Board sues Puerto Rico governor for rejecting furloughs

A federal control board overseeing Puerto Rico's crisis-ridden finances sued the island's governor on Monday for refusing to impose furloughs and take other measures it says are needed to save money.

The lawsuit further raises tensions between Gov. Ricardo Rossello and the board, which is demanding public employee furloughs and a pension reform as the U.S. territory tries to restructure a portion of its $74 billion public debt load. The board also requested an injunction to prohibit the governor from refusing to comply.

"While our preference was to avoid this step, we believe it is a necessary measure to keep Puerto Rico on track with its commitments to reduce spending and build stable foundations for its economic future," said Natalie Jaresko, the board's executive director.

It is the first time the board has gone to court to enforce its demands, and board members have warned that doing so could lead to deeper furloughs if implementation is delayed.

The lawsuit was filed after Puerto Rico government officials clashed with board members during a public meeting earlier this month in which they refused to implement furloughs or impose a 10 percent cut to a public pension system facing nearly $50 billion in liabilities. The board at the time said furloughs were needed because Rossello's administration had not achieved $218 million in savings as part of an overall $880 million in required savings.

Rossello told reporters on Monday that he believes his administration has met the objectives outlined in a fiscal plan that the board certified earlier this year. He also said that furloughs for more than 130,000 employees that the board says should take effect on Sept. 1 aren't needed at this time.

"We are willing to find other alternatives," he said.

Last week, Rossello signed a law that establishes a pay-as-you-go pension plan and sets aside $2 billion this year for tens of thousands of retirees. The law does not include any cuts as required by the board.

Puerto Rico has spent more than a decade mired in a recession sparked in part by previous administrations that borrowed heavily to cover ballooning deficits. The crisis has led to multimillion-dollar defaults on bond payments and prompted nearly half a million Puerto Ricans to flee to the U.S. mainland in search of jobs and a more affordable cost of living.