Oversight Board makes recommendations to University of Puerto Rico to address COVID-19 losses
The economy of Puerto Rico is currently in the midst of the long and arduous process of reopening. This, after a three-month lockdown that drastically limited economic activity in the territory. As Puerto Rico assesses the fallout from COVID-19, the sustainability of major institutions such as the University of Puerto Rico has been brought into question, notably by the organization tasked with overseeing the territory’s finances. In a June 16 memo, the aforementioned organization, known officially as the Financial Oversight and Management Board for Puerto Rico, proposed four sizable reforms the university system should enact in order to avoid insolvency.
The board’s first proposal is for the 11 campuses that comprise the University of Puerto Rico system to merge administrative tasks. Such administrative tasks include the accounting, finance, and the broader bureaucracy that constitute each campus’ administration. The board argues that such reforms are necessary due to the higher costs associated with the current, non-streamlined approach. Note that per the board’s proposal, all 11 campuses will be kept open during and after the enactment of these reforms.
The second of the board’s proposals seeks to reduce the university system’s dependence on appropriations from the government, which have historically been several orders of magnitude higher than comparable mainland universities. In order to further reduce exposure to the economic downturn that has plagued Puerto Rico for nearly 15 years, the board recommends the university system fill the newly created revenue decrease with federal grants, patent and intellectual property monetization, and by charging ancillary service fees for providing training to external institutions. The board does not, however, recommend an increase in tuition to supplant losses from decreased appropriations; the board recommends delaying both graduate and undergraduate tuition hikes until at least the 2021 fiscal year.
The third reform proposed by the board seeks to restructure the system’s pension plans such that they are sustainable post-COVID. In order to address this concern, the board analyzes two scenarios, one in which the system reduces pension benefits and another in which the system keeps pension benefits constant; the board emphatically recommends the system pursue the first scenario, as the second may necessitate the system reduce the quality of education in order to make up for said loss in revenue.
The final reform proposed by the board aims to ensure the following three reforms are followed and carried out by the university system. In order to accomplish this, the board recommends setting several predetermined deadlines, by which the university system must submit the necessary financial statements demonstrating their compliance with any agreed-upon reforms.
The board ends its report by reaffirming the importance of the University of Puerto Rico system, arguing the swift implementation of these reforms is imperative for a system on the brink of insolvency. The future of these reforms, which the board says should be implemented in the coming financial year, now rests in the hands of the Puerto Rican government.