The Puerto Rico Supreme Court largely upheld the Puerto Rico government's December overhaul of the judicial pension system.
The court on Friday found the law to be constitutional, though it said there were mistakes in the way the bill was written. The court found that the reform measure was valid only for judicial members hired after Dec. 24, 2013, a source close to the governor said.
The Puerto Rico government last year approved the measures along with its reform of the teachers' pension system. There have been court challenges to both actions.
Puerto Rico Gov. Alejandro García Padilla had originally proposed the judicial pension changes to only affect those hired after the legislation went into effect. The legislature rewrote the bill to also affect existing judiciary, the governor's source said, and the governor signed the version passed by the legislature.
The financial shortfall of the teachers' pension system is greater than that of the judicial pension system. The court challenge concerning the teachers' pension system continues. The governor expects the court to rule on that suit by March 7.
"Once they resolve [the judicial pension reform case] in our favor it will be very, very difficult to decide the other way on the teachers' pension reform," the source near the governor said.
"This is another step in our journey to rebuild Puerto Rico and I am convinced that together we will succeed," García Padilla said.
The court decision may help the government's planned sale of about $2.8 billion in general obligation bonds in March.
Earlier in February all three major ratings agencies dropped Puerto Rico's GO rating to speculative grades. Despite the downgrades, yields have declined on the secondary market over the last seven weeks after surging over the past six months.
