May 2011
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ADDRESSING THE UH BUDGET CRISIS:
The View from the Faculty Senate Ad Hoc Budget Committee
Committee Members: David Bess, Shirley Daniel, Lilikalā Kameʻeleihiwa, Roger Lukas,
and John Wendell
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Dedicated to the memory of our colleague and friend Gerard Russo
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April 27, 2011
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Background:
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The Faculty Senate established the Ad Hoc Budget Committee January 2010 during a time of
fiscal crisis and amidst discussions of retrenchment of tenured professors. As retrenchment
would effectively put an end to tenure, it could also have a chilling effect on academic freedom,
severely damaging the reputation and standing of the University of Hawaiʻi. All agree that such
a scenario should be avoided at all costs.
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The charge to the MFS Budget Task Force included:
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Confirmation of the extent of the fiscal crisis, especially at Manoa;
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Determination of whether there are sources of funds which have not been considered by
administration committees or offices working on the problem;
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Evaluation of potential solutions, such as enrollment increases and retirement scenarios;
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Any other matters which members determine are relevant to the above.
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Basic principles that impact Committee findings:
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1. The common purpose of the University of Hawai‘i system of institutions is to serve the
people of the State of Hawaiʻi by creating, preserving, and transmitting knowledge in a
multi-cultural environment. The University is positioned to take advantage of Hawai‘i’s
unique location, physical and biological environment, and rich cultural setting.
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2. Since the University of Hawaiʻi is a state university, a core mission of the UH 10 campus
system is to provide higher education for the people of the State of Hawaiʻi. Given the
primacy of faculty in the provision of these services, retention of faculty resources should
be a primary consideration in times of recession and one of augmentation in times of
growth.
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3. The UHM mission emphasizes the synergy between research, classroom education, and
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service activities. Manoa plays a unique role in delivering an integrated education to
future generations, providing important services to the community, and supporting
economically important activities in the State of Hawaii.
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4. The strategic plans, including appropriate prioritizations, of the University and Manoa
should be the driving forces for budget decisions.
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5. The provision of quality services to our students should drive our utilization of public
funds, and such decisions should be made as efficiently as possible.
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6. The budgeting process should be open and transparent both within the System as well as
within Manoa and involve stakeholders such as the faculty.
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7. The Committee believes that University/Manoa systems should encourage
entrepreneurial activities, which both enhance the academic programs and serve as
increased revenue streams from outside sources. (Dealing with revenues.)
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FACTS:
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FINDINGS SYSTEMWIDE:
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1. While the State fiscal crisis is real and significant, the University of Hawaiʻi 6.30.2010
financial statements reveal it is in good fiscal health as indicated by two key financial
ratios. The primary reserve ratio, total expendable net assets divided by total expenses, is
45% and the current ratio, current assets divided by current liabilities, is 1.89. According
to national University budget analysts Howard Bunsis and Rudy Fichtenbaum, this
primary reserve ratio is "quite healthy" and the current ratio is "very solid. "The
university administration in the Management Discussion and Analysis portion of the
6.30.2010 financial statements is optimistic stating "Looking toward the future, despite
the challenges presented by the current state and national economies, management
believes that the University is well-positioned to maintain its strong financial condition
and level of excellence in service to students, the research community, and the State of
Hawai‘i."
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Furthermore, financial rating services Standard and Poors, Moody's, and Fitch continue to
rate UH Bonds very highly with ratings of A+, Aa3 and AA- respectively.
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2. In FY08-09, State of Hawaiʻi funding for UH was about 51% of the total budget [$732.5
M out of $1,443.5 M; in FY10-11, UH received cuts of 13.4% (FY10) and 13.7% (FY11)
of its State funding [$98 M and $100 M out of 732.5 M]. Most of the State contributions
to the UH budget are for personnel (faculty, staff and administration salaries and fringe
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benefits) and facilities (construction, maintenance and utilities). [Source: UH FY08-09
System Reports to the BOR].
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3.
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4. With a total of 209 Administrators, there is now 1 administrator for every 17 faculty
[1:17], which is higher than the faculty: student ratio on most campuses. Moreover, most
administrators make double the amount of the average salary paid to professors.
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5. Since the decision was made to appoint a Chancellor for UHM, and separate out UHM
from the UH System administration, the greatest administrative growth has been at the
System level [41 FTE at $8.8M per year] and at Manoa [26 FTE at $5.4 M] per year. The
new UHM administration costs were added on top of the already existing and well
working system of deans and dean’s staff [64 FTE at $16.8 M per year].
