded 

with your full support when more than 350,000 Puerto Ricans petitioned Congress 

for statehood. Today you are again giving us an opportunity to obtain our equal 

rights and obligations as U.S. citizens of this great Nation. 

In my testimony to this committee on May 22, 1986, when Congressman Morris 

Udall was the chairman, the focus of the hearing was the lack of economic growth 

48 

and welfare dependency in Puerto Rico. Back then I identified our lack of full rights 

as U.S. citizens as the fundamental reason for the poor economic performance of 

Puerto Rico, compared to other states. Today I want to focus my testimony on the 

negative consequences of the Federal tax regime that has kept Puerto Rico labeled 

as a ‘‘foreign’’ jurisdiction for almost 100 years. 

There are two Federal tax acts which have defined Puerto Rico’s tax identity since 

it became a U.S. territory in 1898. The first law—the Revenue Act of 1921— 

classified Puerto Rico as a ‘‘foreign country’’ for tax purposes. The second law, enacted by Congress in 1996, eliminated Section 936 of the tax code, which was used 

then to promote new manufacturing jobs and investments in Puerto Rico. 

What happened in Puerto Rico after 1996? The former Section 936 firms used 

Puerto Rico’s ‘‘foreign’’ tax status to obtain the benefits of tax deferral, converting 

to Controlled Foreign Corporations (CFCs). Unlike the former Section 936 program, 

however, the CFCs in Puerto Rico do not have to create jobs and generate real investments to benefit from Federal tax deferral. Worse, the U.S. Treasury does not 

produce reports that inform Congress whether the CFCs create jobs and real investment in Puerto Rico. Today we know they don’t. 

The CFC regime in Puerto Rico has become a significant drain of tax revenue and 

a formidable opponent of statehood for Puerto Rico. Using transfer pricing abuses, 

the CFCs in the Island are causing the U.S. Treasury to lose billions in Federal tax 

revenue without creating jobs and investment in the Island. One company in Puerto 

Rico was identified by the Senate’s Permanent Subcommittee on Investigations with 

tax savings of $22 million per employee, and only generated 177 employees. Other 

details of this tax abuse are presented in the Appendix. 

Keeping Puerto Rico as a ‘‘foreign’’ country inside the United States undermines 

the U.S. Federal tax base and creates unfair competition against local communities 

in the 50 states. For example, in 2010 the Puerto Rico government imposed a 

4 percent excise tax on CFCs in Puerto Rico in order to pay for a significant reduction in income taxes at the local level. Normally, excise taxes cannot be used as foreign tax credits that reduce the U.S. tax liability dollar for dollar. However, in the 

case of the Puerto Rico’s 4 percent excise tax on the U.S. CFCs, the IRS took the 

position that it would not challenge if U.S. corporations claim a U.S. foreign tax 

credit. In contrast, taxes imposed in the 50 states can be deducted when calculating 

Federal income tax, provided they are attributable to the conduct of the corporation’s business. Effectively, the U.S. Treasury subsidized Puerto Rico’s 4 percent excise tax increase almost dollar for dollar. This unrecorded tax expenditure is not 

available in the 50 states. 

Politically, the CFCs are effectively in control of our major political parties and 

their governing agenda. Whenever the people put pressure for a process of self 

determination, millions of dollars appear out of nowhere to campaign against statehood, since it will be the death knoll for the CFC scam. 

There are hundreds of CFCs in Puerto Rico that make enormous campaign donations to the political leaders in Puerto Rico, many of whom are here today in this 

hearing. I have concluded it is impossible to fight the CFCs if we want to achieve 

statehood in Puerto Rico. We have to make the CFCs part of the political status 

solution. 

Mr. Chairman, I propose that the statehood bill for Puerto Rico that comes out 

of your committee include a 20-year transition for maintaining the CFCs in Puerto 

Rico. There is a precedent for adding temporary tax benefits in statehood bills and 

a transition period was included in the Senate Bill 712 in 1990. 

There is another tax provision that goes back almost 100 years that is keeping 

Puerto Rico back, preventing us from receiving the full benefits of U.S. citizenship, 

namely Section 933 of the Internal Revenue Code (IRC). 

As you know, Mr. Chairman, Congress in 1917 granted U.S. citizenship to individuals born in Puerto Rico. Thus, a person born in Puerto Rico is subject to the U.S. 

tax laws. However, Section 933 of the IRC exempts from U.S. taxation the Puerto 

Rico-source income obtained by bona fide residents of Puerto Rico. 

To exploit this special Federal tax status, the ‘‘pro-statehood’’ administration of 

former Governor Fortun ̃ o adopted two laws in 2012. Act 20 entices millionaires who 

reside in the 50 states to locate to Puerto Rico by taxing their corporate profits from 

exported services at a flat 4 percent rate and allowing those profits to be paid out 

to the owners free of Puerto Rico income tax. 

Act 22 grants new Puerto Rico residents a 0 percent rate on locally sourced interest and dividends as well as all capital gains accrued after they become residents, 

in order to attract hedge fund managers and active traders. So far 509 tax refugees 

have been granted Act 22 status and another 600 will get it this year, according 

to the Puerto Rico’s Department of Economic Development & Commerce. 

49 

1See Caribbean Business, ‘‘The real story behind Puerto Rico’s low 40.6% labor-participation 

rate,’’ May 10, 2011. 2Government Accountability Office, Tax Policy, Analysis of Certain Potential Effects of 

Extending Federal Income Taxation to Puerto Rico, GGD–96–127. 

This egregious legislation is effectively eroding the Federal and state income tax 

base and converting Puerto Rico into a tax haven in the U.S. backyard. We are despised by the Members of the U.S. Congress of New York, California, Connecticut 

and other states where these millionaires used to live. This is what our political 

leaders, of both major parties, have turned Puerto Rico into—a tax haven in the 

U.S. backyard for a few hundred millionaires. 

Mr. Chairman, the citizens of Puerto Rico are outraged by these shameful tax 

benefits given to a few hundred millionaires, while the rest of us have been subject 

to multiple tax increases by the present Administration in the last 3 years. We ask 

Congress to end this tax abuse, and eliminate Section 933 of the Internal Revenue 

Code immediately. 

Some observers in the past have expressed the opinion that the residents of 

Puerto Rico are better off because Federal income tax laws do not apply in the 

Island. This opinion is not correct for two reasons: 

1. The Federal income tax provides job incentives that are lacking in Federal 

direct spending programs. For example, the exclusion of Puerto Rico residents 

from the Federal income tax has prevented almost 60 percent of working families from receiving the Federal Earned Income Tax Credit (EITCs). The 

Federal income tax could be used as an effective tool to increase Puerto Rico’s 

40 percent labor force participation rate, which is the lowest in the United 

States.1

2. The introduction of the Federal income tax, with the administrative support 

of the Internal Revenue Service, would increase the effectiveness of the local 

tax administration in Puerto Rico. Local tax auditors in the Department of 

Hacienda have experienced a 50 percent decrease in the last 6 years, at the 

time when the underground economy in Puerto Rico has grown to about 25 

percent of the market economy. 

Previous congressional studies have already shown the benefits of participating in 

the Federal tax system. For example, GAO in 1996 found that if IRC tax rules are 

applied to residents of Puerto Rico, the average EITC earned by eligible taxpayers 

would be $1,494, taxpayers would owe around $623 million in Federal income tax 

before taking into account the earned income tax credit (EITC), and the aggregate 

amount of EITC would total $574 million. About 59 percent of the population filing 

individual income tax returns would earn some EITC, and 41 percent of the households filing income tax returns would have positive Federal income tax liabilities, 

greater than the EITC received. Thus, the introduction of the Federal income tax 

in Puerto Rico for individuals would generate a wealth transfer from higher-income 

individuals who would pay Federal income taxes, to lower-income earners who 

would receive a refundable credit.2

Mr. Chairman, this is the right moment to draft legislation to resolve the political 

status of Puerto Rico, and include Puerto Rico in the U.S. tax code, with all the responsibilities and privileges of U.S. citizens. This historic change can be achieved 

by deleting Section 933 of the Internal Revenue Code, and defining corporations incorporated in Puerto Rico as U.S. Corporations, for tax and other purposes. 

With Puerto Rico’s full inclusion in the tax code, Congress can stop transfer 

pricing abuses and create effective tax benefits that generate real jobs and promotes 

tangible investments in Puerto Rico through specific legislation that treat 

U.S. citizens in the Island in a manner similar to other communities in the 50 

states. There is a real opportunity to draft effective legislation for Puerto Rico that 

creates a direct link between each dollar of Federal tax benefits to a job, similar 

to the Earned Income Tax Credit that have benefited residents in the 50 states 

since 1975. In addition, Federal tax benefits to generate real investments in Puerto 

Rico can be designed similar to the provisions in Enterprise Zone acts and the 

Promise Zones legislative proposals of President Obama. 

Bringing back Puerto Rico as a full partner into the Federal tax system would 

carry significant benefits to the People of Puerto Rico and the U.S. Treasury, but 

are not possible without your strong commitment to carry them through to the final 

budget agreement. As you know, there are formidable moneyed interests that benefit from using Puerto Rico as a tax heaven, and they would not give up the hugely 

inefficient tax deferral benefits without a fight. The almost 4 million disenfranchised 

50 

U.S. citizens in Puerto Rico count on your support to secure our equal rights and 

responsibilities. 

THE STATUS ISSUE: THE 2012 PLEBISCITE AND STATEHOOD

Regarding the status issue, as you well know, statehood won the 2012 plebiscite. 

