July Budget Update

Aloha!

I am sure you all have been listening to the news regarding the health of the state economy and know that both the State Legislature and the Governor have implemented reductions and restrictions to prepare the state for a potential slowdown. In an effort to set up a transparent exchange while we work through this together, I want to take this opportunity to let you know how these actions will impact the University.

Thanks to a healthy Hawai`i economy, increased student contributions, and the successful research endeavors of our faculty and staff, the UH Mānoa campus budget has enjoyed considerable expansion over the past several years. This fiscal year included an additional appropriation of $1.6 million for the second year of the biennium budget, $4.5 million in the supplemental budget, and a projected net increase in tuition revenues of approximately $12 million, increasing our base budget (general funds and tuition) from $316 to $334.2 million However, the general fund increases are specifically allocated to initiatives endorsed by the Legislature, and much of the tuition increase must be invested to meet our portion of the collective bargaining increase for our faculty and our ever-escalating energy costs.

As you are all aware, recent economic indicators also point to a slowdown in business activities in Hawai`i. In response to this slowdown, the Legislature has imposed a permanent general fund budget reduction for all state agencies for FY2008-09. UH Mānoa’s share of that reduction is $2,451,697. In addition to this budget reduction, UH Mānoa faces an additional $852,249 permanent general fund base reduction derived from vacancy savings. As a cautionary measure, the Governor has also imposed a further general fund restriction on state agencies. UH Mānoa’s share of this restriction is $2,288,188.

Thus for FY2009, UH Mānoa’s initial general fund allocation will be reduced by a total of $5,592,134. This represents about 2 percent of our base budget.

It is therefore necessary to consider all the alternatives available to us to address the current reductions and restrictions and prepare for an uncertain state revenue picture in the future. We are currently looking at ways to reduce our energy consumption and establishing a committee charged with formulating a process for strategically investing our resources. Budget information will be shared with the campus through regular communications including the Chancellor’s Update.

I do not typically believe in across-the-board reductions. However, there are two factors to consider in this particular situation: the amount of the reduction (2 percent overall) and its timing given that UH Mānoa has not yet done the planning and consultation necessary to develop and identify strategic investments and reductions. In order to develop a process for selective investments and reductions in the future, we will complete that planning and consultation together this year. Because that process is not yet completed, however, it would be premature to impose differential reductions—although facilities management will be spared any reductions at this time due to the critical state of repairs and maintenance across campus.

I have informed our UH Mānoa deans and directors that, with the exception of facilities management, each unit will be assessed an approximate 2 percent reduction in its base budget.

The Chancellor’s Office will follow the Governor’s caution by managing its resources carefully. New programs, activities, and services will not be considered until we have a clearer picture of the budget situation.

I realize that such economic constraints impose hardships on all of UH Mānoa, so your understanding and cooperation in this matter are greatly appreciated. This economic downturn has also inflicted hardships on many of our friends and neighbors in the community who are suffering acutely from layoffs and other financial adversities. Budget reductions are unfortunately a common challenge for many institutions, but UH Mānoa is moving in a positive direction in many ways and I am confident that we will develop plans and processes for strategic management of our finances to the betterment of our University.

Mahalo for all that you accomplish—please appreciate the fact that UH Mānoa contributes to the well-being of society each and every day.

Virginia S. Hinshaw
Chancellor