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6. Following the creation of the UHM Chancellor position, a decision was made in 2001 to
make every campus provost a chancellor; each then increased their staff, producing an
apparant overlap in function between System and individual campuses and greatly
increasing administrative costs.
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7. The most efficient administrative model is that of the Community Colleges where there is
one Vice President for Community Colleges in charge of 7 campuses, and where on
average there is one administrator for every 33 faculty [1:33]. At Kapiʻolani CC that
teaches the largest number of students [9,102] out of all the Community Colleges, the
administrative to faculty ratio is 1:72.
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8. At the four-year campuses of UHM, UHH, and UHWO, the average administrative to
faculty ratio is 1:16, as opposed to the 1:33 average ratio for most community colleges, or
the 1:77 ratio at Kapiʻolani Community College, suggesting that the four year campuses
may be over-administered in comparison to the community colleges. It is unclear
whether the difference is justified by mission or size difference between the two groups.
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9. Providing necessary teaching faculty on another four-year campus at West-Oʻahu, 20
miles away from the flagship campus of UH Manoa, will cost an estimated $59M per
year in salaries. The cost of administrative FTE would be in addition to the cost of
faculty FTE.
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10. The UH System controls revenue generating properties not being fully utilized at their
greatest potential. For example, although there are 12 observatories on Mauna Kea, lease
In the past ten years, there has been a rapid growth in administration costs, both system
wide and on each campus, so that now with 209 administrators, administration costs
alone are $44 M per year [fringes included]. [Source: UHPA Webpage.
<http://www.uhpa.org/salary-research/uh-executive-managerial-salaries>]
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rental for the use of the “most important astronomical mountain in the world” is only $1
per year. However, while UHM astronomers do receive “free” use of those observatories,
there does not appear to be a cost-benefit analysis as to the actual cost for such “free” use
in comparison to the fees paid by other researchers for the use of the telescopes.
Depending on how much non-UH professors pay, UH may find that it would be cheaper
to collect a lease rental and pay for our own UH astronomy faculty to have viewing time.
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RECOMMENDATIONS FOR IMPROVED BUDGET EFFICIENCIES AT THE UH
SYSTEM LEVEL:
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1. As previously indicated the University's financial condition remains healthy and in fact
the primary reserve ratio and current ratio both improved from 6.30.2009 to 6.30.2010
(39% to 45% and 1.68 to 1.89 respectively) in spite of the cuts to the general fund.
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2. The University remains financially vulnerable if the Governor and Legislature resort to
draconian cuts to the General Fund allocation or sweeps and fails to restore the
University's revolving funds. If the University of Hawaiʻi is forced to accept draconian
cuts then administrators should be retrenched before faculty are retrenched. Those with
return rights should be able to join departments at salaries commensurate with other
faculty in the unit. Since it is faculty who teach the students who pay tuition and it the
faculty who bring in the grant money, faculty retention should have higher priority than
retention of administration.
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3. An audit should be conducted to ascertain redundancies and inefficiencies in the overlap
between the UH System administration and UHM administration.
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4. In order to be more efficient in use of administration personnel, central administrative
functions of the four year colleges could come under one Vice President for Four Year
Campuses, [just as all of the Community Colleges are under one vice president] at no net
administrative cost. While the size and complexity of Manoa, Hilo, and an independant
UHWO may justify individual Chancellors, it is unclear whether Chancellors for each
community college can be justified.
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5. UHWO should be developed as an integral part of UHM, just as is the Kakaʻako campus.
Current UHWO professors should be integrated with sister departments at UHM, and all
relevant UHM departments should have teaching at West Oʻahu included in their work
loads. Since the BA programs are inextricably linked to MA and PhD programs, students
at West-Oʻahu would benefit from integrated academic programs.
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6. Once the new buildings are constructed at UHWO, unutilized space should be made
available to UHM research programs that currently are in distress from lack of space.
This would help realize higher RTRF rates.
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7. Across the system there are opportunities to reduce expensive electricity bills via capital
improvements. This should be considered as a top priority.