In that same election, with the same officials, in the same voting areas, with the 

same requirements. People voted for the Governor, the Resident Commissioner, 

Legislators, Mayors who were elected and sit in their positions. No one challenged 

their victories or re-interpreted them. 

However, I should not have been surprised when the results were challenged by 

the spokespersons and hired guns from the economic powers that rule the island, 

among them a well-known Republican corporate lobbyist who sent out a statement 

to Congress and others (Attached) against the results of statehood’s win. It is not 

the first time he does this, but then who wouldn’t, if you’re getting paid to the tune 

of >$2.745 million, just from Puerto Rico. I am sure there is even more $$$ to fight 

attacks against offshore corporations from their ‘‘corporate clients’’ with vested interest in keeping their business free of tax in the U.S. ‘‘FOREIGN’’ colony of U.S. 

Citizens in Puerto Rico. 

Mr. Chairman, we thank for your support, and ask that Congress does not hold 

any more plebiscites on status. 

We ask that you present a Puerto Rico statehood admission bill with the above 

terms and others that are considered fair, and ask the U.S. citizens in Puerto Rico 

to vote if they agree to Congress’ terms and conditions. 

I am submitting a draft admission act prepared by my constitutional counsel, 

Attorney Roberto Santana, which also includes what I call the Costas amendment, 

in honor of Attorney Luis Costas who first educated me on these issues. To get the 

CFC’s on our side, (or rather off our backs), award the Corporations special tax incentives for a period of 20 years in the transition process. Then Congress and the 

people of Puerto Rico would negotiate the details of the transition process, which 

may or may not be submitted again to the people for final approval. 

This is the way we designed it in the original Young bill. 

C’MON FELLOW AMERICAN CITIZENS HERE IN CONGRESS!! LET’S DO THIS! 

APPENDIX 1 

Draft of Bill to Include Puerto Rico as Part of the United States 

26 § 7701. Definitions 

(a) When used in this title, where not otherwise distinctly expressed or manifestly 

incompatible with the intent thereof—— 

. . . 

(4) Domestic 

The term ‘‘domestic’’ when applied to a corporation or partnership means created 

or organized in the United States or under the law of the United States, or of any 

State, or Puerto Rico unless, in the case of a partnership, the Secretary provides 

otherwise by regulations. 

. . . 

(9) United States 

The term ‘‘United States’’ when used in a geographical sense includes only the 

States, the District of Columbia and Puerto Rico. 

PUERTO RICO—A ‘‘FOREIGN’’ TAX HAVEN IN THE U.S. BACKYARD 

This brief describes the unexpected results of two Federal tax acts which have 

defined Puerto Rico’s tax identity since it became a U.S. territory in 1898. The first 

law—the Revenue Act of 1921—classified Puerto Rico as a ‘‘foreign country’’ for tax 

purposes. The second piece—the Small Business Job Protection Act of 1996 Act— 

eliminated the main Federal tax incentive, known as Section 936, that the 

U.S. Congress used to promote new manufacturing jobs and investments in Puerto 

Rico until 1996. 

What remained untouched after 1996 was Puerto Rico’s ‘‘foreign’’ tax label, which 

was embraced by former Section 936 firms in order to obtain the benefits of tax deferral, converting to Controlled Foreign Corporations (CFCs). Unlike the former 

Section 936 program, however, the CFCs in Puerto Rico do not have to create jobs 

51 

3The Web site www.puertoricoreport.com provides summaries of Federal commissions that examined Puerto Rico’s territorial status subject to Congressional powers. 4 IRC Sec 7701(a)(9) defines the term ‘‘United States’’ in a geographical sense to include ‘‘only 

the States and the District of Columbia.’’ In contrast, The Revenue Act of 1916 (Part III, Sec. 

15), defines the word ‘‘State’’ or ‘‘United States’’ to include any Territory, the District of Columbia, Porto Rico, and the Philippine Islands. The Revenue Act of 1921 (Title I, Sec. 1), excludes 

Porto Rico and the Philippines from the definition of the ‘‘United States.’’ 5See Joint Committee on Taxation, An Overview of Special Tax Rules Related to Puerto Rico 

and an Analysis of the Tax and Economic Policy Implications of Recent Legislative Opinions, 

(JCX–24–06), June 23, 2006. 

and generate real investments to benefit from tax deferral, and the U.S. Treasury 

does not have formal indicators to measure their cost effectiveness. This brief takes 

a first step to restore accountability and transparency for the CFCs in Puerto Rico, 

providing the evidence to assess growing CFC Federal tax benefits at a time of decreasing jobs and investments in Puerto Rico. 

Section 1—Controlled Foreign Corporations (CFCs) in Puerto Rico 

Puerto Rico has been an unincorporated territory of the United States under the 

jurisdiction of the U.S. Congress since the Spanish-American War of 1898.3

Although major U.S. taxes apply in Puerto Rico as in the 50 states, e.g. Social 

Security taxes, for income tax purposes the U.S. Congress has excluded Puerto Rico 

since 1921 from the definition of ‘‘United States’’.4 As a result, although Puerto Rico 

belongs to the United States and most of its residents are U.S. citizens, the income 

earned in Puerto Rico is considered ‘‘foreign-source income’’ and Puerto Rico corporations are considered ‘‘foreign.’’ This category includes the CFCs with a 

U.S. parent entity, which are analyzed in this brief. 

The 1921 Revenue Act also created the predecessor of the IRC Section 936, which 

became the preferred alternative to operate a U.S. subsidiary in the Island because 

it possessed two ideal features of a tax haven: Puerto Rico-source income was spared 

100 percent of the U.S. Federal tax and it was subject to a minuscule P.R. tax, right 

inside the U.S. borders.5

U.S. electronic and pharmaceutical firms with significant intangible assets tried 

to maximize their tax benefits in Puerto Rico, engaging in transfer pricing practices 

which spawned important court cases and scathing U.S. Treasury reports. In order 

to curtail the abuses of Section 936 firms, Congress in 1993 tied tax benefits to payroll and depreciation expenses, in an effort to channel more of the Section 936 benefits to the U.S. citizens residing in Puerto Rico. 

Finally, the U.S. Congress replaced Section 936 with a temporary Section 30A 

credit, and initiated a 10-year phase out of existing 936 subsidiaries. This momentous decision has created a massive conversion of Section 936 U.S. corporations to 

CFC status, and left U.S. Treasury without a congressional reporting mandate and 

performance indicators to assess the tax effectiveness and efficiency of CFCs in 

Puerto Rico. 

The CFC conversions have triggered a significant increase in CFC activity in 

Puerto Rico, shown in Tables 1 to 5: 

• There was a 122 percent increase in the reported Earnings and Profits (E&P) 

of CFCs in Puerto Rico, to $6.6 billion in 2008, which is the most recent year 

of available CFC data (Table 1). 

• The average tax rate of CFCs in Puerto Rico was 3.9 percent in 2008, which 

was 10.2 percent lower than the average tax rate by CFCs operating in the 

world in 2008 (Table 2). 

• The U.S. corporations with CFCs in Puerto Rico received in just 3 years $3.5 

billion of tax benefits, relative to the 35 percent tax rate of U.S. domestic 

firms (Table 3). 

• There was a wide variation in tax rates across industries. Manufacturing 

CFCs in Puerto Rico had a 2.3 percent tax rate, compared to the 14.9 percent 

tax rate of CFCs in finance (Table 4). 

• The distribution of the tax benefits of CFCs is most likely highly concentrated 

in a few specific firms with significant intangible patents, trademarks and 

copyrights. Congressional investigators found that one CFC reported 

$4 billion in profits, and provided 177 direct jobs, or $22.5 million per job. 

IRS and Congressional investigations have started to uncover significant transfer 

pricing abuses that lie behind the growing trend in earnings of U.S. CFCs in Puerto 

Rico. As early as 1997, the IRS designated Section 936 conversions to CFCs as a 

52 

6See Audit Guidelines Related to Section 936 Conversion Issues in www.irs.gov. 7See Puerto Rico Tax Break Shifts to Cayman Islands, in www.bloomberg.com, and docket 

number 006944–11 in www.taxcourt.gov. 

Tier I issue, with high potential compliance risks.6 In 2011 IRS sent notices of deficiency to Medtronic for $958 million and to Boston Scientific for $452 million over 

their Section 936 conversions to CFC status.7

In 2012 the staff of the U.S. Senate Permanent Subcommittee on Investigations 

analyzed the complex layers of tax haven subsidiaries created by Microsoft to minimize its tax on sales of products manufactured in Puerto Rico and sold in the 

United States. According to the congressional report, in 2011 the CFC of Microsoft 

in Puerto Rico reported $4 billion in profits, and provided 177 direct jobs earning 

an average salary of $44,000 a year, or $22.5 million per person. This example 

shows the low ineffectiveness of a specific CFC in Puerto Rico. Ideally, the U.S. 

Treasury should conduct an in-depth examination of the whole program of CFC tax 

incentives in Puerto Rico, as was done of the Section 936 tax program. 

Table 1: Assets, Receipts, Earnings & Profits, and Taxes of CFCs in Puerto Rico 

Source: IRS Statistics of Income (SOI) Bulletin, ‘‘Controlled Foreign Corporations’’, Table 3, 

Summer 2008, Winter 2011, Winter 2013. 

Note: Data are based on the SOI corporate sample. Since 2004 this sample is far more 

inclusive than earlier SOI studies of CFCs. 

Table 2: Average tax rates of CFCs in Puerto Rico and in other countries 

Note: Average tax rate is defined as income tax divided by E&P before income taxes. 

Source: IRS Statistics of Income Bulletin, ‘‘Controlled Foreign Corporations’’, Summer 2008, 

Winter 2011, Winter 2013. 

