The deeply indebted island defaulted Friday on debt that is supposed to be guaranteed by the Puerto Rican constitution. In other words, Puerto Rico was supposed to pay creditors who hold general obligation bonds before paying anyone else, even police.
But Governor Alejandro García Padilla said: No. He argued that paying teachers, emergency personnel and other critical needs must come first.
"This administration continues to take historic steps to ensure the residents of Puerto Rico continue to receive essential services while the commonwealth continues to face a delicate financial situation," a spokesman said Thursday.
The island isn't planning to make any of the $800 million payment to its bondholders due on July 1. Puerto Rico's government says it is in a "dire" financial position with only about $350 million in cash on hand right now.
Puerto Rico's default Friday marks the first time that a state or state-like entity (Puerto Rico is a U.S. territory) has failed to pay general obligation bonds since the Great Depression.