Standard & Poor’s said it may downgrade its rating on the Employees Retirement System of the government of Puerto Rico if the commonwealth fails to adopt comprehensive measures to address its unfunded pension liability within the next year.

On Thursday the credit rating agency revised its outlook to negative from stable based on the ability of the system’s leading participating employers, including the commonwealth, to continue making required contributions to the system in full and on a timely basis.

The outlook affects $2.9 billion in senior pension funding bonds, Series A, B and C. The BBB-minus rating on the bonds was affirmed.

Puerto Rico’s appropriation debt is rated BBB with a negative outlook.

The outlook of Puerto Rico’s GO bonds was revised to negative from stable in June based on budget imbalance.

“We believe that the commonwealth’s fiscal and budgetary challenges, including the independent actuary’s projected depletion of the retirement fund’s gross assets by fiscal 2019, could limit the commonwealth’s ability and willingness to provide the timely contributions that will be required to maintain an adequate debt-service coverage on the ERS bonds,” said S&P analyst Horacio Aldrete-Sanchez.

Even without a corresponding downgrade on the commonwealth’s rating, the ERS bonds could receive a downgrade, S&P analysts said.

The bonds are limited obligations of the ERS, secured solely by a pledge of participating employer contributions, currently paid at a rate of 11.25% of payroll.

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