Kasich On Puerto Rico Fiscal Crisis

Kasich - Keene, NH 12-29-15Ohio Governor John Kasich punted on the topic of whether Puerto Rico should be given the legal authority to file for bankruptcy protection.  Puerto Rico, overwhelmed by more than $70 billion of debt owed by the Commonwealth and some of its agencies and municipalities, is seeking the ability to file a bankruptcy petition.  Current law precludes Puerto Rico, as well all of the states, from filing a bankruptcy petition.  Unlike states however, which may authorize their municipalities and agencies to file petitions under Chapter 9 of the federal bankruptcy code, Puerto Rico is also precluded from allowing its municipalities and agencies from filing bankruptcy petitions.  With the first significant default on Puerto Rico’s debt having just occurred, the situation is likely to rapidly deteriorate.

Kasich initially referenced Puerto Rico’s status by saying that bankruptcy would require statehood.  That’s not quite right, however, and allowing Puerto Rico to be treated like a state (i.e. permitted to authorize its municipalities and agencies to file, but not itself authorized to file) would only require a very simple (albeit consequential) change in the federal bankruptcy code.  Kasich’s brief response then moved to a quick statement that he would put “people in a room” to discuss solutions and concluding that he’s “not prepared to say… yet” that bankruptcy is an appropriate solution.

The day after our conversation Kasich’s campaign announced the selection of a “chair for Governor Kasich’s newly created Puerto Rico team.”*  The announcement references “the importance of permanently resolving Puerto Rico’s status issue” (whether continuing as a commonwealth, becoming a state or an independent nation), but makes no mention of Puerto Rico’s fiscal crisis.  While status seems likely to be discusses as part of any federal action on bankruptcy or otherwise dealing with Puerto Rico’s debt, it’s a distinct topic without direct bearing on the fiscal crisis.

I spoke with Kasich following a presidential campaign town hall in Keene, New Hampshire.


Note:  Puerto Rico does not participate in the presidential general election, but presidential primaries are held in Puerto Rico.