Puerto Rico’s governor turned over the reins of his government’s finances to a federal control board and outlined what he considers priorities during a televised address Thursday to prepare the U.S. territory for a historic change.
Gov. Alejandro Garcia Padilla said his administration had tried everything to ameliorate a decade-long economic crisis before accepting that the creation of a federal control board was necessary.
“We should all be aware of the repercussions of this process that starts now,” he said. “Like many of you, I didn’t agree either with the excessive power granted to the board, and with some of the people named to it. But the truth is we had no alternative.”
Established by U.S. legislation enacted in June, the seven-member board is scheduled to have its first meeting Friday in New York. It is expected to choose its president as well as outline the first steps it will take to help restructure a portion of a nearly $70 billion public debt that Garcia has said is unpayable.
Garcia urged the board to protect the pensions of retired public workers and the jobs that have been created, and to ensure that the U.S. territory receives equal benefits in the Medicare and Medicaid programs, among other things.
Garcia also said he has requested that the board consider intervening in a trial in which a federal judge is expected to decide soon whether Puerto Rico will have to pay its debts even though the U.S. legislation enacted in June also protects the island from lawsuits through February 2017.
“We’re warning the board about the threat to yours and everyone else’s health, education and safety if the federal court agrees to the creditors’ request,” he said during his address.
Garcia added that he expects to hand over a draft of a fiscal adjustment plan in two weeks and to have a final plan in place before year’s end.
Gustavo Velez, a Puerto Rico economist, said in a phone interview that it is unlikely the island will see any changes before January 2017.
“This is going to take some time,” Velez said, adding that the board will probably seek to access capital markets soon. “In the short term, they will look to stabilize Puerto Rico’s financial situation and avoid a government shutdown.”