Puerto Rico defaulted for the first time in its history Monday after being unable to repay millions owed to their government-owned Public Finance Corporation.
The "death spiral," as commonwealth Gov. Alejandro Garcia Padilla called it, resulted from about $72 billion borrowed from credit unions, citizens, and hedge funds. Every dime was paid back to the latter creditor, yet Puerto Rico obstinately reneged on the remaining $58 million, mainly because individuals and credit unions fund PFC and have limited legal backing to take them to court.
They also have little recourse in halting water cutbacks caused by an unprecedented drought; one that prompted officials to turn off tap water in people's homes. On May 13, state utility AAA mandated water rationing orders for about 160,000 customers, though it soon extended to some 425,000 homes.
Similarly, the recession has taken a significant toll on the state's education system.
Education Department spokesperson Cosette Donalds Brown confirmed 359 Puerto Rican schools - or 30 percent - will force students to involuntarily skip breakfast beginning next Monday. Because of the ongoing drought, they will forgo the first meal of the day for an early 11 a.m. lunch.
If influential parties have a say, academics as a whole will become an afterthought.
A group of 34 hedge funds, led by Fir Tree Partners, funded a report calling for school closures, reduced university subsidies, and pink slips for numerous teachers. This is on top of closures across rural and urban areas this year.
Many criticized the government's seemingly cold-hearted handling of the closures, especially since firing school workers increases already bloated unemployment figures, but Puerto Rico released a report justifying their actions by arguing that debt can't be paid off without massive cuts.
"Puerto Rico currently has 40% fewer students but 10% more teachers than a decade ago," read the report. "Teacher-student ratios are high, higher than in the mainland and many of its wealthiest and best-performing countries. A gradual cut in the number of teachers saves $400 million per year by FY2020 - more if sparsely attended schools also consolidate."
The Fir Tree Partners-led report says student populations decreased by 25 percent between 2004 and 2013. Government spending on schools rose 39 percent in the same time period.
Much of the drop is attributed to parents moving their children to the United States in search of better living conditions. Others are simply leaving after getting their college degree.
Both reports conclude with the importance of passing serious economic reforms, be it by raising taxes or slashing spending. First on the chopping block is the exorbitant cost of running schools with dwindling attendance figures.
Either way, short and long-term effects equally land on the shoulders of children unlucky enough to have been wedged in between financial and environmental catastrophes.
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