McClintock on Puerto Rico pension system

"Puerto Rico's pension system is essentially bankrupt"-Business Week, referring by an article of Bussiness Week: The Great American Ponzi Scheme on page 3.


By Kenneth D. McClintock
Secretary of State of Puerto Rico

Our nation's most prestigious weekly business publication, Business Week magazine, in two words, has summarized the status of Puerto Rico's government employees pension systems-"essentially bankrupt".

Since Gov. Rosselló proposed and the NPP-controlled legislature stemmed the hemorrhaging of Puerto Rico's government pension systems in 2000, PDP governments allowed the systems to slide into essential bankruptcy---a 90% actuarial deficit.

Fast-forward to Gov. Fortuño and 2011---essentially bankrupt no more. Gov. Fortuño has submitted a new budget for fiscal year 2011-12 that includes tens of millions of dollars to fund the first of a ten-year plan to start saving Puerto Rico's government pensions systems. Beginning in slightly over two months, the government will be increasing its employer contribution to its employees' pension systems by at least one additional percentage point per year for the next decade, until the current 9.2% contribution surpasses 20%.

The current legislation will not raise employee contributions, but that is an idea that could be retaken in the future. Retaken because 5 years ago, the Puerto Rico Senate that I presided at the time, with votes from its NPP majority and, remarkably, its PDP minority, approved legislation that would have raised employee contributions from 8% to 10% over 5 years.

As a result of Gov. Fortuño's first bold step, Puerto Rico's pension system will step away from "essential bankruptcy" into the not-quite-comfortable zone of more average-state pension system actuarial deficits. Fortuño's plan is not surprising, in light of the economic miracle that Puerto Rico has experienced during the past two years, as the Governor led us out of virtual junk-bond status and into the realm of gradual economic recovery.