53 

8 Joint Committee on Taxation, JCX–24–06, op. cit., page 50. 

Table 3: Tax benefits of operating in Puerto Rico as CFC, compared to operating 

as a U.S. domestic firm, annually and average figures in latest 3 years 

Note: Author’s calculation, based on data reported in IRS Statistics of Income Bulletin, 

‘‘Controlled Foreign Corporations’’, Summer 2008, Winter 2011, Winter 2013. 

Table 4: Average tax rates of CFCs in Puerto Rico in 2008 

Note: Average tax rate is defined as income tax divided by E&P before income taxes. 

Source: IRS Statistics of Income Bulletin, ‘‘Controlled Foreign Corporations’’, Summer 2008, 

Winter 2011, Winter 2013. 

Given the trend in Federal tax benefits received by CFCs operating in Puerto 

Rico, it is appropriate to assess how this Federal tax program has contributed to 

the economic well-being of the almost 4 million U.S. citizens in Puerto Rico. 

Measures of effectiveness and efficiency of the tax benefits of manufacturing CFCs 

are discussed in the next section of this brief. 

Section 2—Measuring the cost effectiveness of the CFCs in Puerto Rico 

CFCs were introduced in 1921 in Puerto Rico ‘‘primarily to help U.S. corporations 

compete with foreign firms in the Philippines.’’ 8 There is no question that for U.S. 

multinationals the benefits of tax deferral can be significant, since indefinite deferral of U.S. tax liability generates a complete tax exemption on the foreign-source 

income. As was shown in Section 1 of this brief, tax deferral is a powerful tax tool 

to enhance the financial capacity of U.S. multinationals to compete against all firms, 

especially the domestic U.S. firms that pay the 35 percent maximum Federal 

corporate tax rate. 

However, utilizing the 1921 tax law criterion—‘‘help U.S. businesses to compete 

in foreign countries against foreign firms’’—is not appropriate for determining the 

CFC benefits in Puerto Rico for three reasons: the Island is a territory of the United 

States, almost all of its 3.7 million residents are U.S. citizens, and the 423 CFCs 

in Puerto Rico represent less than 1 percent of the 83,642 CFCs in the World. 

Congress did introduce a different objective when it enacted Section 936 tax 

benefits for Puerto Rico, namely, ‘‘to assist the U.S. possession in obtaining 

54 

9 Joint Committee on Taxation, JCX–24–06, op. cit., page 50. 

employment producing investments by U.S. corporations.’’ 9 In order to obtain a precise estimate of tax benefits per employee it is necessary to obtain firm-specific tax 

and jobs data, which is not available to the public. 

An imprecise estimate of tax benefits per employee is obtained with U.S. Bureau 

of census data of manufacturing establishments in Puerto Rico, which are owned by 

CFCs and others. For example, in 2008 there were 2,064 manufacturing establishments with 106,132 employees in Puerto Rico, shown in Table 5. Estimates of the 

average CFC earnings before income taxes of manufacturing establishments range 

from $12,739 (if all jobs are assigned to the CFCs) to $25,477 per employee (if 50 

percent of the jobs are assigned to CFCs) in 2008. These averages, in contrast to 

the $22 million per job earned by Microsoft Puerto Rico in 2011, show that the distribution of the tax benefits of CFCs is most likely highly concentrated in a few 

specific firms with significant intangible patents, trademarks and copyrights. 

Table 5: Manufacturing Operations in Puerto Rico, Tax Benefits of CFCs and Jobs, 

2008 

Sources: (1) U.S. Bureau of Census, County Business Patterns, published annually. (2) Federal 

tax benefits estimated using IRS SOI Bulletin, ‘‘Controlled Foreign Corporations’’, published in 

even years. 

Keeping Puerto Rico as a ‘‘foreign’’ country inside the United States undermines 

the U.S. Federal tax base and creates unfair competition against local communities 

in the 50 states. For example, in 2010 the Puerto Rico government imposed a 

4 percent excise tax on CFCs in Puerto Rico in order to pay for a significant reduction in income taxes at the local level. Normally, excise taxes cannot be used as foreign tax credits that reduce the U.S. tax liability dollar for dollar. However, in the 

case of the Puerto Rico’s 4 percent excise tax on the U.S. CFCs, the IRS took the 

position that it would not challenge if U.S. corporations claim a U.S. foreign tax 

credit. In contrast, taxes imposed in the 50 states can be deducted when calculating 

Federal income tax, provided they are attributable to the conduct of the corporation’s business. Effectively, the U.S. Treasury subsidized Puerto Rico’s 4 percent excise tax increase almost dollar for dollar. This tax expenditure is not available in 

the 50 states. 

How do these estimated Federal cost estimates compare to another Federal credit 

that is directly linked to job creation, namely, the Earned Income Tax Credit 

(EITC), is discussed in the next section of this brief. 

Section 3—Incorporating Puerto Rico Residents into the Federal Income 

Tax System and I.R.C. Section 933 

Congress in 1917 granted U.S. citizenship to individuals born in Puerto Rico. 

Thus, a person born in Puerto Rico is subject to the U.S. tax laws. However, Section 

933 of the IRC exempts from U.S. taxation the Puerto Rico-source income obtained 

by bona fide residents of Puerto Rico. Some observers have expressed the opinion 

that the residents of Puerto Rico are better off because Federal income tax laws do 

not apply in the Island. This opinion is not correct for two reasons: 

1. The Federal income tax provides job incentives that are lacking in Federal 

direct spending programs. For example, the exclusion of Puerto Rico residents 

from the Federal income tax has prevented almost 60 percent of working families from receiving the Federal Earned Income Tax Credit (EITCs). The 

Federal income tax could be used as an effective tool to increase Puerto Rico’s 

55 

10See Caribbean Business, ‘‘The real story behind Puerto Rico’s low 40.6% labor-participation 

rate,’’ May 10, 2011. 11Government Accountability Office, Tax Policy, Analysis of Certain Potential Effects of 

Extending Federal Income Taxation to Puerto Rico, GGD–96–127. 

40 percent labor force participation rate, which is the lowest in the United 

States.10

2. The introduction of the Federal income tax, with the administrative support 

of the Internal Revenue Service, would increase the effectiveness of the local 

tax administration in Puerto Rico. Local tax auditors in the Department of 

Hacienda have experienced a 50 percent decrease in the last 6 years, at the 

time when the underground economy in Puerto Rico has grown to about 25 

percent of the market economy. 

Previous congressional studies have already shown the benefits of participating in 

the Federal tax system. For example, GAO in 1996 found that if IRC tax rules are 

applied to residents of Puerto Rico, the average EITC earned by eligible taxpayers 

would be $1,494, taxpayers would owe around $623 million in Federal income tax 

before taking into account the earned income tax credit (EITC), and the aggregate 

amount of EITC would total $574 million. About 59 percent of the population filing 

individual income tax returns would earn some EITC, and 41 percent of the households filing income tax returns would have positive Federal income tax liabilities, 

greater than the EITC received. Thus, the introduction of the Federal income tax 

in Puerto Rico for individuals would generate a wealth transfer from higher-income 

individuals who would pay Federal income taxes, to lower-income earners who 

would receive a refundable credit.11

CONCLUSION

This brief has demonstrated the importance of incorporating Puerto Rico back into 

the United States for income tax purposes. This fundamental change is necessary 

to protect the U.S. tax base from the abuses in the ill-defined CFC regime in Puerto 

Rico. Furthermore, the inclusion of individual taxpayers into the Federal income tax 

regime would allow families in the Island to receive significant incentives that are 

likely to increase Puerto Rico’s low labor force participation rate, and restore 

economic growth in the Island. 

*****

DRAFT ADMISSION ACT 

Prepared by Attorney Roberto Santana 

Admission of State 

Section 1 

AN ACT 

To provide for the admission of the Commonwealth of Puerto Rico 

into the Union 

Be it enacted by the Senate and House of Representatives of the United States 

of America in Congress assembled, That, subject to the provisions of this Act, 

Congress consents that the territory properly included within and rightfully belonging to the territory of Puerto Rico, officially known and hereinafter referred to as 

the ‘‘Commonwealth of Puerto Rico,’’ may be erected into a new State, with the consent of the existing Government in order that the same may by admitted as one 

of the States of this Union on an equal footing with the other States in all respects 

whatever, subject to the affirmative vote of the eligible voters of the Commonwealth 

of Puerto Rico accepting the terms and conditions of this Act. 

Territory 

Section 2 

The official name of the State of Puerto Rico shall remain to be ‘‘Commonwealth 

of Puerto Rico’’ and the newly admitted State shall consist of all its islands, together 

56 

with their appurtenant reefs and territorial waters, including but not limited to the 

main island of Puerto Rico, and the islands of Vieques, Culebra, Mona, Monito, 

Ratones, Caja de Muertos, Palomino, Palominito, Luis Pen ̃ a, Lobos, Icacos, Isleta 

Marina and other smaller islands, atolls and reefs presently under the jurisdiction 

of the Commonwealth of Puerto Rico and including a ten and thirty five hundreths 

of a mile (10.35) mile Exclusive Economic Zone (EEZ) which is the sea zone over 

which the Commonwealth of Puerto Rico has special rights over the exploration and 

use of marine resources and stretching from the seaward edge of the Commonwealth 

of Puerto Rico’s territorial sea out to 10.35 nautical miles from its coast and including the territorial sea and the continental shelf beyond the 10.35 nautical mile limit. 

Constitution 

Section 3 

Congress finds that the Constitution of the Commonwealth of Puerto Rico is republican in form; it is not repugnant to the Constitution of the United States and 

the principles of the Declaration of Independence and is the functional equivalent 

of a state constitution. 

