The University of Hawaii, which will be expected to play a significant role in diversifying the local economy, could find itself in dire financial straits in the next several years.
After just over an hour of animated discussion Thursday between UH administrators and the university’s Board of Regents, one thing became painfully clear: without swift budget cuts, UH will not survive the fallout brought on by the coronavirus.
“There will be prolonged, possibly perpetual changes to how the university is run,” Kalbert Young, the UH budget chief, told the board.
While budget cuts are expected, as are declining revenues for the university, it’s hard to tell what either of those will look like, and what kind of impact they will have on the university and its operations.
Young put together several scenarios for how much money UH could lose in the next fiscal year. In the worst case, in which the state yanks 25% of its funding and tuition revenues drop 15%, the university will have $181 million less to spend from its $1 billion operating budget.
About half of that comes out of the state’s general funds, which is expected to take a hit from the economic downturn brought on by the COVID-19 response effort.
Some campuses could be worse off than others. UH Manoa, for example, would be close to slipping into the red if tuition dropped by 5% while state funding dropped 10%.
“Beyond that, it would be unsurvivable,” Young said.
Some of the regents want UH officials to quickly come up with a spending plan for the next several years, even with all the unknowns surrounding the budget picture.
“If we wait until school starts to say, ‘here’s what we’ll do,’ it’s kind of late to change the plans,” Randy Moore said during the meeting.
Jan Sullivan, another regent who seven years ago pushed for a policy change to help build up UH’s budget reserves, agreed. At the time, UH Manoa quickly tanked in the wake of the 2008 recession.
“We have to do cuts, and they have to be done in a way that will leave the university standing,” she said. “I hope that discussion will start sooner rather than later.”
Regent Ernest Wilson said the university needs to start thinking about which programs are most critical and which might be less critical to UH.
Young was reluctant to talk about what cuts could be coming until it’s more clear exactly what the budget will look like.
“I don’t know if anyone would want to throw ideas out here in a public meeting right now,” he told the board. “The depth will be significant, maybe never seen.”
The drop in state support stems from a recent projection that Hawaii could have $2.3 billion less to spend than previously thought. That’s expected to get worse in coming years.
UH is also looking at a drop in tuition revenue, even if enrollment increases next year as college-bound kids who might have gone to the mainland for school choose to stay in the islands.
But revenue might dip because out-of-state students, who pay more for tuition, might also be choosing to stay in their home states.
Final enrollment numbers, and how much money they bring, won’t be known until next school year is well underway. Also, Young, a former state budget director, expects the Legislature to make further changes to the budget bill still sitting on Gov. David Ige’s desk.
Lawmakers are still short $413 million to pass a balanced budget for the next fiscal year, which begins July 1. And Young said UH and other departments are bracing for a drop in their general fund budgets.
The university has options to lessen the impact.
Its budget reserves total about $130 million, Young said.
It took seven years for UH to build that up, and it could all be spent in the next two years. But that’s something the administration wants to avoid.
Some of the funds may need to be spent to keep the campuses afloat.
UH is also still trying to figure out how to spend more than $30 million in federal relief funds. UH officials haven’t yet moved to spend that money, in part because they aren’t sure how much more fiscal relief Congress could make available.
UH President David Lassner said federal dollars could be spent on reconfiguring facilities, buying hand sanitizer, daily cleanings and classroom equipment.
He said the university will use the next eight weeks to identify what the money should be spent on as they also prepare students for a return in the fall semester.
“If we don’t do that, we won’t have a university, or an academic year to save,” Lassner said.
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Blaze Lovell is a reporter for Civil Beat and a graduate of the University of Nevada, Las Vegas. He was born and raised on Oahu. You can reach him at email@example.com or follow him on Twitter at @blaze_lovell