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Understanding the US/PR constitutional relationship

Delve into the intricate legal dynamics between the United States and Puerto Rico, exploring historical context, legislative nuances, and Supreme Court decisions shaping their unique constitutional bond.

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Understanding the US/PR constitutional relationship

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  1. Understanding the US/PR constitutional relationship Hiram Meléndez-Juarbe UPR Law School www.elplandehiram.org/seminarios

  2. The PLan • Basic notions • The Commonwealth of Puerto Rico (1952) • The Summer of 2016: Two Supreme Court decisions and one Congressional enactment • Economic Crisis and Puerto Rico’s Territorial Status

  3. The Basics

  4. Insular Cases (1901-1922) • Puerto Rico labeled an Unincorporated Territory • Subject to Congressional Plenary Powers, pursuant to Art IV, §3, cl. 2: “The Congress shall have power to dispose of and make all needful rules and regulations respecting the territory or other property belonging to the United States”

  5. Insular Cases (1901-1922) • Puerto Rico became “a territory ... belonging to ..., but not a part of the United States” (Downes v. Bidwell, 182 U.S. 244, 287 (1901)). • “while in an international sense Porto Rico was not a foreign country, since it was subject to the sovereignty of and was owned by the United States, it was foreign to the United States in a domestic sense…” (White, concurring)

  6. Some consequences: • Provisions in the US Constitution referring to States are not applicable to PR • Examples: • Constitutional requirement that US tax system must be “uniform throughout the United States” (Art I, §8) • Since 1917 all bonds issued by Puerto Rico are exempt from federal, state and municipal taxes anywhere in the U.S. making them attractive to investors. • For most of 20th century U.S. corporations in the island received favorable tax treatment for their territorial earnings • Right to Vote in US elections (despite citizenship since 1917 and federal laws generally applicable to PR)

  7. Additional consequences: • “Plenary Powers” means what it sounds like (forget everything you know about federal / sate relations and limits on Congressional authority to Commerce Clause powers and the like). • Disparate treatment in distribution of US resources is generally O.K. (Harris v. Rosario, 446 US 651 (1980) • Limits to Plenary Powers: • “Fundamental rights” • Rational basis

  8. Current Framework: The Commonwealth of Puerto Rico (1952)

  9. 1900-1952: • Congressional Organic Acts establishing civil government with varying levels of local autonomy 1950: • Congress delegated to Puerto Rico the ability to regulate local affairs when letting it enact its Constitution 1952: • Puerto Rico enacted its current Constitution (with popular and Congressional ratification), mimicking faculties of U.S. States. • US Laws applicable to Puerto Rico. • Removal of Puerto Rico from United Nations’ list of non-self-governing territories (1953)

  10. Did the 1952 constitutional moment change the coreof Us / pr relations?

  11. NO

  12. The Supreme Court, Congress and the Summer of 2016

  13. Puerto Rico v. Sánchez Valle, 579 U.S. ___ (2016) U.S. Supreme Court considered the effect of the 1952 constitutional moment over the question of what is the “ultimate source” of Puerto Rico’s prosecutorial authority for purposes of the Double Jeopardy clause in the U.S. Constitution. “The island’s Constitution, significant though it is, does not break the chain”… Congress cannot “erase or otherwise rewrite its own foundational role in conferring political authority. Or otherwise said, the delegator cannot make itself any less so— no matter how much authority it opts to hand over”.

  14. Puerto Rico v. Franklin, 579 U.S. ___ (2016) • Chapter 9 of the Federal Bankruptcy Code allows municipalities of U.S. States (i.e. political subdivisions or instrumentalities) to restructure their debt in U.S. court. • Puerto Rico is excluded from the Bankruptcy statute “for the purpose of defining who may be a debtor under chapter 9”. • In 2014 Puerto Rico enacted its own bankruptcy statute for public corporations (with over $20 in debt). • Supreme Court found that Congress had excluded Puerto Rico from restructuring its debt in federal court while also denying it the authority to fill the gap in its jurisdiction. • Implicit in ruling: US Constitution requires that federal bankruptcy legislation be “uniform ... throughout the United States” (U.S. Const. art. I, §8, cl. 4). Because Puerto Rico is an unincorporated territory, disparate treatment is OK.