Agreement with United States 

Section 4 

The Commonwealth of Puerto Rico and its people, by the affirmative vote of the 

eligible voters of the Commonwealth of Puerto Rico accepting the terms and conditions of this Act do agree and declare that they forever disclaim all right and title 

to any lands or other property not granted or confirmed to the State or its political 

subdivisions by or under the authority of this Act, the right or title to which is held 

by the United States or is subject to disposition by the United States, and to any 

lands or other property, (including fishing rights); that all such lands or other property, belonging to the United States shall be and remain under the absolute jurisdiction and control of the United States until disposed of under its authority, except 

to such extent as the Congress has prescribed or may hereafter prescribe. Provided, 

That nothing contained in this Act shall recognize, deny, enlarge, impair, or otherwise affect any claim against the United States, and any such claim shall be governed by the laws of the United States applicable thereto; and nothing in this Act 

is intended or shall be construed as a finding, interpretation, or construction by the 

Congress that any law applicable thereto authorizes, establishes, recognizes, or confirms the validity or invalidity of any such claim, and the determination of the applicability or effect of any law to any such claim shall be unaffected by anything 

in this Act: And provided further, That no taxes shall be imposed by said State upon 

any lands or other property now owned or hereafter acquired by the United States, 

except to such extent as the Congress has prescribed or may hereafter prescribe. 

Title to Property; Land Grants; Reservation of 

Lands; Public School Support; Submerged Lands 

Section 5 

The Commonwealth of Puerto Rico and its political subdivisions, respectively, 

shall have and retain title to all property, real and personal, within the Commonwealth of Puerto Rico or any of the subdivisions. Except as provided herein, the 

United States shall retain title to all property, real and personal, to which it has 

title, including public lands. Provided that: 

(a) Except as provided in subsection (c) of this section, the Commonwealth of 

Puerto Rico and its political subdivisions, as the case may be, shall retain title of 

its properties before the passing of this Act and its subdivisions in those lands and 

other properties in which the Territory and its subdivisions now hold title. 

(b) Except as provided in subsection (c) and (d) of this section, the United States 

grants to the Commonwealth of Puerto Rico, effective upon its admission into the 

Union, the United States’ title to all the public lands and other public property, in 

the Island of Vieques after certification by the secretary of the Interior that any and 

57 

all of such lands have been cleaned of all debris and unexploded ordinance used by 

the Armed Forces of the United States in training of the Military, title to which is 

held by the United States immediately prior to the Commonwealth of Puerto Rico’s 

admission into the Union. The grant hereby made shall be in lieu of any and all 

grants provided for new States by provisions of law other than this Act, and such 

grants shall not extend to the Commonwealth of Puerto Rico. 

(c) Any lands and other properties that, on the date Puerto Rico is admitted into 

the Union, are set aside pursuant to law for the use of the United States under any 

(1) Act of Congress, (2) Executive order, (3) proclamation of the President, or (4) 

proclamation of the Governor of Puerto Rico shall remain the property of the United 

States subject only to the limitations, if any, imposed under (1), (2), (3), or (4), as 

the case may be. 

(d) Any public lands or other public property that is conveyed to the Commonwealth of Puerto Rico by subsection (b) of this section but that, immediately prior 

to the admission of said State into the Union, is controlled by the United States pursuant to permit, license, of permission, written or verbal, from the Commonwealth 

of Puerto Rico or any department thereof may, at any time during the five years 

following the admission of Puerto Rico into the Union, be set aside by Act of 

Congress or by Executive Order of the President, made pursuant to law, for the use 

of the United States, and the lands or property so set aside shall, subject only to 

valid rights then existing, be the property of the United States. 

(e) Within five years from the date Commonwealth of Puerto Rico is admitted into 

the Union, each Federal agency having control over any land or property that is retained by the United States pursuant to subsections (c) and (d) of this section shall 

report to the President the facts regarding its continued need for such land or property, and if the President determines that the land or property is no longer needed 

by the United States it shall be conveyed to the Commonwealth of Puerto Rico. 

(f) The lands granted to the Commonwealth of Puerto Rico by subsection (b) of 

this section and public lands retained by the United States under subsections (c) 

and (d) and later conveyed to the State under subsection (e), together with the proceeds from the sale or other disposition of any such lands and the income therefrom, 

shall be held by said State as a public trust for the support of the public schools 

and other public educational institutions, for the betterment of the conditions of 

Puerto Ricans. Such lands, proceeds, and income shall be managed and disposed of 

for one or more of the foregoing purposes in such manner as the constitution and 

laws of said State may provide, and their use for any other object shall constitute 

a breach of trust for which suit may be brought by the United States. The schools 

and other educational institutions supported, in whole or in part, out of such public 

trust shall forever remain under the exclusive control of said State; and no part of 

the proceeds or income from the lands granted under this Act shall be used for the 

support of any sectarian or denominational school, college, or university. 

(g) As used in this Act, the term ‘lands and other properties’ includes public lands 

and other public property, and the term ‘public lands and other public property’ 

means, and is limited to, the lands and properties that were ceded to the United 

States by Spain under the Treaty of Paris of 1898, or that have been acquired in 

exchange for lands or properties so ceded. 

(h) All laws of the United States reserving to the United States the free use or 

enjoyment of property which vests in or is conveyed to the Commonwealth of Puerto 

Rico or its political subdivisions pursuant to subsection (a), (b), or (e) of this section 

or reserving the right to alter, amend, or repeal laws relating thereto shall cease 

to be effective upon the admission of the Commonwealth of Puerto Rico into the 

Union. 

(i) The Submerged Lands Act of 1953 (Public Law 31, Eighty-third Congress, first 

session; 67 Stat. 29) and the Outer Continental Shelf Lands Act of 1953 (Public Law 

212, Eighty-third Congress, first session, 67 Stat. 462) shall be applicable to the 

Commonwealth of Puerto Rico, and the said State shall have the same rights as do 

existing States thereunder. (As amended Pub. L. 86–624, Sec. 41, July 12, 1960, 74 

Stat. 422, Pub. L. 95–372, Title II, § 202, 92 Stat. 634; Apr. 7, 1986, Pub. L. 99– 

272, Title VIII, § 8002, 100 Stat. 148) 

58 

Assumption of Public Debt 

Section 6 

For the purposes of furthering the development of the new State, and the expansion of its economy, and in exchange of the citizens of the Commonwealth of Puerto 

Rico acquiring as taxpaying citizens of the United States their corresponding share 

of the National Debt of the United States, the Public Debt of the Commonwealth 

of Puerto Rico, as of the date of Admission, is hereby acquired by the Treasury of 

the United States and shall be paid according to its terms and as it becomes due. 

Presidential Certification 

Section 7 

Upon enactment of this Act, it shall be the duty of the President of the United 

States, not later than 30 days thereafter, to certify such fact to the Governor of the 

Commonwealth of Puerto Rico and to the presidents of the Senate and of the House 

of Representatives of Puerto Rico. Thereupon, (1) the legislature of the Commonwealth of Puerto Rico shall enact legislation to provide for the vote by the eligible 

voters of the Commonwealth of Puerto Rico as defined by law to accept or reject the 

terms and conditions of this Act, by simple majority vote, which referendum will 

take place not later than 180 days after the Presidential Certification made pursuant to this section and (2) The State Elections Commission of Puerto Rico is authorized to provide for a vote on the admission of Puerto Rico into the Union as a State 

within one hundred and eighty days from the date of the Presidential Certification 

made pursuant to this section, in accordance with rules and regulations determined 

by the Commission, including qualifications for voter eligibility. The ballot shall ask 

the following question: ‘‘Shall Puerto Rico be admitted as a State of the United 

States pursuant to the Act of Congress dated [the date of this Act]? 

Yes ___ No ___.’’ 

The funds made available pursuant to Public Law 113–76 may be used to conduct 

the vote. 

The Governor of the Commonwealth of Puerto Rico is hereby authorized and 

directed to take such action as may be necessary or appropriate to insure the submission of said proposition to the people. The return of the votes cast on said referendum shall be made by the election officers directly to the State Elections 

Commission, which entity shall certify the results to the Governor. The Governor 

shall certify the results of said referendum, as so ascertained, to the President of 

the United States, the Speaker of the House of Representatives, and the President 

Pro Tempore of the Senate. 

Election, Certification, Proclamation, 

Laws in Effect 

Section 8 

(a) Upon the affirmative vote of the eligible voters of the Commonwealth of Puerto 

Rico accepting the offer of Statehood, the Governor of the Commonwealth of Puerto 

Rico shall call for the holding of a Primary Election for Federal office and a General 

Election to elect such federal elected official, on dates to be fixed by the Governor 

of the Commonwealth of Puerto Rico. Provided, that the elections for Federal office 

shall not be held later than the date already legislated by the laws of the Commonwealth for the holding of the next regular General Elections that are held on 

November on the same year as that of the Presidential Elections of the United 

States and at such elections there shall be elected 2 Senators and 5 Representatives, 

each of whom shall first take office on the first day of the next Congress commencing immediately after said election. The Legislature of Puerto Rico shall delineate and enact the corresponding congressional districts. The officers required to be 

elected as provided in this section shall be chosen by the eligible voters of the 

Commonwealth of Puerto Rico. Such elections shall be held, and the qualifications 

of voters thereat shall be, as prescribed by the Constitution of the Commonwealth 

of Puerto Rico for the election of members of the State legislature. The Legislature 

of Puerto Rico shall delineate and enact the corresponding congressional districts. 

