Puerto Rico officials proposed cuts to teacher pensions, a new financial control board and restructuring $18 billion of debt due in the coming five years, as part of a long-anticipated plan unveiled on Wednesday to pull the island out of a wrenching fiscal crisis.
The financial overhaul plan, drawn up by a task force created in June by Gov. Alejandro Garcia Padilla, anticipates the island running out of money by next May or June.
The five-year plan proposes that the government cut subsidies to municipalities and the University of Puerto Rico, and merge state agencies. It also calls on the government to extend until 2021 legislation that would freeze new hires, salary increases and collective bargaining agreements.
Garcia Padilla acknowledged in a televised address that Puerto Ricans already have had to endure new taxes, an increase in utility bills and layoffs during a nearly decade-long economic stagnation.
Even if the plan is implemented, officials warned the government would still face a $14 billion financing gap from 2016 to 2020, and that it would not be able to meet debt payments as scheduled because it could affect essential services. Officials warned that a compromise with creditors is needed to avoid what they called a disorderly default and legal morass.
"The plan itself will not get us out of the hole we find ourselves in," Garcia said. "It's time that creditors come to the table and share in the sacrifice."
Among the other proposals in the nearly 80-page plan are government investment in public-private partnerships, creation of an earned income tax credit, reduction of nominal corporate tax rates and a 10-year waiver from future minimum wage increases for workers younger than 25 to help increase the number of job offers.
The plan also calls for further consolidation of public schools, with some 135 closures already implemented, as well as for subsidy cuts to municipalities to begin in 2018, while allowing cities and town to change their property tax structure and amend license fees if needed.
The plan states that Puerto Rico should seek equal treatment from the U.S. government regarding tax incentives and health care reimbursements.
It is unclear how many of these suggestions would be implemented.
Though the plan involves cuts to the minimum wage and public sector employment, the governor’s working group has said the proposal emphasizes economic development measures, such as tax incentives for companies doing business on the island.
Garcia Padilla's administration now faces the hurdle of trying to implement the plan in the face of potential legislative gridlock and possible resistance from teachers' unions.
Puerto Rico has suffered nearly a decade of recession. Its $72 billion debt load has accumulated, while the number of taxpayers shouldering the burden has dwindled, with thousands moving to the U.S. mainland each year.
Only 40 percent of the working population is in the workforce and island pensions face combined unfunded liabilities that topped $37 billion in fiscal year 2013.
The economic crisis has sparked an exodus of Puerto Ricans to the U.S. mainland, with an estimated 144,000 people leaving the territory between 2010 and 2013. About a third of all people born in Puerto Rico now live in the U.S.
Al Jazeera and wire service