Proposed Budget Cuts to UH Fails in House Finance Committee

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March 29, 2010

Testimony for the the hearing on SB No. 2695

Duane Stevens, Ph.D.
President, University of Hawaii Professional Assembly
Professor of Meteorology, University of Hawaii at Manoa

Of the additional $59 M in proposed cuts:

  • $20M from Tuition and Fees Special Fund.  [The message to the people of Hawaii is:  Your taxes will pay for less higher education.  Therefore higher education costs must be paid from student tuition revenue.  Now the state is stealing those funds to cover a temporary shortall elsewhere.  So tuition will increase further.  Where is the logic?]
  • $15M from Cancer Research Special Fund.  $10M from Research and Training Revolving Fund, generated by federal research dollars. [Net $25M is being removed from research funds.  Indirect costs recovered from federal contracts in the future is likely to decrease!]

 

The net effect of diverting such funds to the state general fund is a direct impact on our operating budget. Many of these funds are already being used to defray the $100 million cut and/or to retain and support critical projects and programs.

Enrollment is at an all-time high with 58,000 students–including 8,000 additional students in the last two years alone. These students include people who have been hit hard by the economic downturn and are going back to school to re-tool for new careers. Students are relying on the university to help them prepare for jobs and compete in today’s global job market, making the university an essential resource for Hawai’i. Our students are counting on us–and it will take our collective efforts to deliver.
            —UH President MRC Greenwood, 3-28-10

With this special fund being raided, tuition hikes may also be a likely result to make up for the shortfall that would be created in the middle of the UH fiscal year, and students would have the most to lose.  We can look to the experiences of universities on the Mainland such as University of California, and can expect riots and protests by students here in Hawaii. The UH system is the main pathway for local students after high school, and this robs them of affordable job training and a higher education. At a time of record-high enrollment and many returning to school to learn new skills, this is unconscionable.
            —UHPA Executive Director JN Musto, 3-29-10

Hawaii requires higher education to prepare the next generation of Hawaii residents for future jobs.
        Duane Stevens, TV advertising in February 2010, sponsored by UHPA

   
The legislature is considering a substantial decrease in state support of higher education.  When I arrived in Hawaii in 1989, 13% of State of Hawaii general funds were allocated to higher education.  Today, according to a graph shown by you legislators in Hilo in November 2009, 8% of general funds goes to higher education.  Today, SB 2695 proposes to decrease funding further.  What does that say about the legislative commitment to jobs in the future?

Around 2000, what happened in senior faculty ranks in UH Manoa’s SOEST?:

  • Professor David Bercovici left  UH Manoa’s Geology Dept., later to become Chair of Geology & Geophysics at Yale
  • Stephen Self left UH Manoa’s SOEST to become Chair at Open University in England
  • Rodey Batiza left G&G to become a Program Manager at National Science Foundation
  • Jill Karsten (Researcher) moved to the American Geophysical Union in Washington, DC.
  • Khalil Spencer moved to Los Alamos National Lab.

When the mainland recovers economically before Hawaii, what do you think the best and the brightest faculty will do?

We may look back to the 2010 legislature and realize that the University of Hawaii System became the Hawaii State College system!!

News Release – March 29, 2010

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NEWS RELEASE

Date:              March 29, 2010
Contact:         Kristeen Hanselman, Associate Executive Director, (808) 593-2157

FOR IMMEDIATE RELEASE

University of Hawaii Professional Assembly: Legislators’ Attack on UH Budget Shows Disrespect for Local Students

A legislative bill (S.B. 2695, S.D.1, H.D.1) to divert $59 million earmarked for the University of Hawaii to help offset the state’s budget shortfall reveals the short-sightedness of our elected officials, and this will have grave implications for Hawaii’s students, said J.N. Musto, UHPA’s executive director.

“The golden goose is being put on the chopping block,” Musto said. “Generating revenue for the state has now become a bane for the UH, with funds set aside to build and maintain a strong research and educational institution under attack once again.”

Monies that provide overhead support for research are being cut, even though these funds come from non-state revenues such as federal and private grants. Taking these funds means less money will be provided by the funding agencies. Hawaii does not fund research from the state’s general operating budget and, in fact, all research is self-funded with a portion used for operational support.

The UH budget was reduced by $98 million last year with another $100 reduction for the fiscal year beginning July 1, 2010.  A House bill (H.B. 2200, H.D. 1) called for an additional $10 million cut and this Senate bill (S.B. 2695, S.D.1, H.D.1), to be heard by the House Finance Committee this evening, seeks an additional $59 million cuts, including $20 million from the Tuition and Fees Special Fund.

