Office of the President

Office of the President
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Bachman 202
Honolulu, HI 96822

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An Open Letter to the University of Hawai‘i

Sept. 28, 2009
Aloha Colleagues,

Once again, please let me express my profound gratitude for the warm aloha that you have extended to me. It is the strength of this aloha spirit and the sense of shared purpose that I am certain will see us through this difficult fiscal period.

None of us are individually or even collectively responsible for the fact that the State of Hawai‘i, our mainstay funder, has experienced severely restricted revenues this year that will most likely continue into at least the next year. As a consequence, our level of state funding has been greatly reduced and we must find an unprecedented amount of savings to meet our budgetary needs.

It has come to my attention that there is continuing confusion about the situation, and thus I would like to share with you a review of previous communications from former President McClain and answers to a number of questions.

On July 1, 2009, he wrote a letter to the UH ‘ohana in which he laid out the basic problem we face:

“As you know, the budget restrictions imposed by Gov. Lingle on June 1 for the next two fiscal years coupled with the budget passed by the legislature and signed into law earlier this week by the governor mean that we will have $76 million fewer general funds in FY10 and $78 million fewer general funds in FY11. Were it not for the offset of $22 million in federal stimulus funds in each year, the general funds budget cuts would amount to $98 million and $100 million, with slightly less than half ($46 million) by the legislature, and slightly more than half ($52 and $54 million) coming from the governor’s action in the wake of the May 28 Council on Revenues downgrade of its economic forecast.

“This amount is more than 20 percent of the general funds received each year by UH, net of payments of such items as fringe benefits, interest payments on bond indebtedness and the like.”

The situation remains essentially unchanged, with the unfortunate further news that the Council on Revenues has projected somewhat lower revenues in the latest forecasting. In the face of these newer projections, Gov. Lingle did make some further reductions to other state agencies but announced that she would not further restrict the University of Hawai‘i.

In addition, the stimulus (ARRA) funds designated for the university have not yet been released. Thus, while we expect to receive them and are planning accordingly, they are not yet available to help address our budget reductons.

When the university receives the $22 million in federal stimulus funds that we are expecting from the governor, our budget cuts will still amount to $76 million and $78 million in FY 2010 and FY 2011, respectively. If we do not receive stimulus funds, we will face budget cuts of $98 million and $100 million.

At the same time, the University of Hawai‘i System is facing a record increase in enrollment levels. More than 58,000 credit students are enrolled at our 10 campuses statewide. While this is a welcome development with respect to acknowledging that the University of Hawai‘i is an important source of educational advancement for students and is highly appreciated by others, it does present significant logistical and resource issues. We must do everything within our means to meet the increased demand for services while making sure all students receive the quality education they deserve and the support they need to succeed.

Thus, the university must now make difficult decisions to get us through this set of circumstances. The approach that former President McClain proposed and with which the Board of Regents concurred was multipronged, relying on multiple strategies as described in the answers to the questions attached.

In an effort to ensure that accurate information is provided about the university’s plans and efforts to address the restrictions imposed on us, please read the attached questions and answers, which also address some aspects of the administration’s current proposal to UHPA.

In these unprecedented times, I continue to believe that the university is, indeed, a powerful agent for economic improvement, educational advancement, and cultural good and that there is no better investment for the future of our state than in higher education and the University of Hawai‘i. I strongly support a competitive environment for faculty salaries and benefits; improved support for teaching, learning and research; and increased access for more students, particularly those who have been underserved, to succeed in our university. I know our entire ‘ohana believes in these objectives as well, and I urge us all to unify our voices so that we will be persuasive as our state leaders consider how to sustain and grow our university.

Mahalo,
M.R.C. Greenwood

Frequently asked questions about the budget restrictions and
the proposal to the faculty


What was the university’s budget reduction and how was it applied?
What about the stimulus funds?
How does the university propose to make up the budget shortfall?
Can’t tuition be increased to meet the shortfall?
What is the administration’s proposal for faculty salary reductions?
What is the payroll lag and how does it save money?
Does the university propose retrenching faculty?
What about the increased cost of the EUTF (Health Fund)?
Are there any other proposed benefits for faculty?
What are other public universities doing with respect to salary savings?

What was the university’s budget reduction and how was it applied?

The state legislature passed a budget that reduced the state’s contribution to the university (general funds) by $46 million in each of FY 2010 and FY 2011. In addition, the governor further restricted the university’s general fund appropriation by $52 million in FY 2010 and $54 million. The result of the initial legislative and gubernatorial actions was a reduction of $98 million in FY 2010 and $100 million in FY 2011.

These cuts have already been made to the budget and the university must now balance the budget without these funds. The budget reductions by unit are as follows:

FY 2010 *
Legislative
Reductions
Governor
Restrictions
Total Cuts
Expected
ARRA
Net
Impact
UH Manoa
$ - 34.2
$ - 29.4
$ - 63.6
$ 14.7
$ - 48.8
UH Hilo
- 2.6
- 4.1
- 6.7
0.3
- 6.4
UH West O‘ahu
- 0.4
- 0.8
- 1.2
0.0
- 1.2
Community
Colleges
- 6.9
- 14.1
-21.0
7.0
- 14.1
UH System
- 1.9
- 3.6
- 5.5
**
-5.5
Small Business
Development
Center/Aquaria
0.0
- 0.1
-0.1
0.0
-0.1
TOTAL
$ - 46.0
$ - 52.1
$ - 98.1
$ 22.0
$ - 76.1
* Dollar amounts above are in millions, totals may not add due to rounding.
** UH may receive additional federal stimulus funds for specific purposes. See the following question.

