By Nick Brown and David Henry
NEW YORK (Reuters) – Puerto Rico’s governor said on Sunday he would submit a revised fiscal turnaround plan on Thursday to the island’s federally appointed oversight board, but the plan would not include labor reforms and pension cuts the board demanded.
Governor Ricardo Rossello also said the government of the bankrupt and hurricane-ravaged island would not allow the oversight board to usurp its legislative powers.
“The Government will not allow the takeover of these powers, and therefore cannot be compelled to implement many of the suggested revisions,” Rossello told the board in an April 2 letter made public with a press release.
The revised plan will exclude layoffs of public employees, the release said.
The comments appear to increase the likelihood of litigation between the local government and the board, which was appointed by the U.S. Congress in 2016 and is charged with approving a blue print for Puerto Rico’s turnaround.
Puerto Rico is navigating the biggest bankruptcy in U.S. government history, with $120 billion in combined bond and pension debt, and its worst natural disaster in 90 years caused by Hurricane Maria in September.
The letter bolsters a hardline position Rossello has taken in the past, including last week when he responded to a letter from the board.
The disagreement comes as the governor seems to have few allies on the mainland. U.S. lawmakers and financial creditors have accused Puerto Rico of overstating its financial straits, while previous austerity moves have angered unions.
The oversight board has called for measures including cuts to public employee pensions averaging 10 percent.
The fiscal reform measures ultimately adopted will determine how much money the U.S. commonwealth has left over to pay holders of $71.5 billion in bonds in a massive debt restructuring.
Rossello complained in the letter that the board is trying to enforce additional cuts on government employee and retirement benefits at the “worst possible moment,” as Puerto Rico attempts to recover from reduced government services and economic loss.
(Reporting by David Henry and Nick Brown in New York; Editing by Richard Chang)