This special fund is used for academic counseling and programs for students, which is especially important as student enrollment continues to increase within the UH system.  In addition, 15 percent of the fund – or $3 million – is set aside for student financial aid.  Using this fund to help balance the state’s budget undermines the quality of education and the ability of Hawaii’s neediest students to enroll in the UH system, Musto said.

With this special fund being raided, tuition hikes may also be a likely result to make up for the shortfall that would be created in the middle of the UH fiscal year, and students would have the most to lose.  “We can look to the experiences of universities on the Mainland such as University of California, and can expect riots and protests by students here in Hawaii,” Musto said. “The UH system is the main pathway for local students after high school, and this robs them of affordable job training and a higher education. At a time of record-high enrollment and many returning to school to learn new skills, this is unconscionable.”

“This bill sends a clear message from our legislators to Hawaii’s people:  Public higher education is not a priority in our state,” Musto said. “All of us will ultimately pay for this with a workforce that is ill prepared for economic recovery.”

 

#  #  #

 

 
About the University of Hawaii Professional Assembly (UHPA)
The UHPA has been the exclusive bargaining agent for all faculty members of the University of Hawaii system since November 1, 1974. The UH System is governed by one Board of Regents and includes seven Community Colleges, UH-Hilo, UH-Manoa, and UH-West Oahu. The UHPA is the elected faculty union as set forth in Hawaii Revised Statutes, Chapter 89.

     

LEGISLATIVE ALERT: EUTF Reform Legislation Needs Testimony – Hearing March 29, 5:00 pm, House Finance Committee

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SB 2849 SD2 will allow establishment of trust funds directly negotiated between the union and employer allowing more control over how employee contributions and benefits are established. This legislation is supported by HGEA, UPW, Hawaii State Firefighters, SHOPO, and UHPA.

Please submit testimony endorsing this legislation and request that the House Finance committee vote to support it. Testimony can be submitted 24 hours in advance in ONE of the following ways:

PAPER:  2 copies to Room 306 in the State Capitol;
FAX:       For comments less than 5 pages in length, transmit to 586-6001 (Oahu) or 1-800-535-3859; or
WEB:     For comments less than 4MB in size, transmit from the Web page at http://www.capitol.hawaii.gov/emailtestimony

 

Administrative Leave Spring Recess 2010

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There is a Memorandum of Understanding pertaining to Administrative Leave (see Reference Section R-19 found on page 100 of the 2009-2015 Faculty Contract.)

The Memorandum of Understanding extends paid administrative leave to all faculty members in bargaining unit 7 during the current biennium beginning on July 1, 2009 and running through June 30, 2011. This paid leave applies to everyone regardless of classification, eligibility for tenure, or appointment period—9 or 11 month. For 11 month employees, that are required to work these upcoming days, compensatory time off is to be provided during this semester. If anyone is having problems with the upcoming Spring recess they should contact UHPA directly.

Legislative Alert: Sign Up for March 23 Member Lobby Effort on GET

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UHPA members are encouraged to  participate in these efforts. This lobbying activity is March 23rd from 10:30 a.m. to noon at the State Capitol. Lunch will be provided. UHPA members will be placed on a team representing the various groups supporting a GET.  Each team will be meeting with two to three legislators seeking their commitment for this legislation.  Participants should meet at 10:30 a.m. at the Queen Liliuokalani statute at the Capitol. UHPA will not cover any travel or other expenses for this activity.

If you plan to participate, please contact kris@uhpa.org by 10:00 a.m. on Monday, March 22nd, with the names of those attending the lobby effort. This is to establish teams and the lunch number.

Let’s End the Vicious Cycle

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At a recent economic forum held at the State Capitol, economists agreed that spending cuts have only worsened the effects of the recession. “Budget cuts affect tax revenues for the State, affect economic growth and result in more claims for unemployment and claims for assistance through welfare.”  – Bill Boyd, Economics Professor, University of Hawaii.  We can’t continue to cut spending because this furthers the negative impact on the economy, leading to lower tax revenues.  It’s a vicious cycle that must end.

$1 Billion Drain on the Local Economy

The state has cut about $644 million in spending this fiscal year. The ripple effect of these cuts affects the state’s overall economy by a factor of two. This amounts to a total economic drain of $1 billion.

