The federally appointed oversight board for bankrupt, storm-damaged Puerto Rico, at loggerheads with the island’s governor over a new fiscal plan, has hit a new low point.
This week, Gov. Ricardo Rossello withdrew his proposal after the board called for cutting public pensions by 10% and implementing other austerity measures. Many in Puerto Rico believe the panel infringes on the territory’s sovereignty. It has the authority to impose its own plan if it doesn’t like what the governor proposes.
“The Oversight Board pretends to dictate the [government’s] public policy. This is not only illegal but is unacceptable,” Rossello said in a statement declaring his reasons for rescinding the labor proposal. He called the board’s actions an “unfair and abusive measure.”
Rossello’s plan featured several employer-friendly provisions, such as eliminating required Christmas bonuses for private-sector employees, as well as cutting mandatory back vacation and sick days, and allowing businesses to fire workers as they saw fit. On the other hand, he also advocated raising the minimum wage.
The board has given the governor until April 5 to come up with his own plan, which includes the labor law changes—and how to deal with the commonwealth’s underfunded pension system.
The dispute stems from Puerto Rico’s tremendous debt crisis, a $120 billion bond and pension debt coupled with the aftermath of September’s Hurricane Maria, which caused widespread devastation. Today, some 16% of the population still lacks power.
At present, Puerto Rico’s general budget makes the payments to its $50 billion underfunded public pension system, which now has no assets. Reuters reports that this is one of few occasions where a large-scale US plan has been left to a “pay-as-you-go” basis.
The island’s huge debt has led to the biggest bankruptcy in US history. If Rossello continues to be at odds with the congressionally appointed oversight board, he risks the panel imposing a fiscal turnaround plan unilaterally if it wishes.
Tags: Pension, Puerto Rico, Ricardo Rossello