Mujica stresses need to plan for federal funding losses

Robert Mujica, executive director of the Financial Oversight and Management Board for Puerto Rico

By The Star Staff

During the 48th Board Public Meeting on Wednesday, Robert Mujica, the executive director of the Financial Oversight and Management Board, discussed the fiscal challenges Puerto Rico is facing as a result of reduced federal funding.

“We must plan to address the fiscal policy changes we know are coming, and we must also prepare for those that could occur but are largely unknown,” Mujica noted.

This uncertainty underscores the need for Puerto Rico to be proactive as federal emergency funding begins to expire, he said.

Mujica also highlighted the potential impact of reduced federal support on education, warning that cuts to financial assistance from the federal government could significantly affect the Education Department. The loss of funds might result in a $500 million reduction in the education budget. Despite the challenges, Mujica emphasized the importance of Puerto Rico being ready to seize opportunities, particularly in the relocation of manufacturing: “We must be prepared to take advantage of the U.S. president’s goal of bringing manufacturing back to the United States …” he said. “Puerto Rico could benefit from these changes in trade and economic policy.”

As the oversight board collaborates with the governor to finalize the fiscal year 2026 budget, it remains committed to ensuring Puerto Rico’s long-term economic growth and fiscal sustainability, Mujica said.

Currently, federal funds, including one-time allocations to Puerto Rico, total $15.4 billion, representing 46.1% of the Certified Fiscal Year 2025 Commonwealth Budget. As previously reported by the STAR, the oversight board recently urged the government to develop a plan to curb the loss of federal funds, including the creation of a centralized office to keep tabs on the use of federal funding.

Board member helps drive the point home

The oversight board also made it clear Wednesday that next year’s budget will undergo significant cuts and is currently navigating a landscape of uncertainty.

During the meeting, Mujica and board member John Nixon stressed that the consolidated budget, projected to total $32.5 billion, will require reductions as the ramifications of federal budget cuts become evident. Those cuts are under active discussion at the congressional level, with a mandate to implement overall reductions of $1.5 trillion.

“We will not just consider budget adjustments; we will be forced to adjust the budget,” Nixon said. “It is critical for everyone to understand that the impacts of Trump’s policies could drastically affect the federal funds coming to the island, leading to significant changes. Many state legislatures have completed their sessions, while others are finalizing their budgets. Depending on how congressional budget reconciliation unfolds, many states will be compelled to revisit and revise their budgets based on the federal support they receive.”

He also pointed out that the timing of congressional procedures presents serious complications for state governments like Puerto Rico’s. The federal fiscal year begins on Oct. 1, which is three months after the new territorial budget takes effect.

“It won’t be a pleasant experience, but all entities relying on federal funds need to be ready for rapid budget adjustments,” Nixon stated firmly.

He noted that while Puerto Rico is not “isolated” from this uncertainty, it faces “magnified” risks due to its heavy reliance on U.S. government funding.

As previously reported by the STAR, just last March, Puerto Rico experienced a loss of $700 million, primarily due to the cancellation of funds. Island authorities have urgently requested that their federal counterparts reconsider the suspension of the funds, particularly those the local Department of Education is counting on for crucial school infrastructure repairs.