Legislative reductions reflect the budget for each major unit as passed by the legislature. The governor’s restrictions were based on 13.8 percent of the university’s state-funded payroll, the amount that would have been saved through her proposal of 36 furlough days per year. These restrictions were allocated to the units based on their proportionate percentage of the payroll.

What about the stimulus funds?

The legislature authorized $22 million in American Recovery and Reinvestment Act (ARRA) funds in each year of the biennium, which represents a spending ceiling. The ARRA funds were applied for by the governor, and the first portion of the funds have been approved by the U.S. Department of Education. The university and the state Department of Education are working with the governor toward an agreement for her to release those funds. Of the $22 million, the legislature authorized $14.7 million for UH Manoa, $7 million for the UH Community Colleges and $.3 million for UH Hilo.

An additional $10 million in ARRA funds was authorized by the legislature for the UH System only for the first year of the biennium only, but would be released only at the discretion of the governor, mostly likely for specific purposes such as the “assurances” necessary under the ARRA. This might include a statewide longitudinal data system to be developed in collaboration with the Hawai‘i Department of Education and others. This $10 million will not be available to address operating budget shortfalls at the UH System or campus levels.

At the end of the biennium, the ARRA funds will no longer be available to help address legislative reductions in the university’s base budget.

How does the university propose to make up the budget shortfall?

The university prefers a strategy that uses multiple approaches to meeting these reductions. The plan includes

  • The use of $22 million in American Recovery and Reinvestment Act (ARRA) funds in each year of the biennium as described above.
  • $2 million in savings from executive salary reductions of 6–10 percent, which began on Sept. 1, 2009.
  • 5 perc ent pay reductions from all other employees, which would save approximately $22 million per year.
  • A payroll lag for faculty, which would result in a $12 million “credit” toward the FY 2010 shortfall since the last paycheck for FY 2010 would be deferred from June 30 to July 1, 2010.
  • $4 million in energy savings from shutting the university down during non-teaching days when the university has proposed to place employees on paid administrative leave and from the implementation of other energy saving measures.
  • Projected net tuition revenue increases of $20 million in FY 2010 and an additional $20 million in FY 2011.
  • Additional savings from retirements, vacancies, increased efficiencies, carry-over funds and program adjustments of $16 million.

Can’t tuition be increased to meet the shortfall?

In accord with the 6-year tuition schedule adopted by the Board of Regents in 2005, tuition is already increasing at the rate of 11–13 percent per year. Additional increases of the same magnitude are approved for the next two years. These are among the highest percentage increases in the country and are generating increased net tuitions of $20 million in each year, which has been factored in to the overall plan for dealing with the budget shortfalls.

What is the administration’s proposal for faculty salary reductions?

Salaries for faculty paid from State-appropriated funds would be reduced by a 5 percent annualized reduction in FY 2010 and no additional annualized reduction in FY 2011. The salaries would revert to current pay levels on June 30, 2011. Salaries for faculty paid from extramural funds would not be reduced.

Salaries for faculty who retire by Dec. 31, 2009, would not be reduced.

The proposal also includes new minimum salaries for each rank. While most faculty are already above these minima, the higher levels will benefit 136 faculty.

Faculty would receive administrative leave with pay for 13 days (5 percent of a normal 11-month work year): the day after Thanksgiving, the week preceding Christmas, the week preceding New Year’s and spring break. The university intends to shut down all but essential services during these periods to help achieve the $4 million in energy savings described above.

What is the payroll lag and how does it save money?

The payroll lag would shift the pay day for faculty from the 15th and 30th of the month to the 5th and 20th. No pay is lost; it is simply delayed by five days. Because the lag crosses the fiscal year, there would be one less payroll in this fiscal year and we can “credit” that savings to this fiscal year’s restriction. All state employees other than UH faculty are already paid on this basis. The five day lag would be implemented by deferring the June 30, 2010 payroll by one day, and then an additional day each month thereafter until the 5 day lag is achieved.

The payroll lag will NOT impact retirement pay for faculty. ERS bases its calculation on when the pay is earned, not paid, so that the pay earned in June would be credited to June even if the actual pay date is July 1.

Does the university propose retrenching faculty?

Even with a 5 percent pay reduction, a payroll lag, tuition increases and our other efforts, the university will still face a budget shortfall of approximately $16 million. The university’s offer to UHPA makes no changes in the current retrenchment procedure and commits to no retrenchment during FY 2010. At this point, if the targeted salary savings are achieved, the university does not anticipate any retrenchment of tenured or tenure track faculty for budgetary reasons in either FY 2010 or FY 2011.

What about the increased cost of the EUTF (Health Fund)?

Employer contributions to the EUTF (Health Fund) are not part of the university operating budget. The contract language proposed ensures that UH faculty would receive the best deal offered to any bargaining unit going forward. If the legislature increases the contribution, faculty would automatically benefit from that increase.

Are there any other proposed benefits for faculty?

In addition to the new minimum salaries for the lowest-paid faculty, the proposal includes the beginning of a new benefit in the form of partial (1/2 of tuition) scholarships for faculty dependents attending a UH campus.

What are other public universities doing with respect to salary savings?

A national association of universities administered a survey in August to 188 land grant and public institutions and 83 responded. Of the 83, 67 are research universities.

Of the 83 responding institutions

42 (51 percent) are laying off permanent staff
8 (10 percent) are laying off tenured/tenure track faculty
38 (46 percent) are laying off temp/part-time staff
28 (34 percent) are laying off temp/part-time/adjunct faculty
19 (23 percent) are mandating staff furloughs
18 (22percent) are mandating faculty furloughs
13 (16 percent) are reducing salaries for senior administrators

The institutions mandating furloughs are in the following states: California, Connecticut, Georgia, Illinois, Kansas, Maryland, North Carolina, Nevada, Oregon, Pennsylvania, South Carolina and Wisconsin.