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San Juan • One of Puerto Rico's largest unions sued on Wednesday to block a federal control board's austerity plan that would slash pensions and other spending by the U.S. territory.
The suit filed by the United Public Servants union said the plan violates a law protecting the pension system as well as constitutional guarantees involving contracts between the government and retirees. The union represents more than 10,000 government workers and 2,300 retired ones.
"(Puerto Rico's) current and future retirees are not rich and will not become rich because of their pensions," the lawsuit states. "To the contrary, many of them will suffer grievous harm from the cuts promised by the final fiscal plan."
The union accused the board of creating what it called "an unauthorized, dangerous and uncertain path" for Puerto Rico's future as the island struggles to emerge from a decade-long economic crisis.
A spokesman for the board overseeing Puerto Rico's finances declined to comment.
The board recently approved an austerity plan that would cut benefits for retirees who receive more than $2,000 a month. If Puerto Rico's government doesn't meet several financial goals imposed by the board in upcoming months, the island's public pension system could be cut by 10 percent. Economists have warned that thousands of retirees would be pushed below the federal poverty level if that measure is implemented.
The system is underfunded by more than $40 billion and is expected to run out of money this year.
"Clearly a 10 percent cut would be very painful," Brenda Vargas, the union's communication director, said in a phone interview. "The majority are still paying mortgages. They also pay a lot for their medications. And not all of them have Social Security."
Teachers and police officers in Puerto Rico do not collect Social Security and depend solely on the island's pension system.
Vargas said 75 percent of unionized retirees collect only $500 to $700 a month in pension, and that many collect even less than because they are still paying off loans.
The lawsuit comes just weeks before a May 1 deadline to restructure a portion of Puerto Rico's $70 billion public debt load. Officials are scheduled to start private negotiations with creditors this week, but if they fail to reach any deals, the restructuring could go to court for a bankruptcy-like process.