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The 2014 Pension 40: Alejandro García Padilla
Puerto Rico may have the worst pension problem in the U.S. The commonwealth has a pension deficit of more than $37 billion. The funding ratio of its Employees Retirement System is 3.1 percent; its Teachers Retirement System is at 15.6 percent. A recent report by the Government Development Bank for Puerto Rico said net assets of the Employees fund will be depleted by 2018–’19 and Teachers will run dry in 2021–’22. In November 2012, Alejandro García Padilla, a Democrat, beat incumbent governor Luis Fortuño by a razor-thin margin by promising to fix Puerto Rico’s economic problems: crime, high utility costs and unemployment. He has taken steps to plug the commonwealth’s deficit, of which the pension fund is just a part. In late November, Padilla, 43, called a special legislative session to win support for a $2.9 billion bond sale backed by an unpopular tax increase, which Moody’s Investors Service said is essential if the commonwealth is to remain solvent. Still, efforts to close the pension deficit have fizzled. Much of a 2013 reform of the Teachers fund was overturned by the courts. Not only has Puerto Rico not paid higher contributions to Employees as agreed to in 2011, but in June the governor slashed contributions by an additional $84 million. The plan tried to make up for its shortfall by issuing $2.8 billion in pension obligation bonds, while Teachers and a smaller, judicial retirement fund tapped investment principal. Then there is the so-called personal loan program: The Employees fund allows beneficiaries to take personal loans of up to $5,000; on June 2013 outstanding loans made up the equivalent of 76 percent of the fund’s net assets.