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Puerto Rico oversight board sues to enforce pension reforms

Puerto Rico's Financial Oversight and Management Board filed a lawsuit Monday in U.S. District Court in San Juan to enforce parts of its fiscal plan calling for furloughs and pension reforms, following Gov. Ricardo Rossello's refusal to carry out those provisions.

The complaint asks the court for an injunction prohibiting the governor from refusing to enforce or comply with the board's fiscal plan.

"While our preference was to avoid this step, we believe it is a necessary measure to keep Puerto Rico on track with its commitments to reduce spending and build stable foundations for its economic future," said Natalie Jaresko, executive director of the oversight board, also known as PROMESA for the Puerto Rico Oversight, Management and Economic Stability Act under which it was created, in a statement.

"On March 13, the board certified the commonwealth's fiscal plan to achieve nearly $40 billion in long-term deficit reduction by increasing revenues and right-sizing the public sector, while beginning the hard work of restructuring the island's unsustainable $74 billion debt owed.

"Puerto Rico's financial situation did not deteriorate overnight, and fixing it is going to be difficult, but we have the tools to do it," Ms. Jaresko said in the statement.

The oversight board's plan for pension reform calls for progressively reducing pension benefits by a total of 10% for most participants and enrolling all active members and new hires in defined contribution accounts.

Furloughs would go into effect if certain benchmarks are not met.