59 

The returns thereof shall be made and certified in such manner as the constitution 

and laws of the Commonwealth of Puerto Rico may prescribe. The Governor of the 

Commonwealth of Puerto Rico shall certify the results of said elections to the 

President of the United States, the Speaker of the House of Representatives, and 

the President Pro Tempore of the Senate. 

(b) In the election of Senators from Puerto Rico pursuant to this section, the 2 

Senate offices shall be separately identified and designated, and no person may be 

a candidate for both offices. No such identification or designation of either of the 

offices shall refer to or be taken to refer to the terms of such offices, or in any way 

impair the privilege of the Senate to determine the class to which each of the 

Senators elected shall be assigned. 

(c) The President of the United States, once notified by the Governor of the election of the federal officials prescribed pursuant to this section, upon certification of 

the returns of the election of the officers required to be elected as provided herein, 

shall thereupon issue his proclamation announcing the results of said election as so 

ascertained. Upon the issuance of said proclamation by the President, the Commonwealth of Puerto Rico shall be deemed admitted into the Union as provided in this 

Act. 

(d) Until Puerto Rico is so admitted into the Union, all of the officers of the 

Commonwealth of Puerto Rico, including its Resident Commissioner, shall continue 

to discharge the duties of their respective offices. Upon the issuance of said proclamation by the President of the United States and the admission of the Commonwealth of Puerto Rico into the Union, the officers elected at said election, and 

qualified under the provisions of the constitution and laws of said State, shall proceed to exercise all the functions pertaining to their offices in or under or by authority of the government of said State, and officers not required to be elected at said 

initial election shall be selected or continued in office as provided by the constitution 

and laws of said State. 

(e) The State Elections Commission of Puerto Rico shall certify the election of the 

Senators and Representative in the manner required by law, and the said Senators 

and Representative shall be entitled to be admitted to seats in Congress and to all 

the rights and privileges of Senators and Representatives of other States in the 

Congress of the United States. 

(f) Upon admission of the Commonwealth of Puerto Rico into the Union as herein 

provided, all of the territorial laws then in force in the Commonwealth of Puerto 

Rico shall be and continue in full force and effect throughout said State except as 

modified or changed by this Act, or by the Constitution of the State, or as thereafter 

modified or changed by the legislature of the State. All of the laws of the United 

States shall have the same force and effect within said State as elsewhere within 

the United States. As used in this paragraph, the term ‘‘territorial laws’’ includes 

(in addition to laws enacted by the Legislature of Puerto Rico) all laws or parts 

thereof enacted by Congress, the validity of which is dependent solely upon the authority of Congress to provide for the government of prior to the admission of the 

Commonwealth of Puerto Rico into the Union, and the term ‘‘laws of the United 

States’’ includes all laws or parts thereof enacted by Congress that (1) apply to or 

within Puerto Rico at the time of the admission of the Commonwealth of Puerto 

Rico into the Union, (2) are not ‘‘Territorial laws’’ as defined in this paragraph, and 

(3) are not in conflict with any other provisions of this Act. 

House of Representatives Membership 

Section 9 

(a) The Commonwealth of Puerto Rico upon its admission into the Union shall be 

entitled to the number of Representatives mentioned in Section 8 of this Act until 

the taking effect of the next reapportionment, and such Representatives shall be in 

addition to the membership of the House of Representatives as now prescribed by 

law: Provided, That such temporary increase in the membership shall not operate 

to either increase or decrease the permanent membership of the House of 

Representatives as prescribed in the Act of August 8, 1911 (37 Stat. 13) nor shall 

such temporary increase affect the basis of apportionment established by the Act of 

November 15, 1941 (55 Stat. 761; 2 U.S.C., section 2a), for the Eighty-third 

Congress and each Congress thereafter. 

(b) Effective on the date on which a Representative from Puerto Rico first takes 

office in accordance with this subsection, the Office of the Resident Commissioner 

60 

to the United States, as described in section 36 of the Act of March 2, 1917 (48 

U.S.C. 891 et seq.), is terminated. 

Continuation of Civil Cases and 

Criminal Proceedings 

Section 10 

No writ, action, indictment, cause, or proceeding pending in the United States 

District Court for the District of Puerto Rico on the date when said Territory shall 

become a State, and no case pending in an appellate court upon appeal from the 

United States District Court for the district of Puerto Rico at the time said Territory 

shall become a State, shall abate by the admission of the Commonwealth of Puerto 

Rico into the Union, but the same shall be transferred and proceeded with as hereinafter provided. 

All civil causes of action and all criminal offenses which shall have arisen or been 

committed prior to the admission of said State, but as to which no suit, action, or 

prosecution shall be pending at the date of such admission, shall be subject to prosecution in the appropriate State courts or in the United States District Court for 

the District of Puerto Rico in like manner, to the same extent, and with like right 

of appellate review, as if said State had been created and said courts had been established prior to the accrual of said causes of action or the commission of such offenses; and such of said criminal offenses as shall have been committed against the 

laws of the Territory shall be tried and punished by the appropriate courts of said 

State, and such as shall have been committed against the laws of the United States 

shall be tried and punished in the United States District Court for the District of 

Puerto Rico. 

Appeals 

Section 11 

All appeals taken from the United States District Court District of Puerto Rico 

to the Supreme Court of the United States or the United States Court of Appeals 

for the First Circuit, previous to the admission of Puerto Rico as a State, shall be 

prosecuted to final determination as though this Act had not been passed. All cases 

in which final judgment has been rendered in such district court, and in which appeals might be had except for the admission of such State, may still be sued out, 

taken, and prosecuted to the Supreme Court of the United States or the United 

States Court of Appeals for the First Circuit under the provisions of then existing 

law, and there held and determined in like manner; and in either case, the Supreme 

Court of the United States, or the United States Court of Appeals, in the event of 

reversal, shall remand the said cause to either the Puerto Rico Supreme Court, or 

the United States District Court for the District of Puerto Rico, as the case may require: Provided, That the time allowed by existing law for appeals from the district 

court for said Territory shall not be enlarged thereby. 

Continuation of Cases 

Section 12 

All causes pending or determined in the United States District Court for the 

District of Puerto Rico at the time of the admission of Puerto Rico as a State shall 

continue under the jurisdiction of the United States District Court for the District 

of Puerto Rico for final disposition and enforcement in the same manner as is now 

provided by law with reference to the judgments and decrees. All other causes pending or determined in the State Courts of the Commonwealth of Puerto Rico at the 

time of the admission of Puerto Rico as a State shall continue under the jurisdiction 

of the State Courts of the Commonwealth of Puerto Rico. All final judgments and 

decrees rendered in the United States District Court for the District of Puerto Rico 

may be reviewed by the Supreme Court of the United States or by the United States 

Court of Appeals for the First Circuit in the same manner as is now provided by 

law with reference to the judgments and decrees in existing United States district 

courts. 

61 

Retention of Jurisdiction and Appeals in 

State Court 

Section 13 

Jurisdiction of all cases pending or determined in the General Court of Justice 

of the Commonwealth of Puerto Rico shall devolve upon and be exercised by said 

court and, as such, it shall retain custody of all records, dockets, journals, and files 

pertaining to such cases. All appeals taken from the Supreme Court of Puerto Rico 

to the Supreme Court of the United States, previous to the admission of Puerto Rico 

as a State, shall be prosecuted to final determination as though this Act had not 

been passed. All cases in which final judgment has been rendered in such court, and 

in which appeals might be had except for the admission of such State, may still be 

sued out, taken, and prosecuted to the Supreme Court of the United States under 

the provisions of then existing law, and there held and determined in like manner; 

and in either case, the Supreme Court of the United States, in the event of reversal, 

shall remand the said cause to the Puerto Rico Supreme Court as the case may require: Provided, That the time allowed by existing law for appeals from the 

Supreme Court of Puerto Rico shall not be enlarged thereby. 

Federal Reserve Act; Amendment 

Section 14 

The next to last sentence of the first paragraph of section 2 of the Federal Reserve 

Act (38 Stat. 251) as amended, is hereby amended by inserting after the word 

‘Hawaii’ the words ‘or Puerto Rico.’ 

Maritime Matters 

Section 15 

Nothing contained in this Act shall be construed as depriving the Federal 

Maritime Board of the exclusive jurisdiction heretofore conferred on it over common 

carriers engaged in transportation by water between any port in the Commonwealth 

of Puerto Rico and other ports in the United States, or possessions, or as conferring 

on the Interstate Commerce Commission jurisdiction over transportation by water 

between any such ports. 

Taxation 

Section 16 

Upon the effective date of the Admission of the Commonwealth of Puerto Rico as 

the 51st State of the Union, those individuals and corporations then currently enjoying tax status and tax benefits existing under Puerto Rico Income, Gift and Estate 

Tax Statutes and the U.S. Internal Revenue Code on that date, shall continue in 

that status and with those benefits for a period of twenty (20) years from that effective date of Admission. The U.S. Internal Revenue Service shall promulgate such 

Rules and Regulations as may be deemed necessary and/or convenient in order to 

carry out this Statutory Provision. 

Repeal 

Section 17 

All parts of the Puerto Rican Federal Relations Act, Pub. L. No. 81–600, 64 Stat. 

3 19 (1950) (codified at 48 U.S.C. §§ 731b–731e (1994)) (‘‘Public Law 600’’) and any 

remaining sections in effect of the Act of Apr. 12, 1900, 31 Stat. 77 (‘‘Foraker Act’’) 

and of the Act of Mar. 2, 1917, 39 Stat. 961, as amended, (‘‘the Puerto Rican Federal 

Relations Act,’’ also popularly known as the ‘‘Jones Act’’), which are in conflict with 

the provisions of this Act, are hereby repealed. 