Cuts to Services

In addition to the devastating effect to the economy, the cuts have directly affected education, health and social services.  Levels of services have been affected to a point that the health and well-being of our community’s most vulnerable population is at risk.  Our children, elderly, disabled and disadvantaged are no longer assured the support of community services so desperately needed in a bad economy.  “When we cut social services, we will pay later in economic and human costs.” — Paul Brewbaker, TZ Economics.

A Multi-Pronged Solution

We cannot expect a different result if we do not do anything differently. “The State can close its budget gap through a combination of temporary increases in taxes, including a modest GET increase and the use of special funds.”  — Byron Ganges, Economics Professor, University of Hawaii.

We Support a Modest, Temporary GET Increase

A 1% increase to the general excise tax could be balanced with a state earned income tax credit helping those in the lower income tax brackets.  It would be used to restore and maintain services which affect the health, education and human services for Hawaii residents.

Small Impact, Big Results

By requesting a moderate increase in the general excise tax, we can create positive change with the least amount of pain for Hawaii’s people.  A 1% increase in the GET with appropriate exemptions is estimated to result in $500 million in revenue for the state.  That would address nearly half of the state’s $1.2 billion projected budget shortfall through 2011.  Economists agree that tax increases have a small impact on consumption.  That’s good for Hawaii’s businesses, and ultimately, helps generates tax revenues for the state. 

Broad Community Support

A recent poll conducted by Qmark reveals that 73% of Hawaii residents support legislators increasing revenues (49% for income tax increase, 23% for GET increase) to avoid more pay cuts.

The following organizations support a modest temporary increase in the GET:

  • American Federation of State, County and Municipal Employees (AFSCME)
  • Hawaii Government Employees Association (HGEA)
  • Hawaii Alliance for Retired Americans (HARA)
  • Hawaii State Teachers Association
  • International Longshore and Warehouse Union (ILWU)
  • Interfaith Alliance
  • Lanakila Meals on Wheels
  • Methodist Division of Church Society
  • National Association of Social Workers, Hawaii Chapter
  • Painters Local 1791
  • Protecting Hawaii’s Ohana, Children, UnderServed, Elderly and Disabled (PHOCUSED)
  • Royal State Insurance
  • University of Hawaii Professional Assembly (UHPA)
  • United Public Workers (UPW)

UHPA Legislative Update: EUTF, GET and UH Funding Reduction

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Over the course of the remaining six weeks of the legislative session there will be increased efforts among public sector labor unions to influence the legislature to take action that fixes the broken EUTF and reduces the decline of state revenues to forestall more public sector job loss. Three pieces of legislation are critical to these efforts.

Employer Union Trust Fund 

SB 2849 S.D.2 addresses the overall reform of the EUTF and contains the following provisions:

The bill includes all thirteen public sector bargaining units and allows for shared benefit plans under the same state of county employer. This would allow UH to provide a benefit plan that covers all employees subject to negotiations with the unions.

The fiduciary responsibility of a benefit fund trustee is to the beneficiaries not the Executive Branch of state government.

Negotiated contributions placed in the trust would be permanently segregated from the employer and the union remaining under control of the trustees.

The trust would appoint an independent legal counsel and plan consultants who are not obligated to the employer. This would stop the state attorney general from making decisions that benefit the state but not the beneficiaries.

EUTF trustees would be appointed by the respective unions and the employers unlike the current EUTF where the Governor appoints all trustees.

There would be negotiations on benefit coverage and contributions which will end the limited bargaining on fixed dollar contributions to a plan. (See HB 2937 H.D.2 S.D.1)

EUTF would continue to be an umbrella for providing health insurance for retired public employees, employees excluded from bargaining units under H.R.S. Chapter 89 and elected legislators.

This bill should go to conference committee.

HB 2937 H.D.2 S.D.1 This legislation is necessary to complete the reform of EUTF by making fringe benefits and contributions for health care a mandatory subject of bargaining. Benefits and contributions would be subject to binding arbitration for those public section unions that do not have the right to strike. UHPA has the right to strike so benefits and contributions would be subject to impasse procedures under this proposed legislation.

This legislation is referred to the Senate Ways and Means Committee with no hearing scheduled.

General Excise Tax

HB 2877 has been amended to provide for a 1% raise in the GET which would generate approximately $600 million in increased revenue for the state. The full text of HB 2877 is not yet available. Legislative sponsors indicate they will propose an earned income tax credit for low income wage earners to offset an increase in GET.

A coalition of groups including the Interfaith Alliance, HGEA, Hawaii Alliance for Retired Workers, PHOCUSED, UPW, Ironworkers, and UHPA are working to advance this moderate increase in the GET as a part of a short term solution to help increase revenues.

