Puerto Rico faces austerity measures amid budget wrangling


SAN JUAN, Puerto Rico (AP) — New austerity measures are looming for storm-battered Puerto Rico after local legislators refused to alter labor laws as demanded by a federal control board that said changes would stimulate the U.S. territory's economy amid an 11-year recession.

The board that is overseeing the island's finances said today it will eliminate a $25 million scholarship fund for Puerto Rico's largest public university, as well as a $50 million annual fund for cities and towns struggling in the aftermath of Hurricane Maria.

The board said it also will scrap an annual Christmas bonus for all government employees starting next fiscal year.

The measures were a blow to Gov. Ricardo Rossello, who had originally promised that Puerto Rico legislators would agree to at-will employment, which means private employers would be able to dismiss workers at any time without having to prove just cause.

Rossello urged the board and legislators to reach an agreement and take what he called "prudent" steps.

"Let's take actions that ... will benefit the people of Puerto Rico," he told reporters.

Board members have said changing labor laws would attract sorely needed investors to a U.S. territory trying to restructure a portion of its $70 billion public debt load as it faces nearly $50 billion in pension obligations.

"Decisions made over decades have led us to this point," board member Ana Matosantos told reporters. "Now, deep cuts to programs, services and debt, revenue increases, reforms to critical infrastructure, revamping outdated government structures and eliminating barriers to job creation are all necessary. ... These difficult choices are not the fault of the board, or of the current government in power. Rather, they are the result of decades of financial mismanagement and neglect."

Puerto Rico Senate President Thomas Rivera Schatz, who campaigned against changing labor laws, issued a strongly worded statement defending his position as he criticized the board.

"They threaten without any justification or economic foundation with eliminating the Christmas bonus, vacations, employment security of the private-sector worker, scholarships for students, funds for infrastructure projects and economic development, among other important items," he said. "They threaten to be worse than Hurricane Maria!"

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