University of Hawaii operating budget into $15 million deficit

The operating budget for the University of Hawaii system is projected to run short by $14.9 million for the 2022-2023 fiscal year, with one-time expenditures such as the expansion of the Clarence T.C. Ching Complex, inflation and sightly declining enrollment among multiple factors nudging the public university into the red.

The shortfall is considered relatively small against the university’s total operating budget of $1.1 billion, but any deficit means UH has to once again scrutinize and prioritize spending, said Kalbert Young, chief financial officer and vice president for budget and finance. It’s how UH has managed to end up on the plus side of the ledger even after initial predicted shortfalls of $5 million to $15 million at the start of each of the past three fiscal years, Young said.

For this fiscal year, “if it were not for the one-time expenditures, the university would forecast that we’re going to bring in more revenue than we will expend,” Young told the Honolulu Star-Advertiser.

Under the new operating budget approved Thursday by the UH Board of Regents, the 10-campus system’s more than $1.112 billion in revenues will be outpaced by nearly $1.127 billion in expenditures and transfers.

The revenue number represents an increase of $74 million, or 7.2%, over the previous fiscal year. The biggest expansion comes in the general funds category: The state Legislature restored cuts made during pandemic belt-tightening, added some initiatives and figured in scheduled collective bargaining raises, Young wrote in a report to the regents.

But other sources of revenue are shrinking. For instance, UH officials expect student enrollment to continue an overall declining trend, pulling down revenue from tuition and fees along with it. While fall semester enrollment won’t be finalized for a few more weeks, revenues for the UH tuition and fees special fund are projected to decrease by $17.5 million, or 5.1%, compared with the previous fiscal year.

Meanwhile, overall expenditures, transfers and one-time spending are increasing by $245.7 million, or 27.9%, compared with the previous fiscal year.

“This is attributable to several factors: Payroll increases associated with collective bargaining, increased on-campus activity as the effects of the pandemic wane, and the expiration of federal coronavirus response funds that were used to offset revenue losses,” Young wrote.

One-time expenditures account for $71.1 million. One of the largest is $30 million to expand seating capacity at the Ching Complex, from its current 9,300 seats to 17,000, to meet the NCAA’s minimum attendance requirements of 15,000 spectators for Division 1 football. The Legislature did not grant capital improvement funding for the expansion, so it must come out of UH’s operating budget, Young said.

An additional $25 million will go to purchase solar photovoltaic equipment installed at Leeward Community College and UH Maui College so that the university can own it and won’t have to keep paying an outside company for electricity. In the long run, paying $25 million now is cheaper than paying about $1 million a year over the expected 40-year life span of the equipment, Young said.

Inflation has pushed up the overall cost of utilities for the entire UH system by about 20%.

UH depends on state general funds for approximately 53% of its operating budget, and tuition revenue accounts for 30%. The Research and Training Revolving Fund is the next largest component of UH’s budget. Auxiliary units such as food services, student housing and facilities rentals make up the balance.

While UH has drawn record levels of extramural funding and philanthropic giving in the past fiscal year, those are separate categories of money given for specific uses that don’t fall under the operating budget.