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Sunday, July 6, 2003



UNIVERSITY OF HAWAII'S MONEY CRISIS

Dangerous  Equations

President Evan Dobelle has run
UH's finances into the red
with huge pay raises and
empty promises



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ILLUSTRATION BY DAVID SWANN / DSWANN@STARBULLETIN.COM


Evan Dobelle became president of the University of Hawaii system on July 1, 2001. As we look back on his two years as president, we don't see the university headed toward the world-class status Dobelle claimed he would deliver if we set him free from bureaucratic constraints. We don't see students better served with campus resources. We don't see faculty and researchers better nurtured to innovate. We don't see our communities enriched by a better town-gown relationship.

In Dobelle's two years, we see an institution where student tuition is being raised while administrative salaries are boosted by more than $4 million, where substance and services take a back seat to marketing and public relations, and where a globe-trotting president fails to bring home the money he promised.

While claiming credit for boosting public perceptions about the university and its role in our community, Dobelle has lost the confidence of significant campus and community leaders, including some members of the Board of Regents. Dobelle is disrespectful of the regents, ignoring their counsel and failing to work cooperatively with the entire board, exceeding his delegated authority, displaying poor judgment, failing to follow through on commitments, and failing to be a proper steward of our university's limited financial and human resources.

Dobelle's administration now faces an internal crisis of confidence and a credibility gap between what he promised he would do and what he actually has done.

Salary increases

President Dobelle's policies have significantly increased overall administrative costs for the university system despite the Board of Regents' repeated admonitions that such changes shouldn't require more money. A broad administrative reorganization pressed by Dobelle, including new positions and higher administrative salaries, has boosted overall salary costs of the top layer of administrators by more than $4 million annually, while the university is facing severe budget challenges. (The $4 million figure does not include the recent pay hikes for UH-Manoa deans and coaches, including football coach June Jones.)

In September 2000, before Dobelle's appointment, the regents adopted a plan to establish a UH-Manoa chancellor separate from the president. According to the minutes of the regents' January 2001 meeting, the regents agreed to separate the positions with the condition that the move "was to incur no additional costs." Except for the new UH-Manoa chancellor position, the idea was simply to shift administrative tasks and positions dealing primarily with the Manoa campus to the new chancellor's office, leaving the president's office to handle issues common to the system as a whole.

Despite the absence of additional resources for this reorganization, salaries for Dobelle's current top-level administrators at all 10 campuses have increased from $3.58 million in June 2001 to $7.64 million today -- an increase of more than $4 million. In other words, to administer the same educational system, the university now is paying twice as much money for similar high-level administrators.

In justifying his reorganization plan to legislators earlier this year, Dobelle said the university is spending "$1.89 million a year less on administrative costs than it did 10 years ago." Yet, according to the UH Office of Human Resources, the salaries for UH executive and managerial posi- tions actually increased by more than 23 percent from October 1994 to October 2002 (from $16.3 million in October 1994 to $20.2 million in October 2002).

The reorganization alarmed Manoa faculty members because of the academic budgetary and communication impacts that would follow, and because they were repelled by the stealthy manner in which it was advanced. Policy that affects academic matters calls for prior consultation. Lack of consultation between the faculty and administration on the reorganization plan led to a resolution to censure Dobelle, which was placed before the faculty senate in November 2002. After a meeting in which Dobelle apologized to the senate's executive committee, the resolution was tabled. But it was not withdrawn, and the resolution may be brought up for a vote the next time collegial governance is ignored.

In a legislative briefing earlier this year, J.N. Musto, the faculty union's executive director, pointed out that while salaries for some university administrators have increased substantially during the past two years, faculty members will receive no increases in salaries for the next couple of years. Each of the 2,800 full-time faculty members state-wide could have received a pay raise of more than $1,400 using the $4 million now going to higher salaries for administrators.

