UH officials criticized for not using special funds

Lawmakers again rebuked University of Hawaii officials for a perceived lack of financial acumen, this time for failing to spend down hundreds of millions of dollars in special fund accounts.

During a 3-1/2-hour budget briefing at the state Capitol on Friday, some members of the House Finance Committee expressed skepticism over roughly $30 million in budget add-ons the university is seeking for next year when the unspent balances in more than 100 special funds and revolving funds maintained by the university are projected to exceed $250 million this year.

“Over a period of time, when I analyze the beginning and ending balances for every single year, and the balances remain consistent, I’m going to assume that those are the funds that’s excess to the university,” said Rep. Isaac Choy, a certified public accountant and former chairman of the House Higher Education Committee. “As far as I’m concerned, this is money — this is money that you folks can use.”

Choy calculated ending balances for this fiscal year totaling more than $253 million in the various special funds, which include UH’s main funds for collecting tuition along with funds for library fees, repair and maintenance reserves, and scholarships.

“The thing that bothers me,” Choy said, “is when you do have this reserve and then turn around and raise tuition or have an enormous, enormous repair and maintenance problem. … I’m thinking, how come you guys aren’t using this money?”

UH President David Lassner said that each of the special funds at UH was created for a specific purpose and use, and that any unspent balances are not intended for general use by the university.

“A balance doesn’t mean it’s ‘excess’ or that it’s lying around,” Lassner said.

Choy, who’s been an outspoken critic of the university’s finances, said he wants to see UH use its existing funds more efficiently before seeking additional money from the Legislature.

“They have money available and they should better manage it, that’s all I’m trying to say,” Choy said after the briefing. “When you look at the magnitude of the funds and they’re coming in for $29 million, it’s like, ‘Excuse me?’”

Kalbert Young, UH’s chief financial officer and a former state budget director, said that while the criticism is “partially valid,” it’s rare for special funds to be tapped for unrelated uses.

“These special funds, and there’s dozens of them, they all have statutory creation. The revenues that go into a special fund, the authorized expenditures that are allowed for a special fund, they are specific and explicit,” Young said.

He acknowledged after the meeting that past Legislatures, governors and the university itself have moved money between special funds or siphoned money out of special funds.

“It is true that the Legislature can do it, has done it. The executive branch could do it, has done it. The university could do it,” Young said. “But doing so is very uncommon, again, because of the original purpose of the special fund.”

In a stated effort to get campuses to use their tuition revenues more effectively, Choy two years ago sponsored legislation that annually requires the university system to sweep any unused balances in each campus’ tuition special fund.

UH officials reported that under the legislation, between $80 million and $90 million lapsed to the system last year. Choy said that figure demonstrates to him that the university has too much funding.

Young, however, said that spending down balances by the end of every year isn’t a best business practice because it encourages a “use it or lose it” mentality that doesn’t always make the best use of public funds. He said the university used that $80 million to $90 million to set aside required reserve funds for each campus before returning any excess to the campus where the tuition was generated.

This is the second time this month that lawmakers took UH to task for amassing large unspent balances in special funds.

Last week Sen. Jill Tokuda, who heads the Ways and Means Committee, slammed the university for millions of dollars sitting in a special maintenance fund for the UH Cancer Center without any public plans to spend it at the cash-strapped research center.