Puerto Rico gov defies board, rejects reform, pension cuts

SAN JUAN, Puerto Rico — The powers of a federal control board overseeing Puerto Rico's finances could soon be tested as the U.S. territory's governor on Monday defied its calls to implement more austerity measures amid an 11-year recession.

Gov. Ricardo Rossello rejected demands that his administration submit a revised fiscal plan to include a labor reform and a 10 percent cut to a pension system facing nearly $50 billion in liabilities. He said the plan he will submit Thursday also will not contain any layoffs.

"The board does not have the power to implement issues of public policy," Rossello said. "It's that simple."

The board has not responded publicly yet to Rossello's comments, which came just hours after he sent the board a seven-page letter Sunday night outlining why he will not implement those and other changes.

"The people of Puerto Rico, in the aftermath of Hurricane Maria, have suffered a great deal in terms of reduced government services and economic loss," Rossello said in the letter. "Now the board is attempting to enforce additional cuts on government employee and retirement benefits at the worst possible moment, as Puerto Rico attempts to recover."

The Category 4 storm caused more than an estimated $100 billion in damage when it hit on Sept. 20 at a time when the territory was struggling to emerge from an economic crisis and restructure a portion of its more than $70 billion public debt load. Roughly 80,000 power customers remain in the dark more than six months after the hurricane.

Board spokesman Jose Luis Cedeno did not respond to a request for comment.

The board has the authority to approve its own fiscal plan with the changes it seeks, but Rossello said it does not have the power to force his administration to implement them.

"If the board certifies some of those measures, we won't execute them," he said.

The board has said it will approve the government's fiscal plan by April 20.

On Sunday, the board posted letters in which it revealed that it also has rejected a fiscal plan for Puerto Rico's largest public university and its Highways and Transportation Authority. It said the University of Puerto Rico should increase its per-credit tuition from $57 to $157 by next year, a proposal that local officials have rejected. In addition, it said the transportation authority's fiscal plan does not set aside funding for key projects and needs a debt sustainability analysis.

Rossello's administration did not immediately respond to the board's letters. It has until Thursday to amend and submit those two fiscal plans.

Rossello initially submitted a labor reform bill to Puerto Rico legislators that would have eliminated a Christmas bonus and increased the minimum wage from $7.25 an hour to $8.25 by 2021, among other things. He then withdrew the bill last week in response to the board's demands.

Rossello also criticized a letter sent to the board last week by Utah Republican Rep. Rob Bishop, chairman of the House Natural Resources Committee. The governor said that it was full of errors and that it seemed the U.S. government was more interested in helping creditors obtain part of the money they invested in local government bonds than in helping Puerto Ricans recover.

Katie Schoettler, a spokeswoman for Bishop, said Rossello was not in office or involved in any negotiations when Congress approved a law in 2016 that created the board, which also is overseeing Puerto Rico's debt restructuring.

"Perhaps the governor has a different interpretation of the actual law," she said.

Bishop said in his March 29 letter that he was frustrated with the board's "inability and unwillingness" to reach consensual restructuring deals with creditors and what he called a "lack of respect" for congressional requirements of Puerto Rico's fiscal plan.

On Monday evening, Rossello issued a 13-page letter to Bishop in which he said that his administration has been working closely with the board and that ultimately Puerto Rico's government is the only one with the power to implement public policy.

"Your letter is truly disturbing in its reckless disregard for collaboration and cooperation in favor of an anti-democratic process akin to a dictatorial regime," Rossello wrote. "Regrettably, your letter embodies everything that is wrong with this process and only serves to reinforce the dismissive and second-class colonial treatment Puerto Rico has suffered throughout its history as a territory of the United States, which undermines our efforts to address the Island's fiscal, economic, and humanitarian crises."