HOUSE OF REPRESENTATIVES

H.B. NO.

1677

THIRTY-SECOND LEGISLATURE, 2024

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT

 

 

RELATING TO THE UNIVERSITY OF HAWAII TUITION AND FEES SPECIAL FUND.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 

     SECTION 1.  Prior to the establishment of the university of Hawaii tuition and fees special fund by Act 161, Session Laws of Hawaii 1995 (Act 161), the State fully funded the core operations of the university through general fund appropriations; all regular university of Hawaii tuition and fees revenue was deposited in the state general fund for use by the State.

     Recognizing that the State would not be able to solely fund the university to meet the full higher education needs of the State, Act 161 created the tuition and fees special fund, into which tuition and fees could be deposited and expended by the university.  When Act 161 was enacted, the legislature made a commitment not to reduce general fund appropriations to the university on the basis of the university's retention of its tuition and fees revenue.

     Nonetheless, soon after the creation of the tuition and fees special fund, the State encountered significant financial challenges and the commitment was not honored; state general fund appropriations to the university were reduced below prior levels, contrary to statute.

     Recognizing the need to take greater responsibility for the financing of public higher education in Hawaii, the university began to cover many expenses through tuition and fees revenue instead of through general funds.  The vast majority of university expenses are for personnel, so as a greater share of expenses became covered by tuition and fees revenue instead of general funds, it became necessary to fund both operating expenses, such as utilities, and the costs for appropriated general fund permanent positions through tuition and fees revenue.

     While the university was able to support the direct salary costs for a number of its employees in appropriated general fund permanent positions with tuition and fees revenue, it was a challenge to also fund the fringe benefits for these employees from tuition and fees revenue.  This challenge was exacerbated by the fact that fringe benefit costs are fully established and managed by the State without any ability of the university to control these costs.

     Recognizing the need to formalize a fair approach to cost-sharing expenses for public higher education in Hawaii between the taxpayers and students, an agreement was reached in 2005 between the department of budget and finance and the university whereby a position that is authorized by the legislature as a general funded position could have its salary paid in part or in whole by tuition and fees revenue while the fringe benefits expense associated with that position could continue to be paid by the general fund as managed by the State.  Only for positions that were general fund authorized by the legislature but for which there were inadequate general funds appropriated, and for which the university would utilize the tuition and fees special funds to pay salaries, could the fringe benefits expenses continue to be paid by the state general fund.

     Concurrently, legislative commitment to cost-sharing the expense of public higher education in Hawaii between the State and university, as established in section 304A-2101(a), Hawaii Revised Statutes, requires the annual appropriation of general funds to the university in an amount that is "not less than three times and not greater than five times" the amount of regular tuition and fees revenues estimated for that fiscal year.  Furthermore, section 304A-2101(c), Hawaii Revised Statutes, reinforces this minimum funding requirement by prohibiting the state administration from using revenue received by the university through the university of Hawaii tuition and fees special fund to be used as an offset or "justification for reducing any budget request or allotment to the university unless the university requests such a reduction".

     A conservative analysis of general fund appropriations and regular tuition and fees revenue makes it clear that this statutory provision has been violated since at least 2010.  It is estimated that since 2014, the total minimum shortfall in appropriations to the university is in excess of $2,700,000,000 over the last ten years.

     Executive Order No. 20-06 formalized the cost-sharing agreement that had been reached in 2005.  The continuation of this cost-sharing program helped prevent increased tuition rates and the reduction of university personnel occupying legislatively appropriated general fund positions for which adequate general funds were no longer being appropriated.  Executive Order No. 20-06 formally authorized the university to establish non-imposed fringe benefits as a means to enable the use of tuition and fees special fund resources by the State to fund the direct payroll of appropriated general fund positions without requiring the tuition and fees special fund to also cover the fringe benefit costs for those positions.

     This use of the non-imposed fringe benefits has successfully enabled a form of cost-sharing for overall personnel expenses between general funds and tuition and fees revenue generated by the university of Hawaii for appropriated general fund positions for which general funds have not adequately covered the salaries for over fifteen years.

     The purpose of this Act is to: 

     (1)  Statutorily recognize the long-standing cost-sharing agreement and practice as beneficial to both the university of Hawaii and the State; and

     (2)  Remove the statutory minimum funding requirement that has been violated for at least ten years, during which the annual general fund appropriations to the university have been well shy of at least three times the amount of regular tuition and fees revenues for each fiscal year.

     SECTION 2.  Section 304A-2101, Hawaii Revised Statutes, is amended to read as follows:

     "[[]§304A-2101[]]  General fund budget appropriations; formulation.  [(a)  The general fund budget appropriations for the university shall be an amount not less than three times and not greater than five times the amount of regular tuition and related fee revenues estimated for that fiscal year.

     (b)] (a)  Any general fund budget appropriation for the university for operating purposes for any fiscal year shall include the consideration of:

     (1)  The fiscal condition of the State;

     (2)  Enrollment;

     (3)  Access to educational opportunity;

     (4)  The mix of resident and nonresident students; and

     (5)  Community service and noninstruction programs.

