Puerto Rico Governor Alejandro Garcia Padilla has announced he will not submit an amended fiscal plan — the board's first request of the island's governor. Photo: AP

In what could be a test of the board's powers, Governor Alejandro Garcia Padilla announced Monday, November 21, 2015 that he will not submit an amended fiscal plan — the board's first request of the island's governor. He said he believes that new austerity measures would only worsen the crisis and insisted that the board restructure nearly $70 billion in public debt that he has said is unpayable.

"It's not right, and it's not necessary," he said of austerity measures. "That would push us into an economic death spiral. It would mark a return to policies of depression."

Board members who met in Puerto Rico for the first time last week said the 10-year plan issued last month needs to be amended in part because it is not realistic and assumes federal financial help when none is likely. They requested that Garcia submit an amended plan by December 15, 2016 so they could approve a final version by January, 31, 2017.

It was not immediately clear what happens now that the governor has rejected the board's request. A board spokesman said he was checking on whether board members would comment on Garcia's announcement.

Garcia steps down as governor on January 1, but he has promised to reject any austerity measures while still in power.

"While I'm governor of Puerto Rico, I will oppose any ... measures such as laying off public employees, reducing the pensions of our retirees and leaving the University of Puerto Rico unprotected," he said.

The board previously requested that some of Puerto Rico's most heavily indebted agencies submit their own fiscal plans, something that had never been required before. Government officials said at the board's meeting on Friday that the agencies, including Puerto Rico's utility companies, would submit their plans.

During that meeting, board member Jose Gonzalez said that Puerto Rico's government needs to set priorities.

"Not everything is an essential service," he said. "It's an incredibly delicate balance between fiscal adjustment and economic growth ... We'll try to get the balance right."

The board had requested the opinion of U.S. Treasury Secretary Jack Lew on the territory's fiscal plan. He said in a letter prior to Friday's meeting that parts of the plan lacked detail and clarity and that a required formal debt sustainability analysis was missing. Lew also said that a credible debt restructuring is needed and that the government should not rely solely on austerity measures.

"As we have emphasised from the beginning of Puerto Rico's crisis, austerity alone is a self-defeating remedy," he wrote.

Puerto Rico has been in a decade-long economic slump, and Garcia's administration has taken measures such as increasing utility rates and imposing new taxes to help generate more revenue. Despite those measures, the island has already defaulted on nearly $1.4 billion worth of bond payments since August 2015, and it owes some $1.5 billion to government suppliers as it continues to delay vendor payments amid a crisis that has prompted more than 250,000 people to flee the island for the US mainland in recent years.

Garcia has warned that the government will run out of money by February if a debt moratorium that expires that month is not extended. The moratorium has so far shielded Puerto Rico from numerous lawsuits filed by angry creditors seeking to recuperate the money they invested in Puerto Rico bonds.