Oversight board certifies its own fiscal plan for University of Puerto Rico
Institution’s governing board reserves comment, as it has yet to be notified
SAN JUAN — Just over a month after sending the University of Puerto Rico (UPR) a noncompliance notification, the island’s Financial Oversight and Management Board certified its own fiscal plan for the academic institution that includes, pension reforms, scholarship funds, faculty increases, tuition hikes and central government subsidy cuts.
The executive director of the fiscal board, Natalie Jaresko, made the announcement during a roundtable in which she also discussed the need for the UPR to restructure its debt, but said the matter is being handled by Puerto Rico’s Fiscal Agency and Financial Advisory Authority (Aafaf by its Spanish acronym).
Meanwhile, the chairman of the UPR’s governing board, Walter Alomar, said a reaction to the certified fiscal plan could not be “responsibly” given because a notification of the fiscal board’s decision had not been received nor was the document accessible.
“At the time of the oversight board’s press conference today, the UPR had not received the certified fiscal plan by that body. We checked their website and they have not published it,” Alomar said, adding that he had yet to receive a reply to the letter UPR administrators sent regarding the fiscal board’s notification of UPR fiscal plan noncompliance, which was sent to the governor May 1.
“The UPR has until August to show complete compliance. Actually, the UPR submitted a plan with established dates to ensure compliance,” he said.
When Jaresko began discussion about the fiscal plan—which her panel has yet to make public but is expected to do so later Wednesday—she argued that the fiscal board understands the value and importance of the UPR, but that given the government’s precarious fiscal situation, the UPR needed to diversify its revenue sources.
“We’re in a world of scarce resources. Puerto Rico is challenged with many needs and few resources. Historically, the university has received a set percentage of the central government’s budget to support its expenses, which in recent years total about $879 million. But we are all being forced to make hard decisions about how to use and how to balance the use of those scarce resources. And so a reduction to the UPR’s appropriation had to be made.”
Jaresko said the UPR’s revenue sources need to look more like those stateside universities count on, and presented a chart showing that, on average, public institution budgets only receive 27 percent of their revenue from state allocations, 18 percent from tuition and 46 percent from grants, contracts, gifts, investment returns, and others.
Although, Jaresko argued that the UPR needs to look for other forms of revenue besides tuition, the fiscal board director maintained that the university also needs to increase tuition, including for graduate studies. For example, the noncompliance notification letter indicated that credits for masters in business administration degrees needed to rise by $10 and that credits for Juris Doctor degrees fell short by $137.
To address the tuition increase issue for low-income students, the fiscal board is also presenting $280 million in grants to be included in both the UPR and the commonwealth’s budgets. Jaresko also mentioned a tuition exception that would apply to veterans, teaching assistants and honor students. She underscored that although the fiscal plan establishes an exemption reduction, it does not do so retroactively, for no students are removed from the exemption program.
The fiscal plan, Jaresko said, is based on students, faculty, campuses and pensions as its pillars, stressing that, in the case of the second, the student-faculty ratio needs to improve.
“In order to maintain the highest level of instructional quality, the UPR fiscal plan allows for faculty increases of 3 percent per year. The faculty are also not subject to the same kind of benefit reductions that are affecting other categories of employee to the UPR.” Jaresko said.
As for the UPR’s retirement system, the fiscal board director warned that not implementing the pension reforms contained in the fiscal plan would lead to a “difficult decision for the UPR, like increase tuition hikes, and the pension itself would be in a position similar to the Puerto Rico Employees Retirement System (ERS), which is not funded.”
In its fiscal plan for the university, Jaresko explained, that the UPR pension system “is moving to a defined contribution plan, like ERS has moved, like we are suggesting the teachers and the judges move in the fiscal plan, but also reducing some of the accrued benefits has been done for all the other pensioners—less so than other pension plans because it’s not as heavily underfunded, so it wouldn’t be identical to what we suggested for ERS, TRS [Teachers Retirement System] or JRS [Judicial Retirement System]; it would be unique to the UPR.”
Jaresko also pointed out that despite holding meetings with a university team monthly to discuss its finances, the fiscal board was not receiving all the financial information it requires.
“They are not producing all the financial reporting that they are supposed to deliver so I don’t have as much as a I have for other territorial entities or instrumentalities,” Jaresko said, stressing that the financial information received is “not in the form that is required and not on a regular basis.”
Chairman Alomar reiterated that the university administration has shown its commitment to implementing fiscal adjustments, leading to higher savings than expected, as well as producing fiscal plans that meet the needs of the institution and that relevant information was submitted to the fiscal board.
“We have presented three audited financial statements, including the one for [fiscal year] 2017-18, demonstrating transparency in our finances and complying with the education-accrediting agencies,” Alomar said.