Thursday, July 19, 2018

UPR fiscal plan includes campus consolidations

By on August 12, 2017

Editor’s note: The following article originally appeared in the August 10 print edition of Caribbean Business.

SAN JUAN — After months of delay, the Governing Board of University of Puerto Rico (UPR) approved a fiscal plan for the academic institution, which is in line with the central government’s fiscal plan.

The UPR fiscal plan, approved July 31, has a baseline budget gap of $519 million. This deficit is reduced to $123 million after revenue and cost-reducing measures are applied. The revenue included in this plan is $899 million, which does not include a tuition hike, since that was described as an “extraordinary measure.” When it comes to cost reductions, the fiscal plan divides this area in two portions, $1.4 billion as Expense Controls and $206 million as Transformational Enhancements.

For cost-reduction measures, the administration is proposing the administrative consolidation of campuses, a 2% yearly attrition for all campuses and changes in personnel. Aside from reducing several employer contributions, the fiscal plan proposes cutting trust and transitory positions, and allows for the relocation of full-time employees.

The University of Puerto Rico, Río Piedras campus, clock tower. (File photo)

As for revenue measures, the plan proposes increasing federal funding and services provided by the UPR to the government, among others. Most of the measures imply increasing professors’ workload. Gloria Butrón, the professor representative, expressed concern on this matter.

“I have a very big concern in terms of what is foreseen in this fiscal plan as revenue measures. All this falls or depends on enormous additional effort from the professors,” Butrón said at the meeting.

The professor representative then argued that the cost-reduction measures regarding personnel are not compatible with revenue measures that primarily depend on professors producing proposals, or giving and overseeing the services provided. Furthermore, Butrón stated “the labor conditions are not competitive,” which means it will not only be complicated for current professors, but it will also be difficult for the UPR to bring the required people on board.

Not included in the baseline gap projections is the debt payment. However, the fiscal team included debt payments in the fiscal plan. The UPR’s total outstanding debt has a principal of $551 million and its different bonds have an average interest rate of 5%. Repayment of these bonds, estimated at $64 million a year, largely comes from tuition revenue. The administration also included debt payment in the UPR budget for this fiscal year, even though the Office of Budget & Management did not include it.

In the case of this academic institution, current and past members of the university administration have argued that the UPR is able to meet its debt payments. Norberto González, director of UPR’s Finance Office, explained during the presentation of the fiscal plan that the UPR is able to meet its obligations. However, toward the end of this part of the presentation, he said that due to the budget cuts, the UPR may need to consider restructuring its debt.

UPR pension system

Aside from the university system, the Governing Board also oversees the UPR Retirement System. This system will receive a $78 million contribution from the university, and has a $3 billion actuarial debt and more than $1 billion in assets. Despite the UPR’s budget cuts in recent years, González argued that the retirement system is not in the same dire condition as other government retirement systems.

“The university, I believe, has managed well its retirement system. We do not have a system that is 100% funded, like we want to, but it has not been at the level of the other three retirement systems of the government of Puerto Rico,” González stated at the beginning of the presentation. “The university has been increasing its coverage. It [the retirement system’s coverage] was at 38% about two years ago, and it is now at 46%, almost 47%.”

Furthermore, the UPR Retirement System had implemented an amortization program that projected a fully funded system in 40 years. However, the director of the UPR budget office explained that given the reduction in government allocations, it would be difficult to keep on the same track, and the short-term goal may need to be to keep coverage in the mid-40% range.

“Now, when we have a situation where the university is going to have less income from the central government, it is going to be difficult to continue to increase that [coverage] percentage,” González argued.


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