62 

United States Citizenship 

Section 18 

Nothing contained in this Act shall operate to confer United States citizenship, 

nor to terminate citizenship heretofore lawfully acquired, nor restore citizenship 

heretofore lost under any law of the United States or under any treaty to which the 

United States may have been a party. 

Separability 

Section 19 

If any provision of this Act, or any section, subsection, sentence, clause, phrase, 

or individual word, or the application thereof to any person or circumstance is held 

invalid, the validity of the remainder of the Act and of the application of any such 

provision, section, subsection, sentence, clause, phrase, or individual word to other 

persons and circumstances shall not be affected thereby. 

General Amendment and General Repeal 

Section 20 

All Acts or parts of Acts referring to ‘‘the 50 states’’ shall be amended to read ‘‘the 

51 states’’ and all such Acts or parts of Acts referring to the Islands and Territories 

of Guam, American Samoa, Northern Mariana Islands, Puerto Rico and the Virgin 

Islands shall be amended to exclude the words ‘‘Puerto Rico,’’ whether such Acts or 

parts of Acts were passed by the legislature of Puerto Rico or by Congress. 

All Acts or parts of Acts in conflict with the provisions of this Act, whether passed 

by the legislature of Puerto Rico or by Congress, are hereby repealed. 

Mr. YOUNG. Thank you, Miriam. 

I will recognize the Ranking Member, and he is going to yield to 

the good lady from Guam. 

Mr. SABLAN. Yes, I am going to yield to the dean of those 

Members of Congress who don’t have a vote. She is our dean. 

[Laughter.] 

Mr. YOUNG. Don’t knock it. 

Ms. BORDALLO. Thank you very much to our Ranking Member, 

Mr. Sablan, from the CNMI. 

Mr. Chairman, there are four of us up here, territorial delegates. 

One is missing. I think she belongs—oh, she just—that is right. We 

are now complete. Five of us. And let me say this, and I want to 

go on record as saying that the life of a territorial delegate in the 

U.S. Congress is the most frustrating job you would have ever expected it to be. When your colleagues are going over to vote, you 

are standing there watching them. And they say, ‘‘Why don’t you 

go to vote?’’ 

I said, ‘‘Well, we don’t vote.’’ Oh, that is right. So, ladies and gentlemen, I sympathize in everything that is being said here. Guam 

is in the same boat. We don’t have 3 or 4 million people; we are 

very small. But when you are not able to vote for the 

U.S. President, as a citizen, and you cannot vote for amendments 

and final passage in the U.S. Congress, yet we sit in the committees, that is a frustrating position. And I have been here 13 years; 

I know all about it. 

63 

Now, the Governor, in his opening testimony, he asked three 

questions. My answer to those three questions is yes, yes, yes. You 

are absolutely right. Or—no? Would it have been no? What was the 

question again, Governor? It was yes, right? 

Mr. BARCELO ́. Yes. It was a yes. 

Ms. BORDALLO. It was a yes. OK. 

Mr. BARCELO ́. It was a yes. 

Ms. BORDALLO. I want to be sure that I am on the right side. 

[Laughter.] 

Ms. BORDALLO. Thank you, Governor. Yes, yes, yes. All right. 

I do have a question here for Mr. Vila ́. I am interested in your 

views on the idea of mutual consent. As I understand it, mutual 

consent between the United States and Puerto Rico is still being 

discussed among the people of Puerto Rico, as part of an opinion 

for political status. How would mutual consent be formulated to 

satisfy objections that it is unconstitutional, or to meet any objections by the Department of Justice? 

Mr. VILA ́. In my written statement, and in the documents that 

I included, I go a little bit deeper on that. I think that approach 

is not the right one. And I do say with total honesty and respect, 

I think that so far we have been discussing this from a political, 

legal view. I think it is about time just to discuss the economic relationship between Puerto Rico and the United States. 

I firmly believe that statehood, economically, is not the alternative, and we can go into deeper discussion on that. It is in my 

written statement, I don’t want to waste your time. But I firmly 

believe it is not a good solution for Puerto Rico or for the United 

States either. I firmly believe independence is not the right economic answer to our situation, and I firmly believe doing nothing, 

the status quo, is also not the alternative. 

I believe that we need to sit down and come up with a new economic arrangement. What is the problem? The problem is that 

Puerto Rico is, and has always been, a developing economy. But 

then we have to play by the rules of the most developed economy 

in the world, which is the U.S. economy. And when you apply the 

rules of the most developed economy to a developing economy, you 

have the problem we have. And if we become a state, it will be 

even worse, because you will apply the tax rules of the most developing economy to a still developing economy. 

So, in that sense, my approach is let’s reach an agreement on a 

new kind of economic relationship, and then, based on that, let’s 

reach an agreement in what the mayor called, ELA Soberano, 

estado libre asociado soberano, a new political arrangement, clearly 

non-colonial and non-territorial. 

Ms. BORDALLO. Thank you very much. 

Mr. Chairman, thank you for being so supportive of our issues. 

And, Ranking Member Sablan, thank you for the time. 

Mr. BARCELO ́. Mr. Chairman, could I—— 

Mr. YOUNG. You have 21 seconds, then I have to let her ask 

questions. 

Mr. BARCELO ́. Could I address, myself, to some of the things that 

he has mentioned about the economy? 

Mr. YOUNG. We will get that next time. 

Mr. BARCELO ́. OK. 

64 

Mr. YOUNG. Madam Vice Chair. 

Mrs. RADEWAGEN. Thank you, Mr. Chairman. I too want to welcome the panel of very distinguished public servants. I see 

Governor Romero, who was a colleague of my dad when they 

served together as Governors of American Samoa and Puerto Rico, 

respectively; Governor Luis Fortun ̃ o, a former Member of this body 

and a colleague on the RNC. Warm welcome to all of you. 

When I spoke in this committee room at a hearing earlier this 

year, I used the term ‘‘colonialism by another name.’’ Well, a threejudge panel gave it another name: ‘‘Cultural imperialism.’’ That 

Federal court of appeals just rejected the argument lawyers made 

in a case claiming the national citizenship clause in the Constitution applies in American Samoa and all other unincorporated U.S. 

territories. 

So once again, the courts have confirmed that U.S. nationals in 

American Samoa and U.S. nationals from Puerto Rico and the 

three other unincorporated territories are required to relocate to a 

state of the Union to secure full and equal rights and duties of U.S. 

citizenship. That means full and equal rights of national citizenship, including the fundamental right of government by consent 

through voting rights in the Federal elections are guaranteed only 

through citizenship in a state, rather than a territory. 

So, for residents of all five unincorporated territories who don’t 

move to a state, the status of a U.S. national in American Samoa 

and a U.S. citizen in a territory is constitutionally the same, with 

only those rights under the Constitution and Federal law confirmed 

by Congress and Federal statutes enacted under the territorial 

power. 

I have a question for Governor Fortun ̃ o. Given the predicament 

for the territories and for Congress due to the twisted saga of unincorporated territory status, do you agree that the best path forward 

is for Congress to support self-determination for each territory, 

based on status options that are legally valid, politically feasible, 

and compatible with the freely expressed wishes of a majority in 

votes held whenever each territory decides to seek a change of 

status? 

Also, would you care to comment on the consistent Federal court 

rulings that confirm full and equal rights of U.S. national citizenship that include that Federal voting rights are attainable only 

through state citizenship, and what it means for those citizens in 

Puerto Rico who democratically have expressed a desire for new 

status with equal rights of national citizenship that includes 

Federal voting rights? 

Mr. FORTUN ̃ O. Thank you, and I commend you for raising this 

very important question. And, it is an honor to see you sitting up 

there on the dais. 

As you very well state, there is a situation that was court-created 

of a so-called unincorporated territory. And what it means is that 

it grants Congress carte blanche to essentially do whatever it 

wants with the U.S. citizens residing in the territories. Initially, it 

was only applicable to territories with non-citizens. But it has been 

extended and applied to territories where American citizens reside, 

American citizens that actually have served with valor and courage 

in every single war, in our case, since 1917. 

65 

The only way to address this situation whereby our constitutional rights are never the same if we live in a territory is to either 

move to one of the 50 states or become a state. In order to attain 

that, there ought to be, in my opinion, number one, a process by 

which majority rules in the territory, in terms of the terms that are 

acceptable, but also in terms that are acceptable to Congress, because Congress has the ultimate word in this matter. And that is 

why H.R. 727 makes a lot of sense. 

Mrs. RADEWAGEN. Thank you. 

Thank you, Mr. Chairman. I yield back. 

Mr. YOUNG. Resident Commissioner, you are up. 

Mr. PIERLUISI. Yes. Thank you, Chairman. Listening to Governor 

Acevedo Vila ́, and former Member of Congress, I just want to raise 

a question to see if you can explain to me what kind of status you 

envision in Puerto Rico’s future? What is your specific position on 

status? Because I, frankly, do not get it. 

And I will be respectful. You know very well the way Congress 

works. Congress approves bills every day we are in session that 

apply or not to Puerto Rico, based on its power under the territory 

clause of the U.S. Constitution. The Supreme Court of the United 

States, ever since the beginning of the 20th century, decided that 

Puerto Rico is an unincorporated territory, meaning that Puerto 

Rico could become either a state or a nation. Two choices: statehood 

or nationhood. 

Yet we are a territory. We have our own constitution—good 

constitution, by the way. We are called a commonwealth. But, as 

you well know, that is the situation. Any day here, they can deal 

with us and we have no vote. We have a say, but no vote. 

Now, looking at the future, what do you want Puerto Rico to be? 

