By Daniel Bases
(Reuters) - Puerto Rico's federally appointed financial oversight board said on Friday it will institute a two-day per month work furlough for government employees, excluding frontline law enforcement personnel, in an effort to achieve $218 million in savings.
The plan, which originally envisioned a four-day per month furlough, is set to begin on Sept. 1 and last throughout the 2018 fiscal year.
It is part of the board's efforts to implement fiscal changes and achieve $880 million in savings for "right-sizing" the government and shoring up the U.S. commonwealth's long-term economic viability.
Natalie Jaresko, the executive director of the oversight board, said the government had offered a number of ideas for achieving savings, only some of which met three broad criteria: 1) money-saving measures should have a clear and reasonable path to implementation; 2) be recurring and permanent; 3) and stem from a structural response to changing the nature of providing government services.
"The gap that didn't meet those three targets was $218 (million)," Jaresko said during a webcast of the board's ninth public meeting.
Furloughs could be scaled back or eliminated early if sufficient savings are achieved per the government's fiscal plan, the board said.
The board also discussed reforms of the pension system, which would include a 10 percent cut in benefits, as well as putting off a final decision over the partial or whole elimination of a public employee Christmas bonus until Sept. 30.
Puerto Rico is weighed down by roughly $72 billion in debt and another near $50 billion in unfunded pension liabilities. It suffers from migration and a 45 percent poverty rate.
Governor Ricardo Rossello's government rejects the furlough plan, which would impact over 138,000 employees. Rossello is scheduled to issue a declaration in response to the board's decisions on Friday afternoon.
Puerto Rico's Treasury Secretary, Raul Maldonado, told Reuters preliminary tax collections in July, the first month of fiscal 2018, are running $20 million to $30 million ahead of forecast.
However, in contrast, board member Andrew Biggs laid out the situation in stark terms during the meeting.
"The simple fact is that the government of Puerto Rico has run out of money," he said, adding that austerity measures, if done properly will "build confidence, will help the economy move forward and help counteract the difficult steps of raising taxes and cutting spending that right now we have no choice but to do."
(Reporting by Daniel Bases in New York; Editing by Lisa Shumaker)