Puerto Rico loses challenge to board overseeing its spending

A U.S. federal judge rejected a legal challenge Tuesday filed by the government of Puerto Rico against the authority of a financial oversight board appointed by Congress as the island territory tries to dig its way out of debt.

Gov. Ricardo Rossello filed the challenge last month after the board rejected a series of proposed budgets for the territory. Rossello argued the board overstepped its authority by insisting on cost-saving measures that included job cuts and the elimination of mandatory Christmas bonuses.

U.S. District Judge Laura Taylor Swain rejected the arguments on procedural grounds in a 39-page ruling in which she called the arrangement between the board and Puerto Rico an "an awkward power-sharing arrangement" that nonetheless allowed the seven-member board the authority to make binding policy choices on the territory.

Rossello, an advocate of statehood for the territory of 3.3 million people, blasted the decision as "further proof of Puerto Rico's colonial status" and said his administration was still trying to determine if it would appeal. In the meantime, the governor said he would be working with the board to avoid harsh austerity measures.

"The federal court ruling states that our public employees won't receive their deserved Christmas bonus unless the Government takes unjustified, draconian measures against our very own employees, which include massive layoffs," he said. "We are adamantly opposed and will not comply with the decision."

Congress created the board in 2016 when it enacted legislation enabling the island to restructure more than $70 billion in debt, acquired largely due to borrowing to cover budget shortfalls over a more than decade-long economic slide.