There’s more bad news for reformers in Puerto Rico this week. The island’s Supreme Court has struck down changes to the teachers’ pension system. The high court must have had a change of heart: It upheld similar changes to Puerto Rico’s Employees Retirement System just last year. Reuters reports:
The ruling stated that the reform plan, known as Law 160, “substantially diminishes” the “contractual rights of the petitioners in terms of their retirement plan.” […]Puerto Rico’s government remained committed to the reforms. […]“If we do nothing, teachers will be without a pension in a few years, and this is something I cannot allow,” [Puerto Rico’s Governor Alejandro Garcia Padilla] said.The reforms were a key part of recent belt-tightening efforts by the territory’s government, which is grappling with a $70 billion debt load, sputtering economy and massive population loss.
This is a big setback for the cash-starved government and teachers both. As of June 2012 the teachers’ pension fund had only 17 percent of the assets it needed and $10.3 billion in unfunded liability. Raising the retirement age and increasing employee contributions would have gone a long way toward stabilizing the fund. And by putting off painful reforms for now, Puerto Rico will be left with worse options later. California and Illinois, don’t try this at home.