Puerto Rico governor to fight proposed furloughs, cuts

Puerto Rico's governor said Friday that he will go to court to fight a federal control board's call to cut a public pension system by 10 percent, furlough tens of thousands of government workers and eliminate Christmas bonuses.

The comments by Gov. Ricardo Rossello come amid rising tensions between his administration and the board created by Congress last year to oversee the finances of a U.S. territory mired in a 10-year recession.

"We will take any steps necessary to protect the people of Puerto Rico," Rossello said.

He said the board cannot impose those measures unilaterally by July 1 without the consent of his administration.

A spokesman for the seven-member board did not respond to a request for comment.

The board has proposed furloughs of two days a month for teachers and four days a month for other government workers as a way to cut government spending by up to $40 million a month in savings. In addition, all Christmas bonuses could be eliminated by fiscal year 2018.

Rossello rejected those proposals on Thursday in response to a letter the board sent his administration last week.

"The oversight board is now trying to strong-arm the government into accepting the expenditure controls," he said. The proposed cuts "carry with them the significant threat of triggering a serious drag on Puerto Rico's economy, which could quickly spiral out of control."

The board has said those measures would go into effect if Rossello's administration did not take sufficient cost-saving steps as it faces nearly $50 billion in pension liabilities and seeks to restructure a portion of the island's $73 billion public debt load.

The board also admonished Rossello's administration last Friday in a letter that warned about plans to generate savings that are "inadequate or poorly executed."

"If that happens, Puerto Rico is all but certain to run out of money to fund the central government's payroll come November or December of this year," the board said.

It also stressed the need for Rossello's administration to come up with a plan to generate enough money to ensure the government can provide essential services without interruption.

"Beginning in July, Puerto Rico will face a worsening cash flow problem because of loss of federal funds and the depletion of pension funds' assets," the board said.

The board also is awaiting a proposed budget that Rossello presented to legislators nearly a month ago. Final approval has been held up by disagreements between legislators and the board over some $25 million, which local officials believe should be used for government services instead of being set aside as a reserve.