Justices Seem Likely to Uphold Puerto Rico Oversight Board

Oct 16, 2019
7:44 AM

The Supreme Court in Washington. (AP Photo/J. Scott Applewhite)

By MARK SHERMAN, Associated Press

WASHINGTON (AP) — The Supreme Court seems likely to leave in place the oversight board established by Congress to help Puerto Rico out of a devastating financial crisis that was deepened by Hurricane María in 2017.

The justices voiced skepticism on Tuesday about a constitutional challenge to the oversight board’s composition that could affect more than $100 billion in debt and the island’s economic future. Hedge funds that invested in Puerto Rican bonds are leading the case against the board.

A lower court ruled in February that board members were appointed in violation of the Constitution because they were not confirmed by the Senate.

The president selects the board’s seven voting members. They and one other non-voting member chosen by Puerto Rico’s governor approve budgets and fiscal plans drawn up by the island’s government. The board also handles bankruptcy-like cases that allow the island to restructure its debts.

Justice Samuel Alito asked facetiously if it’s “excessively cynical” to think that the hedge funds were more interested in the money at stake than the constitutional challenge they are mounting.

The oversight board and the Trump administration appealed the ruling by the 1st U.S. Circuit Court of Appeals in Boston. There appeared to be substantial support for their arguments that the board’s makeup is not controlled by the Constitution’s provision on appointments, but by a different provision giving Congress significant control over U.S. territories, of which Puerto Rico is one.

Legislation passed by Congress in 2016 directed the oversight board to act “on behalf of Puerto Rico and its people and its agencies,” Justice Ruth Bader Ginsburg said.

The appeals court gave the president time to rectify the problem by re-nominating the members and getting them approved by the Senate. President Donald Trump has sent the nominations to the Senate, which has not acted on them while the court case is pending.

Even if the justices uphold the lower court ruling against the board, it could simultaneously also ratify the actions it has taken to date because throwing them out would be very disruptive to the island’s recovery.

A decision is expected relatively quickly because the court agreed to review and decide the case much faster than usual.