     [(c)] (b)  No revenue received by the university pursuant to the University of Hawaii tuition and fees special fund established under section [[]304A-2153[]] may be used by the governor or the director of finance as a justification for reducing any budget request or allotment to the university unless the university requests such a reduction."

     SECTION 3.  Section 304A-2153, Hawaii Revised Statutes, is amended to read as follows:

     "§304A-2153  University of Hawaii tuition and fees special fund.  (a)  There is established the [University] university of Hawaii tuition and fees special fund into which shall be deposited all revenue collected by the university for regular, summer, and continuing education credit tuition, tuition-related course and fee charges, and any other charges to students, except as provided by law.  Moneys deposited into the fund shall be expended to maintain or improve the university's programs and operations and shall not be:

     (1)  Used as a justification for reducing any budget request or allotment to the university unless the university requests such a reduction;

     (2)  Transferred unless otherwise authorized by the legislature; and

     (3)  Restricted by the governor or the director of finance without the prior approval of the legislature.

     Any rule, policy, or action of any agency or individual in contravention of this subsection shall be void as against public policy.

     (b)  Any law to the contrary notwithstanding, the board of regents may authorize expenditures of up to $3,000,000 annually, excluding in-kind services, from this fund for the purposes of promoting alumni relations and generating private donations for deposit into the University of Hawaii Foundation for the purposes of the university.  Any expenditure authorized pursuant to this subsection shall be for a public purpose and shall not be subject to chapters 42F, 103, 103D, and 103F.  The university shall submit a comprehensive report to the legislature detailing the use of any funds authorized by the board under this subsection no later than twenty days prior to the convening of each regular session.

     The report shall:

     (1)  Identify each department of the University of Hawaii Foundation supported by moneys from the fund;

     (2)  Describe the purposes and activities of each department identified in paragraph (1) and how it participates in fundraising activities and benefits the university;

     (3)  Provide the total expenditures of each department identified in paragraph (1) by primary expense categories;

     (4)  Identify all moneys from the fund transferred to any fund of the university and provide a justification of how these moneys are used to benefit the university;

     (5)  Provide a financial summary of the operating activities of the University of Hawaii Foundation, including revenues and expenditures by major reporting categories; and

     (6)  Identify amounts and purposes of all expenditures from the University of Hawaii support fund.

     (c)  Any law to the contrary notwithstanding, the university may transfer funds from the [University] university of Hawaii tuition and fees special fund into the scholarship and assistance special fund established pursuant to section 304A-2159.

     (d)  In estimating its quarterly budget requirements, each campus of the [University] university of Hawaii shall prepare a plan for the fiscal year for the operation of each of the programs that it is responsible for administering.  The operations plan shall be:

     (1)  In such form and content as the vice president for budget and finance and chief financial officer of the [University] university of Hawaii may prescribe; and

     (2)  Submitted, together with the estimated quarterly budget requirements, to the vice president for budget and finance and chief financial officer on such date as the vice president for budget and finance and chief financial officer may prescribe.

     (e)  The president and vice president for budget and finance and chief financial officer of the [University] university of Hawaii:

     (1)  Shall review the operations plan for each campus to determine if:

          (A)  It is consistent with the policy decisions of the board of regents and appropriations by the legislature;

          (B)  It reflects proper planning and efficient management methods; and

          (C)  Appropriations have been made for the planned purpose and will not be exhausted before the end of the fiscal year;

     (2)  Shall approve the operations plan for each campus if they determine that the operations plan meets the requirements of paragraph (1); and

     (3)  May modify or withhold the planned expenditures of any campus at any time during the appropriations period.

     (f)  At the end of each fiscal year, the moneys in the [University] university of Hawaii tuition and fees special fund for each campus shall lapse to the credit of program identification number UOH900 ([University] university of Hawaii, system wide support).

     (g)  The university of Hawaii tuition and fees special fund may be used to pay for salaries in part or in full for positions that have been authorized by the legislature whose means of funding are the general revenues of the State of Hawaii.  In paying the salaries for such general fund authorized positions using funds in the university of Hawaii tuition and fees special fund, the university of Hawaii shall be exempted from the requirements of sections 87A-39(a) and 88-125(a) as they pertain to the liability for fringe benefits reimbursements for contributions made by the State pursuant to sections 87A-32, 87A-33, 87A-34, 87A-35, 87A-36, and 87A-37.

     (h)  The department of budget and finance may establish guidelines and parameters for managing the implementation of subsection (g)."

     SECTION 4.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 5.  This Act shall take effect on July 1, 3000.

 


 

Report Title:

University of Hawaii; Tuition and Fees Special Fund

 

Description:

Specifies conditions for exemptions for the University of Hawaii from sections 87A-39(a) and 88-125(a), HRS.  Amends the formulation of general fund budget appropriation in proportion to the amount of regular tuition and related fee revenues estimated for the respective fiscal year.  Effective 7/1/3000.  (HD1)

 

 

 

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