The battle between the governor of Puerto Rico and the federally appointed oversight board over the beleaguered island's fiscal plan hit a new level on Wednesday evening, as Governor Ricardo Rossello gave an impassioned televised address to publicly deny many of the board's requirements.
"As part of the evaluation process of the fiscal plan submitted by our government, the board has sent us a communication proposing measures that would have the effect of increasing the conditions of poverty in Puerto Rico," Rossello said in his prepared remarks.
"Although the board endorsed our initiatives to transform the education and health systems, I cannot allow the board to award itself powers that it does not have, much less when they intend to use this power to impose measures that negatively affect the quality of life of our people," the governor added.
Earlier on Wednesday, the oversight board sent several letters to Rossello, saying that changes to the proposed fiscal plan, including a cut to the commonwealth's troubled pension system and additional austerity measures, are required.
"The conditions that the board pretends to impose would make it practically impossible to increase the federal minimum wage; would eliminate the Christmas bonus for public employees, would further affect vacation and sick leave; and do not include programs for the training of our workforce. Our proposal was based in the salary increase for our workers and the creation of training opportunities. With these elements made impossible, the proposal is not viable," he said.
A spokesman for the oversight board declined to comment on the governor's remarks.
The board is requiring a 10 percent cut to the island's pension system, which currently has around $50 billion of unfunded obligations. Pensioners with a combined retirement plan and Social Security benefits below the poverty level of $1,000 per month would not be subject to the 10 percent cut, according the letter the board sent to Rossello.
The governor has repeatedly rejected any reductions to the island's pension system and excluded it from the most recent draft of the fiscal plan he submitted for review on Friday
Rossello reiterated his stance on the subject in his address Wednesday evening.
"I inform you that although the board certifies in the fiscal plan a reduction of 10 percent to pensions, that unfair and abusive measure will have my tenacious opposition," he said.
However, the board says this is a non-negotiable requirement for the bankrupt island's fiscal plan.
"These are the changes we need to make to honor our pensioners, to honor all of our Island's residents — those working and those not yet working — to attain a better reality for all," said a Wednesday letter from the oversight board to Rossello.
The governor contends that the PROMESA Act, a law passed by the U.S. Congress that enabled Puerto Rico to restructure a large portion of its $73 billion in outstanding debt, establishes that the board can make public policy recommendations, but not establish it.
"That is a role of the government elected by the people of Puerto Rico," Rossello said in his televised address. "They intend to dictate public policy, reducing health benefits while striking public employees and the economy of the Island."
The televised address followed the oversight board's decision on Friday to cancel a Monday meeting originally set to certify the fiscal plan.
Bonds issued by Puerto Rico rallied on Monday off of the news to levels not seen since early October when President Donald Trump's comments about wiping out the financially strapped island's debt load sparked a selloff. The island's benchmark General Obligation bonds due in 2035 gained more than 20 percent on Monday following the draft plan submission to the board.
That proposed fiscal plan showed that the island's government had close to double the cash available, due to hurricane relief funds. It projected a surplus of $6 billion over the next 6 years, which is up from the $3.4 billion the island's government had foreseen just last month.
The government of Puerto Rico has until April 5, by 5:00 p.m. AST to submit the updated fiscal plan, with the required changes, to the board for its review.
"To avoid the necessary changes for the development of our people, is precisely what has led us to the worst crisis in history," Rossello said as he closed out his speech. "I did not take control of the government to do more of the same. I am here to transform Puerto Rico, and nothing will stop my commitment to improve your quality of life."