  15. PROMESA (Puerto Rico Oversight, Management and Economic Stability Act, 2016) • Fiscal Oversight Management Board (FOMB) empowered with broad policymaking authority over Puerto Rican affairs. • Establishes a judicial debt restructuring process initiated at the Board’s discretion, in federal court. • Enacted by Congress pursuant to its Plenary Powers under the territorial clause.

  16. La Junta FOMB is an unaccountable governmental structure with vast authority over local affairs, supplanting elected political institutions, as well as the Puerto Rico Constitution itself. For example: • Requests multi-year Fiscal Plans and yearly operational budgets from the local government. If the government fails to submit acceptable Plans or budgets, the Board may develop them independently (§§201-203). • The Board can “recommend” policy measures covering all areas of government (conditioning Fiscal Plan approval upon their local adoption) (§§205, 201(b)(K)) • Reviews for its approval government laws, contracts and regulations among other faculties (§204).

  17. La Junta • Austerity measures amid deep economic inequality • According to the US Census, 45.1% lives in poverty.* UPR study suggest that post Hurricane figure may increase from 52.3 to 59.8%)** compared to 12.3 in the United States. • Measures affect essential public services and programs such as public pensions, schools, public university, public safety, employee rights, etc. • *https://factfinder.census.gov/faces/nav/jsf/pages/community_facts.xhtml?src=bkmk • **https://caribbeanbusiness.com/study-reveals-poverty-scenario-in-puerto-rico-after-hurricane-maria/ • ***https://estadisticas.pr/ • ****https://centropr.hunter.cuny.edu/sites/default/files/RB2018-05_SEPT2018%20%281%29.pdf

  18. Disparate treatment in distribution of federal resources: • Supplemental Security Income(SSI) not applicable to PR • For aged, blind, and disabled people who have little or no income • GAO estimates that PR would have received in 2011 from $1.5 billion to $1.8 billion if included. • SupplementalNutritionAssistanceProgram(SNAP), not applicable to PR (block grant instead) • 2010 U.S. Department of Agriculture report: implementing SNAP in Puerto Rico would increase Puerto Rican households receiving benefits by 15.3% (from 554,000 to 639,000 households). • GAO found that Puerto Ricans would have received up to $700 million more in benefits in fiscal year 2011 Source: Complaint Filed Peña Martinez v Azar, 18-CV-01206 (Filed March 2018, US D Ct PR)

  19. Economic Crisis and Puerto Rico’s Territorial Status

  20. Role of Us/PR relations in economic crisis • For more than one hundred years Puerto Rico’s economic model has been based on U.S. investment, rather than developing a solid economic domestic foundation. • Since the mid 1940s, and through the end of the century, local elites promoted their invitation as the main development strategy. • Puerto Rico’s seemingly prosperous growth was built upon hollow foundations laid by Congressional territorial powers: tax exemptions to U.S. corporations underwrote American industries in the island at the expense of local industry development. • While many factors (political, institutional, demographic, financial) have contributed to Puerto Rico’s economic decline, Congressional repeal of tax incentives in 1996 with a 10-year transition phase-out seems to have played a role in dismantling Puerto Rico’s fragile economic foundations.

  21. Role of Us/PR relations in economic crisis • Since 2007 (after repeal of tax breaks) Puerto Rico’s economy has been in steady decline with a negative GNP growth nearly every year. • Issuing debt became an important source of income to finance public projects and operational expenses. Puerto Rico’s highly coveted triple tax-exempt bonds—enacted pursuant to Congressional territorial authority— allowed easy access to borrowed dollars. • Public debt grew dramatically during the last 15 years • 1995: $16 billion • 2005: $40 billion • 2015: $72 billion

  22. hiram.melendez@upr.edu Presentation available at: http://elplandehiram.org/seminarios/ For more, see: In the Red: Puerto Rico's Fiscal and Democratic Deficits Laid Bare (August 18, 2017). QuaderniCostituzionali 2017 No. 3. Available at SSRN: https://ssrn.com/abstract=3022151

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