SAN JUAN, Puerto Rico — For the first time in Puerto Rico’s history, legislators on Thursday introduced a bill created by a federal control board overseeing the island’s finances that aims to impose austerity measures the U.S. territory’s government has rejected.
The bill would reduce vacation and sick leave by half, eliminate a popular Christmas bonus and increase the minimum wage for certain workers if Puerto Rico manages to increase its labor participation rate as it struggles to recover from Hurricane Maria amid an 11-year recession.
Now that the bill has been submitted, it will lead to what many anticipate will be a fierce debate between Jose Carrion, president of a board that Congress established two years ago, and the president of Puerto Rico’s Senate, Thomas Rivera Schatz. He ordered Carrion to appear at a public hearing on May 1, the same day that tens of thousands of Puerto Ricans are expected to go on strike to protest austerity measures the board approved last week in a 6-1 vote.
“(Carrion) can explain to us the ‘virtues and benefits’ that this so-called ‘labor reform’ might have, if any,” Schatz said in a written statement.
Carrion has said the board would consider going to court if Puerto Rico’s government refuses to implement the recently approved measures. They are part of seven fiscal plans that will serve as Puerto Rico’s economic blueprints in upcoming years as it struggles to emerge from a financial crisis and restructure a portion of its $72 billion public debt load.
The bill was submitted the same day the board ordered Puerto Rico’s government to submit a proposed fiscal year 2019 budget by May 4 that is consistent with fiscal plan figures.
Several economists have said they believe the fiscal plans are overly optimistic when estimating how much federal funds Puerto Rico will receive as a result of Hurricane Maria, a Category 4 storm that struck on Sept. 20 and caused more than an estimated $100 billion in damage. Martin Guzman, an economist at Columbia University, said Thursday during a visit to the U.S. territory that the fiscal plans also underestimate the impact of new austerity measures.
“This is not the time to make structural changes,” he said, adding that reforms, “don’t usually generate growth miracles.”
He and other economists also called for an audit of Puerto Rico’s debt before it can be restructured. A federal court judge is currently holdings hearings after Puerto Rico filed for the biggest U.S. municipal bankruptcy in May 2017.
Greg Clark, head of municipal research of New York-based Debtwire, said in a phone interview that the lack of audited financials since 2015 means there is no baseline to judge the validity of projections presented in the fiscal plans.
“That’s where I think the big flaw is,” he said. “I’m still surprised the board hasn’t taken care of that kind of thing.”
In addition, Clark said the austerity measures that the board approved will be a tough sell in Puerto Rico: “The legislature there has become more populist...and that doesn’t bode well for the passage of these types of things.”
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