There were questions being asked at a recent UH Manoa Faculty Senate meeting about HB2670, which would authorize a 66% increase in the amount that can be used from the UH Tuition and Fees Special Fund to pay expenses of the UH Foundation.
The bill, introduced by Rep. Mark Takai and Jerry Chang, originally removed the current $3 million cap on transfers of tuition money to the foundation, leaving the amount up to the Board of Regents. A spending cap was restored when the bill was amended by the House Higher Education Committee, but was increased from $3 million to $5 million.
The bill passed on second reading as amended and was referred to the House Finance Committee. It has not yet been scheduled for a hearing.
Retired professsor Victor Kobayashi submitted testimony opposing against the bill, arguing that tuition funds should direction support teaching and scholarship.
Kobayashi also questioned the legality of taking tuition money to pay for fundraising costs of the foundation, which has, in recent years, claimed to be an independent nonprofit agency despite its intimate ties to the university, in part to escape from the public disclosure requirements of the state’s public records law. However, it seems clear that the statute authorizes this use of tuition funds.
Tuition and fees already comprise the largest source of foundation revenue. If the increased tuition transfer is approved, tuition funds would amount to more than half of the foundation’s annual revenue, which averaged $9.5 million over the past two years (see the Tuition and Fees Special Fund Reports for FY 2009 and FY 2008).
A 2003 audit criticized the foundation for its secrecy and raised concerns about the foundation’s use of tuition and fees.
Despite the limitations imposed by the foundation, we were still able to identify a number of questionable foundation expenditures made under the guise of fundraising. For example, a number of social events and functions attended by foundation employees such as football games, holiday luncheons, and community fundraisers, were not justified as fundraisers for the university and do not appear to benefit the institution. We also found that student tuition-funded contract funds were used to entertain foundation employees. For example, foundation employees’ tickets for a rock concert were paid with state contract funds. State contract funds were also used to pay for at least two foundation employees’ farewell parties at a local restaurant and museum. Finally, we found that the university president used public contract funds to purchase a personal gift.
The foundation also derives substantial revenue from income from “expendable accounts”, along with fees from its endowments and from gifts.
These fees may have become a point of contention with donors, according to a February 2008 email from Bill King, foundation vice-president for administration and CFO, to a support forum.
We charge a 3.5% upfront gift fee. Nobody likes it but most times we can get them to understand the need. We now have a very large potential gift but the donor is pushing back hard on the fee. Actually wants NO fee. Has anyone come up with an alternative to the fee in special cases? The only thing I’m coming up with is to track the actual time we spend on the gift and charge the account for that. Would rather not do that and I’m not sure how the donor would react.
Another institutional fundraiser, commenting in the same forum, wrote that “the idea of ‘charging’ a gift, and moreover, having to be ready to justify the charge to a donor, is very troubling.”
The increased transfer of tuition and fees would more than offset fees charged on gifts, which amounted to just over $1.1 million in FY 2009, according to the foundation’s latest report to the legislature.
The foundation’s tax return for 2007, the latest year available, can be viewed by clicking here.
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Here’s the background on this bill. A few years ago, I was critical about how the UH Foundation was operating. The decision to place a cap on the use of the funds coming from the special fund was my idea.
Today, the UH Foundation is running much better and has been working to raise a significant amount of funds for the University.
I’ve learned that the UH Foundation raises $8 for every $1 of state funds. We’re hoping that with this increase in support that the UH Foundation will leverage this additional funding to obtain/seek significantly more funds for the University.
If successful, everyone (including all the students) will benefit from this intiative.
I realize the significant challenges that the University is facing in regards to its budget.
This effort was to assist the University in its efforts to broaden the support from outside the University.
Hope this helps to clarify the reason why this bill was introduced.
Thanks.
Some of the deans at UH Manoa also use UH Foundation discretionary funds to pay for development officers assigned to their unit.