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'A few key people'

Dobelle's own initial salary of $442,000, approved by the regents, was nearly triple that of his predecessor, Kenneth Mortimer, and, with benefits, was ranked fourth highest in the nation in a survey of university presidents by the Chronicle of Higher Education. By comparison, the new president of the massive University of California system is paid $375,000. The UC system has an enrollment of 200,000 students, whereas the UH system has 46,000 students.

Dobelle insisted that his picks for several key UH positions receive generous compensation packages, justifying his approach as "a few key people with higher salaries and a lot of responsibility."

Eyebrows were raised when Dobelle's first appointments were announced. J.R. "Wick" Sloane, vice president for administration, is paid $227,000, an increase of $100,000 over the former salary for the same position. Paul Costello, vice president for external affairs and university relations, earns more than twice the salary of his predecessor. With the approval of the regents, neither position was advertised in open competition, as is generally required by state law.

Dobelle has appointed six friends or former associates to highly paid executive and managerial positions. These include Sloane; his wife, UH Foundation President Elizabeth "Betsy" Sloane; Costello; Executive Assistant Prescott Stewart; Assistant Kristin Blanchfield; and Senior Adviser for Global Affairs Michael Lestz. Dobelle has hired other friends and former associates as well-paid consultants.

The hiring of Costello and Sloane was the focus of a February 2002 article in the Chronicle of Higher Education. Dobelle told the Chronicle that he couldn't imagine why anyone would see his hiring of Costello and Sloane as "cronyism," which he defined as "hiring people you know who aren't qualified."

According to a financial disclosure filed with the State Ethics Commission, in the year prior to becoming the chief financial officer of the university, Sloane received a $70,000 salary in 2001 for providing "finance advice" to a company called B China B Plastics. Despite a lack of significant experience in large and complex public university administration and financing, Sloane now receives $227,016 each year as chief financial officer of our university.

Equally surprising are the salaries Dobelle awarded two personal aides -- Stewart, his executive assistant, who is paid $111,552, and Blanchfield, his assistant, paid $93,168. Each receives substantially more than a UH full professor, the highest faculty rank, earning an average of $80,500, and more than members of the governor's cabinet, who earn $85,302 a year. A faculty member may take 20 years or longer to reach the rank of full professor, with tough peer reviews and productivity requirements along the way. Meanwhile, Dobelle brings in relatively young staffers well above that full professor level.

Retirement bonuses

Dobelle also recommended large bonuses for retiring administrators, costing taxpayers and current and future retirees hundreds of thousands of dollars and incurring inflated retirement costs over the longer term.

For example, a Manoa executive turned his duties over to a successor and then got a 50 percent raise, from $120,000 to $180,000, and was effectively given a one-year leave at the higher salary until he retired June 30. Similarly, a high-level Bachman Hall interim executive will step down soon and then will return to the faculty ranks, going on a "professional improvement leave" for nine months at an annual salary of $254,040 before retiring.

Normally, any university staffer granted such a paid leave must pay back the university by returning to work so that the university and the public will benefit from his or her new or sharpened professional skills. In these cases, that requirement was waived and both UH executives will retire or have retired with substantial boosts to their retirement benefits as a result of the extra time at high salaries.

Interim administrative appointees who return to the faculty ranks typically return to the lower faculty salary level. However, in this situation, Dobelle is allowing this interim appointee to continue to receive his interim executive's salary of $254,040 while on the nine-month leave.

Before working at Bachman Hall, the interim executive was a 30-year faculty member making about $85,000 a year. He received $238,800 the first year and $254,040 the second year as an executive.

Retirement benefits for state employees who work for more than 30 years, who are in the contributory system and who receive more than $200,000 for their final three years will receive approximately $120,000 annually. If these employees were working for approximately $85,000 for their highest three years, each would receive approximately $51,000 annually in pension income. In other words, these employees will receive a boost of more than 100 percent in their retirement income -- the $120,000 annually is even higher than their original $85,000 salary.

