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Budget Situation Update for the UH ‘Ohana

June 19, 2009

Members of the UH ‘Ohana:

I’m writing to bring you up to date on the university’s response to the governor’s June 1 announcement of her intention to furlough state workers three days a month for each of the next two fiscal years, in which she restricted our budget by an equivalent amount.

In my message on June 2, I committed to you that “my highest priority is to find the best path forward that will minimize the impact on each of you while limiting the negative consequences on the students and communities we serve, who are relying on us more than ever to continue to educate and innovate.” That commitment continues.

On June 10, I briefed our Board of Regents on the situation and on the discussions I’ve had about how to respond to the restrictions with student and faculty leaders, Native Hawaiian faculty and staff, chancellors and the system leadership team and community supporters of UH.

In my remarks to our board, I stated that we estimated the restrictions to amount to some $50 million per year in FY10 and FY11, and I went on to note that “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.”

Earlier this week we received formal notification of the amount of the governor’s restriction of our general funds budget. It will be $52.1 million in FY10, and $54.7 million in FY11, bringing our overall general funds reduction to $76 million in FY10 and $79 million in FY11.

As expected, several unions have now taken legal action to prevent the governor from implementing furloughs and have sought various forms of relief. Meanwhile, yesterday the governor presented more details of her furlough plans.

Last Wednesday I participated in collective bargaining discussions under the auspices of a federal mediator; further discussions are scheduled for next week. And some are calling for the Legislature to come back into session in July and enact revenue-increasing measures that would obviate the need for budget reductions or furloughs of this magnitude.

At the university, meanwhile, I reported to the board on June 10 that a year-on-year comparison of registrations for next fall’s semester suggests a surge of enrollment of nearly 30 percent at our community colleges, with smaller increases at our baccalaureate campuses. Fall 2008 saw 6 percent enrollment growth to an all time record of 53,500. It’s likely that our fall 2009 enrollment will top 60,000 students.

Though the situation remains fluid, we are making progress in crafting our response. As we do so, we are guided by the strategic plan reaffirmed by our board during our centennial year of 2007–2008 and by the 10 strategic outcomes and performance measures approved by the board at that time.

I affirmed to our board on June 10 that salary reductions for administrative executives will be part of the university’s plan. While we do not have a “rainy-day” fund as such at UH, we do have balances in some of our special and revolving funds, as well as continuing income flow from non-general sources of funds. We certainly can increase the efficiency and flexibility of our operations further (including energy efficiency, course articulation efficiency and perhaps scheduling efficiency), and we can make programmatic adjustments as necessary.

One idea that surfaced in several of my conversations with members of our UH ‘ohana was the institution of an early retirement program; while I currently believe this would require action at the State level, it’s a concept I support.

As you can tell from this review of our options, the final package will likely involve several initiatives, not just one approach, and it’s clear that some actions can bear fruit in FY10, while others won’t have an effect until FY11.

Meanwhile, as I noted above, collective bargaining discussions continue, and the outcome of these will also influence the university’s response, as will the prospect of further actions by the courts, the governor and the Legislature.

Because of these prospective actions, and because of the dramatic growth we expect in the number of students we serve, it’s important that the university not be overly hasty in finalizing our response, and that we use the financial flexibility afforded by our multiple sources of funds. At the same time, I want to stress that this budget restriction is three times greater than the one we were prepared to address when the Legislature concluded its work in early May, so we will have to take some actions in the relatively near future.

On June 29, I’ll again be briefing our Board of Regents on our budget situation, and we’ll review our progress on collective bargaining. On June 30, I’ll be briefing a joint hearing on the university’s budget challenges being held by the House and Senate Higher Education Committees.

Any actions that require Board of Regents approval will likely be on the board’s July 23 agenda.

Mahalo nui loa for your patience during this difficult time and for your ongoing commitment to the students and communities we serve.

With best wishes and aloha,
David McClain