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8. An audit should be conducted of all income realized by Mauna Kea Observatories with a
commensurate increase in lease rental be required for all new observatories being
suggested [as well as the new one for Haleakalā]. Existing leases should also be vetted
and renegotiated. Since both Mauna Kea and Haleakalā are considered sacred mountains
to Native Hawaiians, Pūko’a Council has suggested a desecration tax of $40 M per
observatory. In addition the University should seek to identify other properties with
income producing potential that can be realized without compromising the University's
teaching and research endeavors.
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FACTS
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FINDINGS UH MĀNOA:
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1. State of Hawaiʻi funding for UHM (FY08-09) was 29% [$264 M] of the total UHM
budget [$908 M]
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2. UHM received State funding cuts of 24% [$63.6 M] and 25% [$66 M] out of the $264 M
total state funding for UHM. While it seemed as though- the budget crisis at UHM was
severe, salaries and other operating costs were met through a 4 % cut from UHM
operating budgets, and in anticipation of further loss of funding. When the anticipated
cuts did not materialize, a portion of the $8 M reserve surplus was redistributed to UHM
schools in January 2011.
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3. While the old UHM strategic plan (2002) was out of date, and never provided
programmatic or budgetary priorities or guidance, the new UHM Strategic Plan, just
finished in January 2011 has proposed such guidance for budget priorities
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4. Currently there is a general lack of understanding as to why certain budget decisions were
made and on what basis. There has been no visible tie to strategic plans in many
instances. This has created an environment of mistrust among faculty.
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5. The apparent processes/decisions for the System and Manoa administrations to “capture”
funds from units’ entrepreneurial activities tend to stifle entrepreneurial activities exactly
at a time when they ought to be encouraged.
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RECOMMENDATIONS FOR IMPROVED BUDGET EFFICIENCIES AT THE UH
MĀNOA LEVEL:
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1. The faculty of UH Manoa should always be closely involved with developing new
strategic plans [as occurred with the most recent UHM 2011 Strategic Plan] which should
prioritize activities and drive budget decisions, so that the decisions do not have an ad
hoc appearance. These plans need to set priorities for growth which then help clarify
priorities for reductions.
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2. All budget decisions should be more transparent from the chancellor down to deans and
department heads, so that stakeholders can understand the basis on which decisions are
made. The University brings in funds in numerous categories, and some means of
providing an overall picture of all funds should be devised.
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3. Mechanisms to increase faculty understanding of budget processes, such as further
trainings, or an audit of the various funds should be undertaken by the Faculty Senate to
increase the foundations for transparency.
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4. Entrepreneurial activities should be encouraged and supported to generate increased
revenues for units, Manoa, and the University. Such activities could include , but are not
limited to:
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a. Provide incentives for units/individuals for the provision of increased educational
opportunities, such as distance education.
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b. Increase transparency in the costs and benefits of teaching, research, and public
service).
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c. Reconsider ethics “standards” to permit appropriate collaborations with the
commercial sector. (Can also help to build the economy.) This could include feefor-service consultation/collaboration.
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d. Consider enhanced lease/rental fees for UHM facilities.
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e. The Regents could increase the tuition for International and out-of-state students
and then increase marketing efforts.
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f. Better utilization of teaching spaces and increasing them as demand dictates, thus
realizing greater enrollment.
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g. Along with tuition increases, support for students (e.g. scholarships, computers,
etc.) should be increased.
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CONCLUSION:
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The Committee has found that there are significant areas for improvement in the University
budgeting processes, and there are numerous ways to reduce costs without reducing services,
many of which could be done in fairly short order. Some of these are at the University System
level, and some at the Manoa level.
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First, there needs to be transparency in both process and budget driven by a true strategic plan
with realistic budgets. The implementation proposal in the current 2011-2015 Manoa strategic
plan should help facilitate this change in practice.
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Second, there should be an external review by university consultants of management systems
with a view to redundancy in administrative functions between System and the individual
campuses, including UHM.
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Third, the planning for the administration and staffing of UH West Oahu should recognize the
value of UHM faculty and administrative expertise and avoid future inefficiencies from
duplication between the two campuses.
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Fourth, there needs to be policy and cultural change to encourage increased entrepreneurial
activity, as it is in the best interests of units and their stakeholders and the university as a whole.
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Fifth, the faculty should be looked upon as a resource and should be actively involved in these
improvement activities.
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Finally, whenever fiscal crises in the State of Hawai’i creates a critical reduction in support of
UH operations, the UH BOR should look first to reducing administrative costs before
compromising faculty resources.
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