Furthermore, The UH Foundation also occupies substantial space on the Manoa campus for its operations, including development officers, without paying rental fees for the spaces that could be used by official UH units requiring that space. Instead, the UH Manoa Vice President Cathy Cutshaw obtained approval from the Board of Regents (see October 2009 minutes) to move some of the staff of Outeach College to offices in a building in downtown Honolulu, using student tuition and fees monies, including the lease fees of over $200,000 a year.
The building, in the Oceanit Centter, is also connected to some former regents who are members of the Regents Emeritus group that informally meet to discuss UH matters, including with the Athletics Director and the President of the University Oceanit also receives “earmarks” (porkbarrel) money for military related research projects, through its connections in Washington D.C., some of which were not even requested by the U.S. Department of Defense.
It is important for Legislator who support this bill that UH Tuition and fees monies are basically tax monies (special funds) that are being transferred to a private non-profit company. The use of tuition and fees monies should be reviewed carefully, especially at a time when classes are being cut while the State has authorized millions from student tuition and fees to go to the UH Foundation.
The UH Foundation can benefit the students and University better if the Foundation doesn’t depend on the University for using its scarce general and special fund resources (that include space and utilities) for a private non profit unit that pays large salaries for its officers. It shouldn’t be a way of reducing expenses for donors, who get an income tax break anyway for its generosity.
The fact that the money supposedly goes to alumni relations is not convincing, since some of the UH alumni associations are independent non-profit agencies themselves that receive contributions for scholarships.
All this points to the fact that the University is obsessed with fundraising at the expense of its teaching faculty and its own students.
Student tuition and fees should be used only for students, especially in view of the fact that that UH is canceling classes for the “supposed” budget crisis. UH needs more instructors.
Precisely, how will “If successful, everyone (including all the students) will benefit from this intiative.” Students ought to be really angry about this proposal.
Wow – go Victor (and Noel) for catching this and speaking out, but also kudos to Mark Takai for engaging and sharing his views on this site. (Though I’m still with Victor and Noel.)
The blog world is surely imperfect, but this is a sign of where it can help bring out and move forward policy discussions. Thanks Ian!
Aloha.
check out the salary pages. IRS 990 form has too many pages for most people to wade through, maybe just summarize the pay. 50 people making over 50K, many over 100k, some over 200k, and one making over 250k in wages and 250k more in benefits in one year, yet few people know who they are.
One of the reasons given for using special funds for salaries of full time faculty and administrators within UH is that the State provides for the over 30% fringe benefits (from another source in the state budget). I know that since I deaned a unit that was completely self supporting and required use of tution and fees monies to pay for all of our expenses, including my own salary, that of the staff, electricity, phone, utiltities, and instructors for the summer session.
At a time when there is insufficient funds for the university, the administration must use the tuition and fees special funds for instructional expenses, even if it will have to include the fringe benefits. Otherwise it will not move forward in its efforts to be autonomous fiscally as well as academically.
The legislature has the authority as to how special funds are to be expended and should not compromise on this by permitting the University to transfer funds, especially tuition and fees monies, to the UH Foundation. It should also not have UHF determine its governance–for example, the current chair of the Board of Regents was Chairman of the Board of UH Foundation and had worked directly with the then and current President of UH Foundation. This makes the UH Foundation de facto a state unit, which is a violation of its own status as a philanthropic affiliate of the University of Hawaii that even has priority over campus facilities over legitimate UH units.
This and other arrangements, compromises both the autonomy of the University as well as the private non-profit status of the Foundation.
The current arragements also encourages administrators to contribute to their own support, by making tax deductible contributions to discretionary funds under its own control, which would certainly raise eyebrows of the IRS.
This is yet another in a long list of egregious acts by UH administration. Money can be directed to UH Foundation but Hamilton Library must be closed during Spring Break. Priorities are seriously messed up for an institution that calls itself a research institution. How can we (UH students) do our work without access to library services?