This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Puerto Rico Teeters On Fiscal Edge Over Pensions

Nearly three years ago, former Gov. Fortuno established a committee charged with solving the pension fund's problems, noting that the overall system was paying $679 million more a year than what it received in contributions.

"Absent any corrective measures, the systems could be left without funds in or before 10 years," he stated in a March 2010 executive order.

That study led lawmakers to increase employee contributions to the system and they transferred $162 million into the retirement system so that officials could buy a capital bond expected to generate $1.5 billion in 40 years. But it wasn't enough to solve the problem.

Puerto Rico's public pension problems also have damaged the island's bond ratings, which remain significantly lower than any U.S. state, raising the island's cost of borrowing.

In December, Moody's lowered Puerto Rico's credit rating, stating in part that it doesn't have a clear idea as to how and when the government will solve the retirement systems' problems. It warned of an additional credit rating downgrade if no reforms are undertaken.

Complicating the territory's financial situation is its $69 billion public debt.

"Puerto Rico debt levels are well, well in excess of what we see in other states," Krop of Fitch Ratings said.

Most states have an average 3 percent of tax-supported debt as a percentage of personal income. Nine percent is considered high. Puerto Rico is at 80 percent, Krop said. The per capita debt is more than $12,000 per person, excluding pension, she added.

Given those numbers, Marti said she doesn't believe she'll have enough money to retire. She went back to work in part to collect more Social Security, but even then, she said the federal fiscal situation doesn't give her much hope.

"Things are not easy," she said. "You don't know what's going to happen with Social Security either."

Copyright 2011 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
3 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG

Markets

DOW 17,683.58 -46.53 -0.26%
S&P 500 2,068.76 -8.02 -0.39%
NASDAQ 4,991.94 -17.2740 -0.34%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs