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Puerto Rico to reform teachers’ pension system

December 19, 2013

SAN JUAN, Puerto Rico (AP) — Hundreds of teachers organized a protest Thursday at Puerto Rico’s seaside Capitol building after failing to reach an agreement with the governor to reform a public pension system that officials warn will soon collapse.

The protest interrupted a special legislative session that Gov. Alejandro Garcia Padilla had called to debate reform measures amid pressure to appease Wall Street ratings agencies as the U.S. territory braces for its eighth year in recession.

Garcia said the teachers’ pension system has a $10 billion deficit and will run out of funds by 2020 if nothing is done.

“We cannot remain with our arms crossed,” he said. “Postponing this reform will worsen the state of the system, require more drastic measures to save it and contribute to the country’s worsening credit.”

The government is seeking to change the system from a defined benefit plan to a defined contribution one and possibly increase the retirement age, among other things.

Jaime Perello, speaker of Puerto Rico’s House of Representatives, said he supported Garcia’s proposal. “There is no way to save the teachers’ pension system without making changes to it,” he said.

Aida Diaz, president of the Teachers’ Association of Puerto Rico, said she does not support the measures that Garcia submitted to legislators.

Teachers protesting the proposed measures say they favor alternatives such as increasing taxes on foreign companies to generate more revenue and receiving unclaimed money from the island’s electronic lottery system.

Nearly 42,000 teachers contribute to a pension system that supports nearly 38,000 retired teachers. Unlike other government workers in Puerto Rico, teachers do not receive Social Security and depend completely on their pensions upon retirement.

The government said if it had contributed $736 million to the system this fiscal year it would have helped fix the deficit, but it noted that it only was able to contribute 25 percent of that amount, or $186 million. Puerto Rico is currently battling a $70 billion public debt.

Garcia already has taken other measures to appease credit ratings agencies, including reforming a separate public pension system for other types of government workers.

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