Along with the state, and beyond the state, there are many other valuable things. It could be said that for a liberal, everything that is really valuable is outside the state. But only the state, no matter what its concrete institutional form, guarantees the achievement of the goals that individuals propose.
— Andrea Greppi
Because the “third sector,” autonomous non-profit organizations, provides essential social services that are complementary to those provided by government institutions, their social value and legitimacy are widely recognized in the modern world. This is especially true in the fields of education, health care, charity and culture where non-profit community organizations are common. The third sector organizations are an essential component of our social system, so in modern times states around the world provide financial support to these autonomous bona fide institutions which are not based on profit. The “principle of subsidization” is the basis of state support of the third sector and the way it is put into practice is called the “system of subsidization.” The strategic objective of any system of subsidization is to formalize and expand the principle of subsidization as a means of encouraging and facilitating the development of autonomous cultural organizations under the belief that this expands third sector participation, increases its financial stability and creates strategic alliances on behalf of the common good.
In Puerto Rico, the government’s financial support for third sector institutions is extensive, continual, growing and now reaches into the millions of dollars. This support makes the third sector an essential component of the so-called social pact, even though there is no coherent system that organizes this practice on a rational and systematic basis. Unlike other countries and regions, Puerto Rico has subsidization practices but no system of subsidization. Many of the allocations of government funds to the third sector originate in the Legislative Assembly, where they are mostly improvised and are used as a tool for promoting political patronage, without professional selection criteria or effective evaluation procedures. There is only a certain level of control over fiscal transactions through the Legislature’s internal rules and those of the intermediary agencies, such as the Department of Education, the Department of the Family and the Institute of Puerto Rican Culture.
In the wealthiest countries, the government’s subsidization is often directed at complex systems and institutions, established by legislation and governed by detailed regulations, for the explicit purpose of professionalizing the services and avoiding political patronage, corruption and bureaucratic control. In general, government subsidies start from the perception of social needs and are based on functional criteria of evaluation and formalization of agreements, which match both the commitments of both parties and the rules of openness.
The theory at the basis of any system of subsidization is founded on one basic principle and five strategic objectives. The principle is that when a civil organization assumes a public role with a clear social value, it is the government’s responsibility to recognize that value and contribute to the organization’s financial stability to ensure these objectives:
(1) stabilize the organization’s operations
(2) create more efficient use of resources
(3) represent the community
(4) improve the quality of services
(5) ensure programmatic and operational autonomy
In other words, a system of subsidization is a pragmatic mechanism for channeling the flow of public funds to the third sector, avoiding both political and bureaucratic control and the depredation that typically accompanies privatization and commercialization. The principle of subsidization also establishes effective means of ensuring openness. Periodically, the subsidized institution is obligated to report not only on fiscal affairs, but also on fulfillment of its goals. Continuance of the government subsidy depends on this qualitative evaluation of fulfillment of short-term plans done autonomously by the organization.
Although the Legislature has, in practice, established a system of subsidization, it is more fragmentary than comprehensive, lacks a cohesive strategy and is not based on clear theory or methodology. Yet to be implemented is an integrated organizational plan with the legal means to make it viable, an integrated design for the executive and administration structures to manage the system, a plan for integrating the current practices into the new system, and a general consideration of the institutional procedures for evaluation and openness. The Commonwealth Constitution does not include a system of subsidization, in part because it supposes that essential social work will be attended to directly by the government (welfare state). This is obvious in the area of health care. In the beginnings of the Commonwealth of Puerto Rico, the government had an impressive public health system that covered the gaps in the service provided by private commercial systems. However, beginning in the last decade of the past century, this system was dismantled and no non-profit system has been created to complement the private system of commercial insurers that replaced the state system.
By all measurements, it is obvious that the natural development of non-profit private initiatives, both individual and collective, in the field of culture and social services, is growing more broadly and creatively, particularly in modern societies and those that are involved in the global economy.
Author: Roberto Gándara Sánchez
Published: September 11, 2014.
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