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Lately the University of Hawaii at Manoa’s finances have garnered a lot of attention as faculty members, students and the public speculate about the firing of Chancellor Tom Apple and its connection with his directive to freeze all hiring in an effort to stop the budget bleeding.
Talk about the budget has gotten especially heated as Apple supporters and others scrutinize the university’s Cancer Center, a research unit administratively attached to UH Manoa that’s been criticized for its divisive leadership and alleged over-reliance on students’ tuition money.
In a recent letter, Apple primarily blamed his demise on the Cancer Center and his unsuccessful attempts to remove its director, Michele Carbone, and restrict its spending. Apple said he took a range of measures to deal with the campus’s financial shortfalls.
But some people say the Cancer Center and Carbone are being scapegoated.
“It’s a result of people connecting dots that don’t actually connect that way,” said Board of Regents Chairman Randy Moore in a recent interview with Civil Beat.
Either way, the beginning of a new school year is a good time to analyze how money flows into, around and out of UH Manoa. Conversations with a range of key stakeholders — including Moore, UH faculty union Executive Director J.N. Musto and university Budget Director Laurel Johnston — reveal that even the insiders lack clarity as to how cash works its way through the school.
“The whole thing at Manoa caught everyone off-guard. That’s the puzzle.” — Budget Director Laurel Johnston
“The university budget was always this magical thing,” Musto said, adding that “conflicting information” about UH revenue and spending has undermined the university’s relationship with the Legislature. “It’s very hard to follow the money.”
Understanding the nebulous world of the school’s finances — and separating fact from fiction — is a first step in trying to figure out why Apple was terminated, whether the Cancer Center and Carbone are truly the bad guys and what can ultimately be done to put the campus on sound financial footing.
UH President David Lassner won’t specify why he let Apple go other than that the chancellor failed to keep Manoa’s budget in the black and “build a team spirit” at the university’s flagship campus. Lassner has denied that Carbone or Cancer Center supporters influenced his decision, though critics remain skeptical of that.
Apple is staying at UH Manoa as a chemistry professor with a $299,000 annual salary, a significant pay cut from the $439,000 he made as chancellor. Robert Bley-Vroman, dean of the College of Languages, Linguistics and Literature, is filling in as interim chancellor starting Sept. 1.
UH Manoa’s finances are so muddled that there’s disagreement over how to characterize the campus’s current financial state. Contrary to some accounts, UH Manoa as a whole isn’t actually in a deficit; as Johnston describes it, it “hasn’t overdrawn its checking account.”
But that’s not to say it’s financially stable.
There’s Manoa’s Athletic Department, which closed the fiscal year with a $2.1 million deficit. The deficit is projected at $1.5 million for the current fiscal year.
Meanwhile, the campus also faces a nearly $400 million repair and maintenance backlog. It typically spends about $40 million a year on basic facilities upkeep, much of which goes toward utilities. Last year, utilities alone cost UH Manoa $33.5 million, according to a university spokeswoman.
In announcing the hiring freeze, Apple said UH Manoa, whose annual operating budget is $400 million — or about a fourth of the entire university’s $1.5 billion budget — has been depleting its reserves by about $20 million a year. (As of now, that hiring freeze is still formally in effect, though officials say exemptions are being made and that student learning won’t be affected.)
What Apple was referring to, according to Johnston, weren’t actually reserves — they were cash balances. The university didn’t maintain reserves until recently, thanks to a new policy stipulating that all campuses keep a certain amount of backup cash.
Johnston does, however, agree that UH Manoa’s cash balance has “declined precipitously” over the years.
In the 2011 fiscal year, for example, UH Manoa had $77 million in unencumbered cash in its tuition fund. By the 2012 fiscal year, that number had dropped to $35.4 million. This past fiscal year, the cash balance amounted to $1.9 million, according to UH estimates.
By comparison, the cash balance for UH Hilo’s tuition fund has hovered between $5.5 million and $11.7 million since the 2011 fiscal year.
“You’re supposed to build your reserves,” Moore said. “Not eat into them.”
How UH Manoa’s cash balance dropped so low, Johnston said, seems to have officials mystified.
“The whole thing at Manoa caught everyone off-guard,” she said. “That’s the puzzle.”
The University of Hawaii is a byzantine operation divided into 10 campuses — including four-year schools in Manoa, Hilo and West Oahu and seven community colleges — that are then broken up into various units.