Do you want Puerto Rico to be recognized as a sovereign nation, 

and then strike getting to a compact or treaty with the United 

States providing for the economic benefits you were talking about? 

Is that what you want? Or do you want Puerto Rico to continue 

being a territory as it is, and then keep trying to get better treatment in the laws that Congress approves on a daily basis? 

Mr. VILA ́. Resident Commissioner, I just said that, for me, status 

quo is not the alternative, and doing nothing is not the alternative. 

I also said that what we need to get to is a new economic relationship which is described in many of my essays. One of them is 

included as an annex to my written statement. 

In that sense, what I think we need to establish is a new relationship based on a compact in which we clarify the powers of 

Congress and we clarify the powers the people and the government 

of Puerto Rico will have. 

To me, this is a political will situation, not a legal question. 

Actually, I ask any of you to look into the U.S. Constitution and 

read to me the clause where it talks about unincorporated territory. It is nowhere. It is nowhere. The Constitution only talks 

about territories. 

But when the U.S. Government came to the realization that they 

had Puerto Rico—back then Philippines, many of the territories— 

but that they were not on the path toward statehood, they had a 

political situation. And then a new theory came to accommodate 

that new reality, and now we are called unincorporated territories. 

66 

But that is not in the Constitution. That is nowhere in the 

Constitution. 

So, to me, what we need is to reach a political will for the new 

economic relationship. And I firmly believe that the best alternative for the people of Puerto Rico and for the United States is 

what we have called sovereign commonwealth, estado libre 

asociado soberano, where you clarify the powers of Congress, and 

you clarify the powers of the people of Puerto Rico. For me, the 

most important one has to do with economic development. 

Mr. PIERLUISI. Would that be a territory, or would that be a 

sovereign nation in association with the United States? 

Mr. VILA ́. A new relationship, the same way that, before, there 

were only territories, and then, after that, it was accepted to have 

unincorporated territories. I think what we have to reach is a political and economic agreement, and then we will deal with the legal 

structure. 

Mr. PIERLUISI. And would Puerto Ricans continue to be American 

citizens—— 

Mr. VILA ́. Yes. 

Mr. PIERLUISI [continuing]. Even if they are residing in a 

sovereign nation, as opposed to the United States? 

Mr. VILA ́. Yes, it is a matter of political will. 

Mr. YOUNG. We will continue this. 

Mr. LaMalfa. 

Mr. LAMALFA. Thank you, Mr. Chairman. I just had a question 

I wanted to throw out there on the idea of Puerto Rican bonds that 

might be going into bankruptcy. I am trying to work through this 

a little bit here, I am trying to get familiar here, but it is the possibility that previous bonds could end up in bankruptcy. What would 

that mean for investors? And then, what kind of confidence would 

anybody have in future bonds going forward? 

And then, how would this lay over with how things look with 

Greece—how would that differ from the country of Greece, with 

those governments defaulting? What kind of confidence would investors be able to have with Puerto Rico at that point? 

Mr. FORTUN ̃ O. Mr. Chairman, should I give it a try? 

Mr. YOUNG. He just put it out. Anybody wants to answer it—— 

Mr. FORTUN ̃ O. I will be happy to, of course. And some of the 

members of this committee know my background. I slashed expenses by 20 percent. I am proud to be a fiscal conservative. But 

I can tell you that I believe that the rules in the country should 

apply in the same way for creditors and debtors across the country, 

regardless of whether you are dealing with the credit of Detroit, 

California, Florida, or Puerto Rico. And, in that sense, I believe 

that certainty is required. 

Some people have stated in the past, well, if you now implement 

a Chapter 9, or you allow Chapter 9 to actually benefit both creditors and debtors of debt issued by Puerto Rico, you will be changing the rules of the game. That is exactly what this Congress does 

every day, and that is exactly what investors in every type of paper 

face every single day. Congress changes rules, especially tax rules, 

every single day. 

So, in that sense, nothing special. But I strongly believe that 

there ought to be fiscal responsibility on the part of the territory, 

67 

but there ought to be certain rules that apply to debtors and 

creditors. And Chapter 9 applies in the 50 states; it ought to apply 

across the country, including the territories. 

Mr. VILA ́. May I just add that what will happen is the same 

thing that happened in Detroit. The same thing. You have an 

orderly process to deal with the situation. We are not—we are talking about municipalities or instrumentalities of the central government that might go bankrupt. So, in that sense, you have a very 

recent experience in Detroit. So that is the same. It is basically allowing those corporations and those instrumentalities of the government of Puerto Rico to use that tool. 

And I just want to clarify also that the reason Resident 

Commissioner Pierluisi’s bill is so important is because the local 

government in Puerto Rico approved a local law and was declared 

unconstitutional by a Federal court. That case is pending in 

Boston, in the First Circuit, Boston Court of Appeals. We will see 

what happens. 

The problem is that we don’t get action from Congress. And then, 

when the local legislature of Puerto Rico decided to somehow act, 

then we have a Federal court say, ‘‘You cannot do that.’’ So I don’t 

know of any other place in the world that doesn’t have rules—— 

Mr. LAMALFA. And that feels like—— 

Mr. VILA ́ [continuing]. To deal with the status—— 

Mr. LAMALFA [continuing]. Already, right? If the court is 

stopping you from doing things. But—— 

Mr. VILA ́. I missed you, sorry. 

Mr. BARCELO ́. Can I make a statement? 

Mr. LAMALFA. We don’t change tax rules every day around here. 

We have had a package that has been very difficult to do tax reform around here, so it is not as easy as maybe it is made out to 

be. 

But go ahead, sir. 

Mr. BARCELO ́. We are very concerned. People are concerned 

about the bond holders, and they think of the bond holders as 

wealthy bond holders from the Nation, from the United States. A 

lot of the bond holders—and I don’t know how much of a percentage, but a large percentage are poor people of Puerto Rico, retirees. 

And some of the retirement funds in Puerto Rico have invested 

heavily in Puerto Rican bonds, because they have faith in the government of Puerto Rico. So they would also be subject to not only 

the bond holders in Wall Street, but the individual bond holders 

and family bond holders in Puerto Rico will be affected by anything 

that is done. 

And when something is done in an orderly fashion, it is the best 

way to do it. If nothing is done, and then the roof falls down on 

everyone, then everybody is going different ways, and going to 

court, and court proceedings for years and years and years. That 

is why it is being sought. Nobody expected this to ever happen. 

One of the problems is that in Puerto Rico there has been a— 

as a colony, we have created a dependency. You have heard 

Governor Vila ́ speak about how he wants to have U.S. citizenship 

and not participate in the democratic process. How can anybody 

that says that they believe in democracy and that they want the 

U.S. citizenship, not want to participate in the democratic process 

68 

of the nation they are citizens with? Somebody is telling a lie or 

does not understand what democracy is, and does not understand 

what U.S. citizenship means, because they want citizenship but 

they don’t want to vote. Oh, that is bad, to have representation in 

the government of our Nation is prejudicial. 

I mean how can that even be accepted? I wouldn’t have the gall 

to go any place and say, ‘‘I am a Democrat, I believe in democracy, 

but I don’t want to have the right to vote or the right to 

representation.’’ 

Mr. LAMALFA. Yes, I am sorry, sir. 

Mr. YOUNG. Time is up. 

Mr. LAMALFA. OK, thank you. Just be careful on asking for 

statehood, because you might get more EPA than you ever asked 

for, because my resources, we can’t get at in California any more 

due to those guys. 

Mr. YOUNG. The Ranking Member. 

Mr. SABLAN. Yes, on the EPA part, you get it whether you are 

an outlying area, you could be in Midway and get the EPA. Trust 

me. 

[Laughter.] 

Mr. SABLAN. Would it be possible for the people of Puerto Rico 

to come together and figure this out themselves, and then come to 

Congress and tell us what it is you want? 

I have learned in my short 7 years here in Congress that you 

don’t ask a question unless you know the answer. If you are really 

going to look to Congress for guidance—seriously, is there a way 

for you to finally come together and—— 

Mr. PIERLUISI. Would the gentleman yield? 

Mr. SABLAN. I yield to the gentleman from Puerto Rico. 

Mr. PIERLUISI. See, the problem, Mr. Sablan, is that as I was 

saying, in Alaska they held a referendum, a plebiscite, years before 

they came a state. And 57 percent chose statehood, and 43 percent 

said they didn’t want it. It always happens. In Alaska—correct me 

if I am wrong, Mr. Chairman—but I believe there are people who 

still want Alaska to be independent. 

[Laughter.] 

Mr. YOUNG. Primarily because of the EPA. 

[Laughter.] 

Mr. PIERLUISI. The same happened in Texas. Texas was an independent nation before it joined the Union. So you will always have 

different opinions and different factions. So, to ask Puerto Ricans, 

‘‘Oh, why don’t you just agree, all of you,’’ it is just an easy way 

out, with all due respect—— 

Mr. SABLAN. Reclaiming my time—— 

Mr. PIERLUISI [continuing]. Because Congress needs to act—— 

Mr. SABLAN. Reclaiming my time. I am just suggesting—I am 

naive—that in Puerto Rico, just like in the Northern Mariana 

Islands, politics is something we discuss breakfast, lunch, and 

dinner. 

I reclaim, Mr. Chairman, and this is interesting, I hope I didn’t 

offend anyone. And, if I did, then that is your problem, not mine. 

[Laughter.] 

69 

Mr. SABLAN. But I am enlightened. I am going through the same 

growing pains, although Puerto Rico has been in this since 1902— 

or 1908. 

Mr. PIERLUISI. In 1898 we became a territory, a U.S. territory. 

