States aren’t the only ones being bankrupted by pensions. Puerto Rico, an unincorporated U.S. territory, faces its own pension crisis, which is hitting at a time when the island’s tax-supported debt has already reached an alarming 80 percent of personal income. Things have gotten so bad that Moody’s has downgraded Puerto Rico’s credit rating and is threatening to do so again unless it solves its retirement problem. The AP reports (h/t @dlippman):
Some experts are calling for cutting benefits to help Puerto Rico confront what economists and financial analysts say is a ticking fiscal time bomb: A public pension system with a $37.3 billion unfunded liability that must be addressed soon, at a time when the U.S. island territory’s government has little money to spare.
The unfunded liability, which is spread across three public pension systems, is almost four times the annual government budget for the island of nearly 4 million people. Only a few much larger U.S. states, such as California and Illinois, face bigger unfunded liabilities.
What can we say that we haven’t said before? There are no easy ways out of a mess like this. There will be plenty of pain to go around as belts are tightened and services end up on the chopping block.If there’s a silver lining, it’s that crises like these can embolden policymakers to try new things and experiment as they rebuild. Neither America nor Puerto Rico are remotely like the Scandinavian countries whose interesting post-blue reforms we highlighted this weekend. But America does have the advantage of a relatively loosely coupled system, which provides it with a grand total of 50+ smaller laboratories in which to try innovative solutions. Now we just need both parties to let go of their deeply-held, stultifying orthodoxies and start thinking outside the box.