UH also affiliates with a number of independently operated agencies such as the University of Hawaii Research Corporation, which handles research grants that come into UH and the state, and the UH Foundation, an autonomous nonprofit that raises private funds to support the university.
“The university budget was always this magical thing .. It’s very hard to follow the money.” —UH faculty union Executive Director J.N. Musto
The entire UH system is overseen by its president — a position that Lassner has held since June after serving as the interim president for nearly a year.
UH Manoa was established in 1907 as a college of agriculture and mechanical arts and became the university system’s flagship campus in 1972. As a research institution, a significant portion of its money comes from contracts and grants. (The university as a whole gets about $400 million a year through outside research grants, according to Johnston.)
UH Manoa serves 20,000 students, including 14,500 undergraduates. The campus employes about 6,400 people.
It is led by a chancellor, who consults with six advisory groups, including the student government and the Faculty Senate. The chancellor oversees seven branches. These include the Office of the Vice Chancellor for Academic Affairs — which is primarily concerned with undergraduate and graduate instruction — and the athletics department. The medical and law schools are their own units, while the Office for the Vice Chancellor for Research manages many of the divisions not directly associated with instruction, such as the Cancer Center and the Lyon Arboretum.
Here is the UH Manoa organizational chart:
About 40 percent of UH’s money comes from state general funds.
State appropriations to the university are based on — but often very different from — funding requests submitted by UH administrators and approved by the Board of Regents. State funding has waned over the years, a decline that parallels national trends.
That decline, according to Moore, “is further complicated by a lack of consensus as to what portion should be paid for by students and parents versus taxpayers.”
The Legislature decides how much money to allocate to each campus. But the campuses for the most part decide how to allocate those funds; at Manoa, that authority lies with the chancellor, while department deans and directors choose how to spend their allocations. (The UH president is allowed to move general funds across the campuses, but this rarely happens.) One of the exceptions to this rule is the John A. Burns School of Medicine, which is part of UH Manoa but has its own line item in the state budget.
For the current fiscal year, the Legislature allocated $178 million in general funds to UH Manoa, up from $174 million the year before but significantly down from previous funding levels of more than $200 million, according to budget worksheets and UH data.
That $178 million was matched with $360 million in special funds — money that comes from sources such as tuition revenues — along with $6.9 million in federal appropriations and $64.9 million in revolving funds. (The Legislature also allocated $16.5 million in general funds to the medical school.)
These funds account for the lion’s share of UH Manoa’s budget, but there is also revenue from contracts and grants. Details on the contract and grant funding weren’t immediately available, as the money is piecemeal and is often left out of central accounting data.
Much of the money UH gets is earmarked for specific activities. Donations collected by the UH Foundation, for example, are typically assigned to specific programs — particularly athletics.
That means general funds and tuition revenues are essentially the only two kinds of discretionary income.
The university uses virtually all of its state funding to pay employees’ salaries, according to Johnston. That’s because the state covers the costs of fringe benefits if general funds are used for salaries.
The Legislature gave the university the authority to manage its own tuition in the mid-1990s but requires that the revenues— which comprise a “special fund” — be “expended to maintain or improve the university’s programs and operations.” (State law allows the university to deposit up to $3 million of these revenues annually into the UH Foundation “for the purposes of promoting alumni relations and generating private donations.”)
UH Manoa is projected to receive nearly $201 million in gross tuition revenue this school year, up from nearly $187 million last year, according to budget documents shared with the Board of Regents last week. About 4 percent of the revenue is going to faculty pay, while less than 2 percent is being used for additional student financial aid. A sliver of it is also being invested in facilities work and deferred maintenance.
UH Manoa dedicated 20 percent of its tuition revenue to need-based and merit scholarships last school year.
How UH Manoa spends the rest of tuition dollars is a huge bone of contention. Many faculty members say that money doesn’t always follow the students and often trickles down into units that have little to do with instruction, such as the Cancer Center.
But it’s hard to track the money. Even Johnston couldn’t say how much, if at all, tuition revenues stray from the students who pay it because of how many “moving parts” there are on campus.
The Cancer Center does get some of its funding from tuition it doesn’t generate, while more than half of its budget comes from the National Cancer Institute, according to Associate Director Patricia Blanchette. Civil Beat will take a deeper dive into the center’s finances in the coming weeks.