Mr. SABLAN. 1898. Well, see, that is what happened when that 

war broke out in Cuba. The United States won the war. They kept 

Puerto Rico and sold off to the Germans. And that is where we left 

off, but now I am so glad we are together again. See, it is so wonderful. The world goes around in circles. And in 100 years we will 

probably be down there and you are up here, because you are a 

state. 

But I will tell you this much. There are so many times when I 

am trying to get something done in Congress and I pray, ‘‘If only 

Puerto Rico were a state, and they would be out of my way.’’ 

[Laughter.] 

Mr. SABLAN. Thank you very much, Mr. Chairman, for this 

hearing. 

Mr. VILA ́. May I react to his comment? I know it was not a 

question, but I think that probably we all agree. 

I am going to say two things in terms of things that are happening and have been shown here. For example, Pierluisi’s bill for 

Chapter 9 has bipartisan support in Puerto Rico, and that is very 

rare. So you have statehooders, pro-commonwealthers, all sectors 

supporting that. A coalition has been created to deal with the 

health issue, Medicare and Medicaid, also with bipartisan support. 

That is new. Probably 10 years ago that would have been impossible. That is why my presentation is basically about the economic 

crisis. 

I think you have a responsibility and a unique opportunity. I am 

not talking only about Congress. It has to do also with the executive branch. This crisis is going to get complicated. And as I said, 

and I repeat it, we are in this together. The solution for this crisis 

needs the U.S. Government to come to the table and be part of that 

solution. I think, on that, we might also be able to get some kind 

of agreement beyond political parties in Puerto Rico. 

Mr. YOUNG. I want to thank everybody at this table. I may have 

to leave here in a moment if—my Vice Chairman, because we have 

a vote on. 

Miriam, what is—and this is for all of you—how does this tax 

structure work for the bigger companies that—pharmaceuticals and 

I don’t know what else is down there. How does that work, and 

what benefit does it bring to Puerto Rico? 

Mr. BARCELO ́. I think it hurts Puerto Rico. 

Mr. YOUNG. Pardon? 

Mr. BARCELO ́. I think it hurts Puerto Rico, Mr. Chairman. I 

think that—for a long time I have been saying that if we reduce 

this 90 percent tax credit to the corporations, basically the pharmaceuticals, down to 70 percent, instead of paying 4 percent they 

would pay 12 percent. It would mean about $3 to $4 billion more 

in revenues for the government of Puerto Rico, and we could start 

solving this economic situation. 

But the incumbent now, the government, the Governor and the 

Popular Party, will never do that because when the campaign 

70 

comes along, the lobbyists and the lawyers from these corporations, 

they raise a lot of money for them. And that is—— 

Mr. YOUNG. Well, what I am leading up to, it is just not pharmaceuticals. There are other ones. But that would bring money into 

the Puerto Rican economy. 

Mr. BARCELO ́. Definitely, yes. 

Mr. YOUNG. Because, right now, some of these companies don’t 

even have workers from Puerto Rico, do they? 

Mr. BARCELO ́. Yes, they do—— 

Mr. YOUNG. But Miriam—wait a minute. Miriam, go ahead. 

Ms. RAMIREZ. Well, I have spent a lot of years now looking at 

this, because when I first started coming up here I thought it was 

the independentistas who were obstructing the deal. And I was 

bumping into these lobbyists who were actually—— 

Mr. YOUNG. Now, don’t knock lobbyists all the time. I want you 

to know something. They do inform people. But I just—because you 

are basically all lobbyists, sitting at that table. 

Ms. RAMIREZ. I realize that. 

Mr. YOUNG. OK. So—— 

Ms. RAMIREZ. What I mean to say is that I found these procorporation—this particular type of corporation lobbyists interfering with the work that we were doing up here to try to convince 

Congress to move on this issue. And since then, the GAO has produced—I have introduced that and have links in my testimony— 

has produced evidence that this is one of the biggest tax evasion 

scams in the whole world. Almost every country is looking at this 

very seriously. And I have met with people in the finance—in the 

Ways & Means Committee, and they are very concerned about the 

fact that there are all these trillion—this is in the papers every 

day—trillion dollars of money out there in foreign countries. 

But here is the problem. We are coded as foreign in the IRS. I 

don’t know if the other territories are, but we are coded as foreign 

under Section 933, which is what has allowed the benefits for these 

people who relocated to Puerto Rico, for these corporations. And I 

just have the numbers from Microsoft, because they became public. 

But I know for a fact that this is happening also with the pharmaceuticals and everybody else. The contrast is here we are talking 

about how Puerto Rico is sinking in bankruptcy, how Puerto Rico— 

do you think the people of Puerto Rico don’t see that? That is why 

they are leaving. 

Mr. YOUNG. OK, stop right there. What I am looking for, if that 

is happening—because we have another bill that has been introduced by, I believe, a gentleman—Duncan, is it Duncan, South 

Carolina—that wants a congressional control board. 

Does anybody there support that? 

Mr. PIERLUISI. Mr. Chairman, would you yield? 

Mr. YOUNG. I am going to, yes. 

Mr. PIERLUISI. It is not a bill. He wrote a letter. And some are 

advocating for that. I should say for the record that I oppose that. 

Mr. YOUNG. OK. 

Mr. PIERLUISI. I mean Puerto Rico, as we have discussed, we 

have a republican form of government, a constitution blessed by 

this Congress. 

71 

So, unless you suspend the effectiveness of our constitution— 

which makes no sense—you don’t appoint a financial control board 

to take over Puerto Rico. Puerto Rico, with all due respect to the 

District of Columbia, is not the District of Columbia. It is not the 

city of New York. We are a territory. And there is case law from 

the Supreme Court saying that—— 

Mr. YOUNG. I understand what the gentleman—— 

Mr. PIERLUISI [continuing]. We deserve deference, in terms of our 

own self-government for our local—— 

Mr. YOUNG. I am about ready to run out of time. But here is 

what I am looking for. 

As you know, I am a proponent, because it is probably the central solution, and you all have a vote, just say you are going to be 

a state and be a state. And then that may not happen, because this 

is—this cannon is an awful—has a long fuse on it. 

I have problems, and with the Congress. I have, like I said, been 

in this business for a long time and watched the attitude, which 

is bad. We don’t need a bunch of foreigners—by the way, back in 

the United States—we don’t need two Senators that are new. We 

don’t need five Democrat Congressmen—which is not true, by the 

way, you would probably end up all being Republicans, all due 

respects. 

[Laughter.] 

Mr. YOUNG. Because I lived through that. We were all 

Democrats, now we are all Republican. 

But I do think we have to—and my job is to try to keep this alive 

and moving, because somewhere we have to solve this economic 

problem. I personally think statehood would do it. I may be wrong. 

We also have to consider the fact that maybe we change the tax 

laws so we can pick those up a little bit, where we can take—be 

more solvent. But the present system, the status quo, is not working. I said this 21 years ago, and if I am alive 20 more—God help 

you guys if I am alive 20 more years. But the fact is I would like 

to see this not be a black eye on American citizens, and Puerto Rico 

be accepted as equal. 

I do apologize, and I want to thank the panel, we have a vote 

on. And for those Delegates that don’t have to vote, you’ve got it 

made. You don’t have to run over there and have a vote and miss 

a vote, you know? If you miss a vote, they say you have committed 

a crime. 

If there are no other questions, I will adjourn. 

Ms. BORDALLO. Mr. Chairman? 

Mr. YOUNG. Yes, ma’am. 

Ms. BORDALLO. May the territories take over this meeting? 

Mr. YOUNG. Absolutely. I have offered to her [Delegate 

Radewagen], if she wants to do it. Are you through? OK. 

We are adjourned. 

[Whereupon, at 4:35 p.m., the subcommittee was adjourned.] 

72 

[ADDITIONAL MATERIALS SUBMITTED FOR THE RECORD]

[LIST OF DOCUMENTS SUBMITTED FOR THE RECORD RETAINED IN THE

COMMITTEE’S OFFICIAL FILES]

— June 22, 2015, Diaspora Puerto Rico 51st State, Statement for 

the Record. 

— June 23, 2015, Mr. Luis G. Rivera Marı ́n, Esq. Statement for 

the Record. 

— June 23, 2015, Dr. Gabriel J. Roman, President, Citizens 

Movement for Statehood, Guayama, Puerto Rico, Statement 

for the Record. 

— June 23, 2015, The Honorable Larry Seilhamer, Minority 

Leader, New Progressive Party Delegation, Senate of Puerto 

Rico, Statement for the Record. 

— June 24, 2015, Dr. Gladys Escalona de Motta, Senator Jose ́ A. 

Ortiz-Daliot, Alliance for Free Association ALAS, Letter to 

Chairman Don Young. 

— June 24, 2015, The Honorable Sergio E. Estevez, Municipal 

Legislator, Municipality of Carolina, Minority Whip Leader 

for the New Progressive Party, Statement for the Record. 

— June 24, 2015, Dennis O. Freytes, American Patriots for 

Equality (Igualdad)—Civil Rights, Statement for the Record. 

— June 24, 2015, Mr. Franklin D. Lopez, ‘‘The Time for Equality 

is Now! ,’’ Statement for the Record. 

— June 24, 2015, Anı ́bal Acevedo Vila ́, former Governor of Puerto 

Rico, Submission for the Record, ‘‘Supreme Court of the 

United States, LIMTIACO v. CAMACHO.’’ 

— June 24, 2015, Anı ́bal Acevedo Vila ́, former Governor of Puerto 

Rico, Submission for the Record, ‘‘Toward the Economic 

Refounding of Puerto Rico and its Commonwealth Status.’’ 

Æ