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Judge upholds Puerto Rico oversight board authority on fiscal plan

Ricardo Rossello, governor of Puerto Rico

A federal judge Tuesday dismissed a lawsuit by Puerto Rico legislators and governor challenging the authority of the federal oversight board to impose a fiscal plan and related budget.

U.S. District Judge Laura Taylor Swain for the district of Puerto Rico, San Juan, who is overseeing the island's bankruptcy case, granted the oversight board's motion to dismiss after hearing arguments July 25 to consider the legislators' claim that the board encroached on the Legislature's authority by refusing to certify its budget, instead certifying a new fiscal plan with reduced appropriations. The legislators had sought to have the judge rule the oversight board's actions as "non-compelling recommendations."

Another issue raised in the lawsuit was whether some labor reforms sought by the board violated wrongful termination law.

Congress gave the Financial Oversight and Management Board for Puerto Rico the authority to enact and impose a fiscal plan. The board has certified two earlier versions of a plan after a series of negotiations with Gov. Ricardo Rossello, largely over labor reforms.

Mr. Rossello agreed in May to labor reforms in the fiscal plan, including making Puerto Rico an "at-will employment" jurisdiction for current and new employees, but the changes required action by the Puerto Rico Legislature. The Legislature's failure to pass bills containing the changes led to the board's decision to recertify the plan.

Oversight board Chairman Jose Carrion welcomed the decision in a statement: “There can be no doubt that the fiscal year 2019 budget certified by the oversight board is the only one and must be enforced.”

Mr. Carrion said the board needs to focus on “implementing critical reforms, resolving the crushing debt crisis and transforming the island’s economy,” and he promised to announce steps in the coming weeks to increase public-sector efficiency and economic improvements, while working with creditors on debt restructuring.