Birling Capital issues proposal to overhaul UPR.

A Birling Capital Advisors report outlines a sweeping roadmap for the University of Puerto Rico after the Financial Oversight and Management Board issued a formal Notice of Violation declaring that UPR’s revised fiscal plan cannot be certified.

By THE STAR STAFF

The University of Puerto Rico (UPR) is operating “with no margin at all” and must undertake a structural transformation over the next 13 months to secure its future, according to a new analysis by Birling Capital Advisors.

The report, authored by the firm’s president and CEO Francisco Rodríguez Castro, outlines a sweeping roadmap for the public institution of higher education after the Financial Oversight and Management Board issued a formal Notice of Violation on May 23 declaring that UPR’s revised fiscal plan cannot be certified.

Rodríguez Castro argues that the oversight board’s directive marks the end of incremental adjustments and the beginning of a mandated, comprehensive redesign of the university’s financial and operational model, to be completed and certified before the end of fiscal year (FY) 2027 and implemented starting in FY 2028.

The analysis frames UPR’s crisis as the result of two simultaneous pressures: a dramatic external reduction in government appropriations and an internal cost structure that has not adapted to the new fiscal reality. The elimination of the 1966 formula that guaranteed the university 9.6% of the General Fund reduced UPR’s annual appropriation from $911 million in FY 2017 to $441.2 million in FY 2026, a 51.6% decline. If the formula still existed, the university would receive more than $1 billion today.

Internally, UPR employs 4,450 professors for 44,233 students, a student‑faculty ratio of 9.9 to 1 compared with the national average of 18 to 1. Faculty salaries total $342.4 million, and pension contributions add another $132.7 million, consuming more than half of the institution’s entire budget. Tuition accounts for only 13.8% of total revenue, far below the 65% to 75% typical of private universities on the island.

The FY 2026 certified budget underscores the fragility of the system: $1.21 billion in revenue, $1.17 billion in expenses, and a net operating position of $36.3 million — exactly equal to the university’s contractual debt service.

“Final net position: zero,” the report notes, emphasizing that UPR operates without any margin for error.

Rodríguez Castro stresses what is at stake by documenting the university’s 123‑year contribution to Puerto Rico’s economic and social development. Since 1903, UPR has conferred more than 350,000 degrees, including 70,000 teachers, 45,000 engineers, 32,000 scientists, 7,200 physicians, and thousands of lawyers, nurses, pharmacists and other professionals who built the island’s modern institutions. He argues that defunding the university is “not a fiscal decision. It is a civilizational decision,” given its central role in producing the human capital that sustains Puerto Rico’s health system, industrial base, and public sector.

The oversight board’s Notice of Violation identifies three core deficiencies in the university’s proposed fiscal plan: the use of non‑recurring revenues as if they were structural, projections of federal research funds that exceed historical execution levels, and expense projections that fail to reflect operational realities, including rapid leadership turnover. The board concluded that the plan is “balanced in form, but not structurally balanced,” and instructed the university to produce a new plan grounded in verifiable data and realistic assumptions.

Birling Capital proposes a three‑phase transformation spanning 15 years. The first phase focuses on structural triage, including enforcing faculty workload standards, aligning promotion criteria with national benchmarks, transitioning new hires to defined‑contribution retirement plans, and completing a systemwide campus rationalization. Achieving those steps, the report argues, would unlock $172 million in conditional government funds that remain unspent due to unmet reform milestones.

The second phase centers on building financial independence through tuition adjustments that could generate between $50 million and $100 million annually while protecting low‑income students through the Law 4‑2022 scholarship fund; the creation of a robust alumni endowment capable of reaching $500 million within a decade; expansion of technology transfer to capture revenue from Puerto Rico’s $60 billion pharmaceutical export sector; and the development of executive education programs that could generate immediate income using existing faculty and facilities.

By the third phase, projected for years seven through 15, the university would have restructured its labor costs, consolidated its campus system, and built diversified revenue streams capable of reducing its dependence on the General Fund from the current 46.8% to 30% or less. Rodríguez Castro notes that institutions such as the University of Virginia and Georgia Tech achieved similar levels of autonomy through long‑term structural reforms rather than government appropriations. “Autonomy is not granted,” he writes. “It is earned.”

The analysis also outlines a proposed restructuring of the 11‑campus system. Río Piedras, Mayagüez, Ponce and the Medical Sciences Campus would operate as full research universities. Bayamón, Arecibo, Cayey and Humacao would be redesigned as two‑year transfer colleges with guaranteed pathways into the research campuses. Utuado, Aguadilla and Carolina would be consolidated due to low enrollment, geographic redundancy, or high potential for alternative economic uses.

Rodríguez Castro argues that such a restructuring preserves access while concentrating resources where they can generate the greatest educational and economic return, noting that “resources follow students, not square footage.”

The report identifies four commitments that the new fiscal plan cannot overlook: stable leadership capable of executing a multi‑year reform agenda; completion of pension reform; revenue projections grounded in historical performance rather than aspiration; and explicit coordination with the Puerto Rico government’s broader fiscal framework, particularly given looming pressures on Medicaid funding and disaster‑recovery disbursements.

Rodríguez Castro asserts that restoring the 1966 formula alone will not resolve UPR’s structural challenges. With two‑thirds of its resources tied up in payroll and pensions and every reallocation subject to oversight board approval, the university requires a transformation “inside and out.” Puerto Rico, he argues, cannot afford to lose the institution that has produced its teachers, engineers, scientists, health professionals and public leaders for more than a century. “Puerto Rico cannot export talent it never formed,” he writes. “Protecting the legacy of UPR -- by transforming the institution that produced it -- is the highest‑return decision the island can make.”