$1.5 million for branding

Dobelle shelved the proposed UH logos after a public uproar because of the inappropriate designs and high costs. The university's marketing initiative was $1.5 million for this year, recently reduced to $1.1 million. However, since Bachman Hall does not have money even for the scaled-back initiative, Dobelle has required each campus to pay an assessment to fund the effort.

According to Costello, the Manoa campus was assessed $749,582 taken from the student tuition account. Likewise, the community colleges this year were collectively assessed $305,743. With the university facing multimillion-dollar budget cuts, it is highly unwise, if not irresponsible, to spend so much money on marketing.

Dobelle's fund raising

In several instances, Dobelle has deflected criticism of his spending decisions by publicly promising to raise money to cover specific expenditures, but these commitments have so far proved hollow.

Soon after assuming office, Dobelle responded to criticism of the $1 million in renovations to College Hill, the president's home, by pledging to raise private funds to cover the cost overruns. In November 2001, Dobelle said he had raised $50,000 from a private foundation. But more than a year later, in a legislative hearing in January 2003, Dobelle had nothing more to show beyond the initial foundation grant.

"I haven't made that a highest priority," Dobelle said. "We will begin to raise the money, but I couldn't make that a priority over scholarships for students." He told lawmakers that "it's very hard to raise capital costs" for the house. "We continue to ask, but it is not the major priority."

A letter in March from the UH Foundation clarified that Dobelle had raised $112,270 from private sources for the College Hill project, leaving him nearly $900,000 short of his promise.

Legislators now are worried about Dobelle's commitment to raise $150 million in private funds to match state spending for the new medical school in Kakaako. At an October 2001 legislative hearing, Dobelle was asked what would happen if the university doesn't raise the $150 million. "I don't think that way," he answered. "We will raise the $150 million."

Fifteen months later, in a January 2003 legislative hearing, the president again was asked to update the Legislature about the fund-raising efforts for the medical school. "We will raise the funds," was Dobelle's answer once again. In March, legislators learned that only $500,000 had been raised to date -- less than 1 percent of the total promised.

On May 1, the Legislature finally received a "preliminary fund-raising plan" for the campaign. Despite taking more than one year to formulate this preliminary plan, Dobelle admitted that it must be presented to the Board of Regents for its "review and approval prior to any presentation to donor prospects." To date, the regents have yet to receive this proposal.

University nearly broke

Although the university ended the 2003 fiscal year on June 30 in the black, this fiscal year is already looking bleak. It has been suggested that the university is facing at least a $2.4 million budget deficit overall by June 2004. Additionally, the system-wide administration faces nearly a $500,000 deficit in funds to cover the salaries of Dobelle's highly paid administrators. Moreover, the chancellor of Manoa has asked for an additional $10 million in cuts from Manoa's academic and research units to cover an anticipated budget deficit and new campus initiatives for the budget year that began on July 1.

The budget situation for Manoa is so critical that on June 27, administrators sent an e-mail saying that "effective immediately, campus mail services will be temporarily suspending the processing of any outgoing mail until Monday, July 7." In a June 30 follow-up e-mail, university employees were told that mail requiring postage was temporarily suspended "due to the depletion of the campus mailroom's postage meter account."

During discussions on the budget at the June regents' meeting, Regent Ted Hong asked about a $439,000 shortfall in the budget for administrative salaries. Sloane explained that the university will be using $1 million in interest from university accounts to pay for the shortfall. After being questioned further about the use of interest income on "fixed costs," Sloane replied: "This is not a way to do this ... Some of these positions are only going to be here for a year and so we are taking this one year at a time, but we take seriously where this is heading us towards."

As early as last October, Sloane began looking into every budgetary nook, including the use of research overhead funds, to pay for Bachman Hall administrators. These funds are required by the Legislature to be spent in support of research. The funds come from reimbursements for indirect overhead costs like electricity incurred in connection with federal research projects.

Their use is regulated, and misuse may result in the loss of federal research funds. A state law requiring that the university set aside 12 percent of the overhead funds to pay for several faculty housing projects was dropped by the Legislature in 2001. However, the university has continued to set aside the 12 percent for the housing projects.

