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Update to the Board of Regents on the FY10 and FY11 Budget

June 10, 2009

President McClain reported to the Board of Regents on the status of the university’s response to the governor’s announcement on June 1 of three-day-per-month furloughs for most state workers and an equivalent restriction in the general funds budget for UH, the DOE and the Hawai‘i Health Systems Corporation. UH has not received formal notification of the amount of the reduction from the governor’s office or the Department of Budget and Finance, but estimates the magnitude to be in the $50 million per year range for each of the next two fiscal years, FY10 and FY11.

This restriction comes in addition to a $46 million per year reduction in the university’s general funds budget approved by the 2009 Legislature, which is to be offset by an infusion of $22 million per year in federal stimulus funds, for a net reduction of $24 million per year.

Thus taking the governor’s restriction and the legislature’s action together, UH expects to have a general funds budget in FY10 and FY11 some $75 million less than current levels. The UH general funds budget is about $725 million, including pass-throughs of fringe benefits and interest payments on debt; net of these amounts the general funds budget is about $460 million.

The president reported that he has consulted with a number of groups within and external to the university to discuss the university’s response to these budget reductions: the University Community Partnership, the Council of Chancellors, leaders from the Student Caucus, the All-Campus Council of Faculty Senate Chairs and the Pukoa Council, as well as the UH System leadership team. The president affirmed that administrative salary reductions will be part of the university’s response.

UH is monitoring the situation at the state level and expects the furlough initiative to be challenged by several unions; the outcome of that challenge will indicate whether furloughs are an option for UH. Other options include increased efficiency of operations (including energy efficiency), reduced salaries for administrators, use of reserve funds and other non-general sources of funds and programmatic adjustments. Meanwhile, collective bargaining discussions continue, and the outcome of these will also influence the university’s response.

The Senate and House Higher Education Committees will hold joint hearings on the university’s response to the governor’s budget restrictions on June 30.