UH Budget Cut $10 Million Dollars by House Finance Committee

The House Finance Committee, chaired by Representative Marcus Oshiro, has proposed a $10 million dollar reduction in general funds to UH.

As reported in the Honolulu Advertiser on March 5, 2010 “Oshiro, expecting complaints about the $10 million cuts to the university, noted that the new contract with the faculty union contains temporary pay cuts that will eventually be restored and pay raises in future years. Other state workers who agreed to pay cuts to help close the deficit received no similar promises. He also said the university has the option to raise tuition fees to generate new revenue.”

The budget process is not complete with expectations of significant changes in the proposal advanced by the House Finance Committee.

Economist Look to Small Tax Increases to Help Hawaii: Report of the Economic Forum March 10, 2010

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Solving State’s Budget Crisis Requires Multi-faceted Solution

As with most challenging situations, there are no simple answers.  Solving our state’s current budget crisis requires a thoughtful approach that creates the least harm and the most benefit for our community in both the short and long term. 

That was the consensus of four notable economists who recently shared their views and solutions to the State’s budget shortfall at a special forum titled, “Save Our Essential Services,” sponsored by PHOCUSED (Protecting Hawaii’s Ohana, Children, Under Served, Elderly and Disabled).  The event, held at the Hawaii State Capitol auditorium on Wednesday, March 10, provided a macro-economic perspective by showing how different factors and every decision made by the State affects the entire economy.

“When we talk about cuts or raising taxes, the calculus has to take into account the long-term costs and benefits,” said Paul Brewbaker of TZ Economics and former chief economist of Bank of Hawaii, who was joined by other leading economists Bill Boyd, Gerald Russo, and Byron Ganges.  “We when cut social services, we will pay later in economic and human costs.”

Through bar charts, Brewbaker documented how Hawaii’s gross domestic product (GDP) as measured by consumer spending, began to drop from the fall of 2008.  “People weren’t buying and companies weren’t investing in their operations.  Decreased retail consumption down and the increased savings rate intensified the recession,” he said.

Multi-pronged Approach Necessary
The economists showed how attempting to implement one-dimensional initiatives to resolve the budget issue such as reducing budgets for State programs can actually bring about more harm than good.

“Budget cuts affect tax revenues for the State,” said Bill Boyd, economics professor at University of Hawaii-West Oahu.  “Cuts affect economic growth and results in more claims for unemployment funds and claims for assistance such as welfare.”

Boyd recommended doing as little harm as possible by, in order of preference, tapping into surplus funds such as the state’s hurricane fund or rainy day fund, increasing taxes and implementing spending cuts.

Budget Cuts have Large Multiplier Effect
Byron Ganges, economics professor at the University of Hawaii-Manoa, concurred with a multi-pronged approach but noted that budget cuts alone do not solve the problem and in fact, exacerbates Hawaii’s economic condition.   He noted that deep cuts on public sector spending have a large “multiplier effect” on Hawaii’s overall economy, including layoffs and cuts to State worker income that results in reduced spending because of smaller pay checks.

“With the high cost of more program cuts and unemployment, the State can close its budget gap through a combination of temporary increases in taxes and the use of special funds,” Ganges said.

Income Tax Increase for Higher Income Households
Ganges offered strong justification for his recommendations.  He said that appropriate tax increases that fall in part on higher-income households would likely have a smaller adverse effect than a comparable spending or employment cut. He said the multiplier effect would be smaller because those families could reduce savings and would not need to cut back on spending as dramatically. 

During his presentation, he quoted Nobel Laureate Joseph Stiglitz and co-author Peter Orszag, now President Obama’s budget director, who said that “tax increases on higher-income families are the least damaging mechanism for closing state fiscal deficits in the short run.”

Temporary GET Increase
Ganges also said a relatively small increase in the general excise tax would be a way to raise significant revenue for the State, and pointed out that concerns about regressivity, or disproportionately burdening lower-income taxpayers, could be addressed through credits or exemptions.

Making tax increases a temporary measure for a one- or two-year period would help to make it more acceptable and reduce disincentives.  “People are OK with temporary increases, but resist permanent increases,” Ganges said.

He said about 38 percent of the GET burden is “exported” to visitors.  He said an increase in the transient accommodations tax, enacted in 2009, is another way of exporting the tax burden.
  
Tapping Special Funds Least Disruptive
Finally, he said the use of existing government special funds is the only action that does not adversely affect the economy.  “It makes sense to draw on special funds where possible to get through the current downturn,” Ganges said.