Connecticut feels the human fallout of Puerto Rican debt crisis

Jessica Galarza is one of thousands who has fled economic adversity in Puerto Rico to begin a new life on the mainland. She chose to begin that life in Manchester.

But Galarza did not show up at U.S. Sen. Richard Blumenthal’s roundtable discussion on the Puerto Rican debt crisis to talk about her new life. She came to talk about the one she left after she lost her job several months ago.

Two days after an unprecedented court hearing began what could be a years-long bankruptcy-like process for Puerto Rico, Blumenthal met in Hartford Friday with current and former island residents, state legislators and advocates for change to hear their concerns and, when possible, answer their questions.

Blumenthal said Puerto Rico and the rest of the United States are “one community,” even if some perceive the island’s residents to be outsiders.

“They look at me as though I’m describing another country,” Blumenthal said. “I feel like I represent you and represent the people of Puerto Rico indirectly in this issue.”

Puerto Rico has $123 billion in obligations it says it cannot afford to pay. More than half of it is bond debt. The remaining portion is attributable to pension costs for retired public-sector workers.

In recent years, the island’s government has cut back on nearly all non-essential services in an attempt to keep making payments to its bond investors. It even has made dramatic cuts to services many argue are essential, such as health care and education.

Eventually, Puerto Rico ran out of services to cut. On May 3, under a new federal provision approved last year, the island territory declared a form of bankruptcy. The first court hearing was Wednesday.

It was the culmination of a decade-long recession that has demoralized a generation of Puerto Ricans, who have faced an increasing cost of living and a deteriorating quality of life. The Pew Research Center reported in March that the island’s population has declined by 400,000 since its peak of 3.8 million in 2004. Nearly all the change can be attributed to outmigration.

While many Puerto Rican natives have moved to cities in Florida and New York, some have come to Connecticut as well. People of Puerto Rican heritage now make up nearly 8 percent of the state’s population – and more than half of its Latino population.

Galarza described to Blumenthal and others at the forum the economic perils of life on the island.

Costs are increasing, she said, as worker salaries and pensions continue to be cut. After Galarza lost her job, she considered working multiple part-time jobs to pay the bills. She said she determined it would not be enough.

“It’s almost better to just live off of what little welfare you can get through the federal government rather than risk yourself by going out into the market,” Galarza said through a translator.

She left her parents and friends behind in search of a fresh start.

Luis D. Dávila, deputy director of the Puerto Rico Federal Affairs Commission in Washington, D.C., said the crisis Puerto Rico faces has no simple solutions.

“It’s a complete collapse of the whole economic system,” Dávila said. “If there was a time to blow everything up and do it from scratch, it’s now.”

“Pretty much our whole future depends on that ruling, what the judge is going to decide,” he added.

Others in attendance painted the same grim picture.

Emilio Estrella, a native of Puerto Rico who graduated from Eastern Connecticut State University this week, said he initially planned to return to the island after graduation to attend law school and begin his career. Now he plans to stay here.

Estrella, who is finishing up an internship with Blumenthal’s office, said he was hesitant at first to come to Connecticut, but his parents gave him clear advice.

“Things were so bad, they were like, ‘You should just go,’” Estrella said.

His parents, Edgardo Estrella and Enid Terón, were in Hartford Friday after attending their son’s graduation ceremony at the XL Center earlier in the week. They participated in the forum as well.

Terón, a music teacher, said the government continues to gut her pension as it struggles to make its payments. She said if her pension survives in court, it would probably not be enough to stave off poverty. Emilio translated for his mother as she spoke.

“She wants to know why people, health and education are being held responsible for the mistakes of the government,” he said.

Thousands of government employees in Puerto Rico are facing similar conditions, which has drawn attention from some unions in Connecticut and across the rest of the United States.

Juan Hernandez, director of Connecticut’s chapter of the 32BJ Service Employees International Union, said the government is “eliminating labor rights” and “using working people to pay for the debt that they didn’t create.”

“People will be dying in the streets if we do not do something now,” Hernandez said, calling the crisis a potential “genocide.”

Advocates at the forum lobbed accusations of corruption at the territory’s government and a federal oversight board commissioned last year that has direct control over the island’s finances. Dávila said what little autonomy Puerto Rico had before is now gone.

That loss of autonomy, and the court proceeding itself, are happening because of a federal law signed by President Barack Obama last year. The law, the Puerto Rico Oversight, Management and Economic Stability Act, better known by its acronym PROMESA, allowed Puerto Rico to avoid making payments to creditors after it began defaulting on some of its debt last July. Blumenthal supported the bill.

It also created the controversial oversight board that some in attendance decried as being complicit with government leaders in a policy that ensures government dollars are paid to creditors – many of which are hedge funds – instead of spent on basic human services they say the government should be providing.

“We’ve had our share of corruption here,” said state Rep. Edwin Vargas, D-Hartford. “But over there, it’s almost like acceptable. This board now has this authority, and it’s going to leverage that authority.”

Blumenthal said the Senate Finance Committee and the House Natural Resources Committee are responsible for oversight of the Puerto Rican oversight board, but added that neither panel has any members of Connecticut’s congressional delegation among its members.

Dávila called Blumenthal “a champion” for Puerto Rican causes in the Senate, but he said the island needs 50 more like him to make the changes that are necessary.

State Rep. Hilda Santiago, D-Meriden, said the island’s governor and legislators should take whatever action is necessary to stop payments to creditors as the court proceedings move forward.

“(They) should be moving to halt that bleeding,” she said.