Puerto Rico governor wants fewer austerity measures

SAN JUAN, Puerto Rico — Puerto Rico's governor submitted an austerity plan made public on Wednesday that would cut deeply into the U.S. territory's budget while avoiding some of the most painful measures recommended by a federal control board that is overseeing the island's effort to confront a debt crisis that has led to repeated defaults.

Gov. Ricardo Rossello's plan would cap some Medicaid benefits, effectively raise property taxes and collect a tax on internet purchases. It would also scrap some infrastructure projects and could turn ferries, ports and parking lots over to private companies.

But it would fall short of the board's recommendation of a 30 percent cut in payroll costs and 10 percent reduction in the government pension system, which is on track to run out of money next year.

Rossello said his plan would help generate $4 billion in revenue and save $11 billion in costs. It calls for making up to $1.2 billion in debt payments by 2019, though that is only a portion of the amount due.

Puerto Rico is trying to stabilize its staggering economy while trying to cope with a $7 billion deficit, nearly $70 billion in public debt and a growing number of angry creditors.

The control board established by Congress has final say on the plan and is supposed to rule by March 15.

Among those hit hardest would be Medicaid beneficiaries, who include nearly half of the island's 3.4 million inhabitants. Some benefits would be eliminated or capped. Retired government workers who receive pensions of more than $2,000 a month could see cuts.

Rossello said he wants to collect taxes on internet purchases, which now total around $2 billion a year in the territory. And he said he plans a whistleblower office that would help root out tax cheats. Traffic and motor vehicle license fees would jump 10 percent. And many property owners could see tax bills rise because valuations would be reassessed.

In addition, Rossello asked the board to extend a stay on litigation that expires in May to Dec. 31 to allow for negotiation with bondholders.

The governor earlier approved laws to allow a shorter work week for public employees and the elimination of extra pay for Sunday shifts.

Economist Vicente Feliciano said the biggest difference between Rossello's plan and that of the board is rooted in estimates of how far the economy -- and government revenues -- will shrink.

"The board says we should expect 17 percent, and the plan says 2 percent," he said. "Before implementing any austerity measures, the plan assumes that the government already has $9.3 billion."

He said the plan's assumption is likely more accurate given that the largest contraction in Puerto Rico's economic history since the Great Depression was 4 percent.

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Danica Coto on Twitter: www.twitter.com/danicacoto