Thursday, April 2, 2020

Incoming Administration Evaluates Fiscal Board’s Calls for “Right-Sized” Gov’t

By on December 22, 2016

SAN JUAN–The incoming New Progressive Party (NPP) administration plans to consolidate agencies and eliminate duplicity of services as part of the Fiscal Oversight Board’s suggestion to “right-size the government” but which non-essential entities will be targeted for a possible repeal is still subject to analysis.

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Incoming House Government Committee Chairman Jorge Navarro (CB)

“How it is going to be done? We still have to analyze and wait for what La Fortaleza will say,” noted incoming House Government Committee Chairman Jorge Navarro, whose committee will be in charge of government restructuring.

Navarro did not say which services are considered “non-essential” to the point that the Fiscal Oversight Board has suggested for elimination. “We would be analyzing that,” he said.

In a letter to La Fortaleza, the board stressed the need to “right-size the government,” citing that it has 70 treasury units with no centralized accounting system, no central office to manage federal funds and a central procurement office that manages purchases for only some government entities, for instance.

“Puerto Rico needs to transform its government to be better positioned to deliver only essential services (such as public safety, education, healthcare and welfare) more efficiently,” the board said.

The board added that in education, Puerto Rico needs major outside-the-box thinking and comprehensive reforms to achieve the dual objectives of improving K-12 outcomes across the board and right-sizing the public school footprint to better fit a declining student population.  This alone would unlock potential savings of more than $1 billion over 10 years.

For higher education, Puerto Rico should implement a means-tested tuition policy that aims to improve graduation rates and time towards a degree and supports the elimination of the current funding formula.

On healthcare, Puerto Rico should focus on determining the amount of resources it can afford to invest on a long-term sustainable basis and the most efficient allocation of those resources.  In the near term, to reduce the current expenditures on healthcare, the government should look to reduce healthcare operational costs and the scope of insurance coverage. In the long-term, Puerto Rico should pursue value-based care opportunities to improve patient outcomes while lowering total cost of care.

The board also called for the “right pricing of services” to reduce subsidies.  “For decades, Puerto Rican citizens have paid virtually the same price for all sorts of government-provided services, whether it be heavily subsidized ferry trips to Vieques where passengers pay a tiny fraction of the true trip costs, or a University of Puerto Rico tuition level that requires substantial subsidies from the central government,” the board said.

The board, nonetheless, said “right-pricing” does not mean a regressive system that punishes low-income students and working families.  “Instead, it means thoughtful economic strategies, such as means-based university tuition, supplemented with Pell grants, or mechanisms to protect prices, such as charging tourists higher prices more aligned with the real price of improved ferry services.  In the current environment, all government fees and subsidies need to be reevaluated and right-priced based on the true cost of delivery and the ability to pay.”

The board also called for privatizing a number of government assets, such as real estate, the state insurance fund and ports.

Whether or not the incoming government will yield to the board’s suggestions remains to be seen. Navarro said that the board’s suggestions are guidelines that the incoming government will decide whether or not to accept but he said “we cannot continue to punish the people.”

 

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