Fiscal board: Education Dept.’s funding model is unsustainable

By THE STAR STAFF

The Financial Oversight and Management Board for Puerto Rico has issued a warning to the Puerto Rico Department of Education (DE) and the Office of Management and Budget stating that the agency’s growing reliance on non‑recurring funds to cover recurring Special Education obligations is “not sustainable” and must end.

In a letter dated May 29, the oversight board said the issue is not whether services should be delivered, but that the DE has repeatedly failed to budget and manage resources in a way that ensures long‑term stability for students who depend on therapies, evaluations, transportation and other federally mandated services.

“Relying on prior‑year balances or other one‑time resources to support ongoing obligations only postpones the underlying shortfall and leaves programs without a stable, long‑term funding base,” the oversight board wrote, noting that federal pandemic‑relief funds that once covered a large share of Special Education costs expire in fiscal year (FY) 2026, which ends on June 30.

The board said the DE’s recurring obligations now “press against the General Fund without a corresponding recurring revenue source,” a structural imbalance worsened by years of budget overruns, weak fiscal controls and a cost structure built for a much larger student population. While DE’s enrollment has dropped 37% since FY 2017, its General Fund appropriation has increased 18%. Special Education enrollment has fallen 18% since 2010, but cost per student has surged by more than 100% through FY 2026.

Against this backdrop, the oversight board approved several budgetary reprogramming requests -- most of them tied to Special Education -- only as exceptions and with strict conditions. They include: $27.8 million in prior‑year funds to cover FY 2026 transportation, reimbursements and other Special Education expenses, $9.5 million to pay for therapies, evaluations and related services, and $102.3 million in internal reallocations to cover salary increases and other FY 2026 initiatives.

One request -- an extension of FY 2026 funds for Provisional Remedy Program services -- was denied, with the oversight board saying the DE failed to justify the need beyond the standard 60‑day disbursement window.

To prevent further instability, the board is requiring the DE to take several corrective actions within 90 days, including submitting the long‑delayed regulation to fully implement Student‑Based Budgeting, a reform the Fiscal Plan identifies as essential to aligning resources with actual student needs.