After years of fiscal mismanagement, Puerto Rico has appealed to the U.S. Supreme Court to help it smooth the road out of debt. During oral arguments in late March, Puerto Rico complained that a decades-old law prohibiting it from declaring bankruptcy was unfair.
All 50 states have authority to declare Chapter 9 bankruptcy to restructure public utility debt. But Congress specifically forbade Puerto Rico from doing so in a 1984 law that also said the island’s legislature cannot come up with an alternate plan.
But Puerto Rico can’t pay its bills. And so its legislature passed a law to let its public utilities restructure about $20 billion in debt, in defiance of the federal regulation. Puerto Rican lawmakers called it the Recovery Act....