Senators approved a bill Thursday to overhaul Puerto Rico's crumbling pension system after days of heated debate with hundreds of irate public employees protesting outside the U.S. territory's seaside Capitol building.
The bill was expected to also be approved late Thursday by the House of Representatives, which is controlled by the governor's party, and signed by Gov. Alejandro Garcia Padilla.
The proposed law calls for a higher retirement age that would vary according to the type of job held and number of years worked, as well as a nearly 2 percent increase in worker contributions and reduced benefits and monthly pensions for certain employees. It also would transfer the bulk of employees from a defined-benefit plan to a hybrid plan that includes a defined contribution component.
Dozens of public workers watching the vote from a second floor hurled insults at legislators who defended their decision.
"Not taking action would mean that the pension system and everyone's pension would collapse in seven months," said Eduardo Bhatia, Senate president. "This administration not only assumes the responsibility of this bill, but more importantly, of saving pensions."
The current pension system faces a more than $37 billion unfunded liability, one of the highest compared with any U.S. state. The liability is almost four times the island's annual government budget.
Legislators warned that despite the bill, the general fund will still have to contribute roughly $100 million a year for several decades to keep the pension system afloat, a daunting task given that Puerto Rico has a projected deficit of $1.2 billion this year.
The pension system currently covers more than 130,000 public workers and more than 116,000 retired ones.
The island's Senate, which is controlled by Garcia's Popular Democratic Party, narrowly approved the bill 14-11.
Sen. Margarita Nolasco, of the opposition New Progressive Party, was among those who voted against it. "It's a hard hit to a group that has already been beaten down by an economic situation and pushed into poverty," she said.
Unions representing thousands of public workers organized a protest outside the Capitol early Tuesday, crowding around legislators as they entered the building to debate the bill.
"Workers are not responsible for this crisis," said Federico Torres Montalvo, president of one of the island's worker unions. "There are other alternatives less disastrous than those offered today."
The bill was approved just weeks after major ratings agencies downgraded Puerto Rico's general obligation bonds to near-junk status, citing concerns about the island's pension system.