Although budgeting $2.5 million for 2002 and $3.1 million for 2003 from the research overhead for these housing costs, Dobelle's administration has transferred only $1.27 million to the housing account each of the past two years.

Researchers who earned the grants have a basic question: Have the additional millions that were budgeted for housing assistance been used to cover Dobelle's administrative overruns? State law specifies that the regents -- and only the regents -- have the authority to determine the amount of this transfer. To date, they have not done so.

In her March 2003 audit, the state legislative auditor also found that the monies from the research and training revolving fund have been used for "questionable purposes," such as aesthetic improvements to Hamilton Library.

The expenditure of research overhead funds has been a "major source of discontent among the faculty researchers," a faculty union leader told legislators. Faculty members "are very dissatisfied about the possible misuse of these funds and the auditor's report only reinforces their continued skepticism and concerns. ... This is bad for morale," said Musto, the faculty union director .

Defiance of board

Signaling a loss of confidence in Dobelle's judgment, the Board of Regents voted last October to limit substantially or remove the president's discretionary authority. The board, concerned about Dobelle's habit of informing regents of his plans only at the last minute, inserted a definition for "consultation" in the regents' administrative rules to make clear that the president must "obtain input, comment and advice from the board or the board's designee prior to making a recommendation to the board for decision-making and, in certain instances, prior to administrative action."

Additionally, in the minutes of the October meeting, the regents clarified that "the interpretation of board policies rests with the board."

Other changes reflect the regents' concerns about high administrative salaries.

"The amendments further clarify that all actions pertaining to executive employees as well as exceptions to policies requires the prior approval of the board," according to minutes of the regents' Oct. 18 meeting. In addition, the board now requires that it approve all consultant contracts of $100,000 or more, and any with significant policy or systemwide impact.

In a slap at Dobelle's travel costs, including first-class upgrades for Dobelle's staff as well as himself, the board imposed a new requirement for the president to submit a monthly travel report that includes "total expenses of each trip and funding sources."

Dobelle has indicated he has spent nearly half his tenure on the road. "Almost 240 of the 570 days I've been president (I've been) in a hotel room somewhere in the country raising money," he said at one point.

Conclusion

Our beloved university is in turmoil -- from highly paid administrators who have not proven their worth to concerns about cronyism, from constituencies who have been ignored and million-dollar logo and marketing plans to questionable expenditures of research funds, from inattention to administrative arrogance and deception.

We all welcomed Evan Dobelle's arrival in July 2001. Many of us, including the media, have given Dobelle much latitude to succeed. However, after two years of high expectations from the Dobelle administration, the 10-campus university is in disarray, is unfocused and faces an uncertain future.

We care about our University of Hawaii -- and the university is at a critical point.

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How to start getting things under control

>> The Board of Regents, in its current review of the president, should carefully consider the issues raised here, critically assess his responses, then seek a concrete plan for dealing with these multiple concerns. The board also should consider hiring its own external auditor and its own external attorney to investigate these issues.

>> Members of the Board of Regents are restrained from complaining publicly. The board's traditions discourage public criticism of the president or his practices. However, breaking with their tradition of deference to the administration, the regents should provide sufficient information for the public to be assured that the criticisms and concerns are being addressed, and that there is improved accountability for how the funds of the university and the University of Hawaii Foundation are being expended.

>> The legislative auditor should continue her efforts to audit specific university funds and accounts.

>> Taxpayers and members of the UH community across all 10 campuses must demand a full accounting of all tuition and taxpayer money entrusted to Hawaii's only public institution of higher education. These individuals should identify other issues and problems and bring them to the attention of the regents.

-- The authors

About the authors

Dr. Amy Agbayani

She has been employed at the University of Hawaii for 30 years and serves as the Director of Student Equity, Excellence and Diversity at UH-Manoa. She was honored as a UH distinguished alumna and received numerous awards from national and local associations for her work on behalf of students, women, underrepresented ethnic groups and immigrants. She is president of the Filipino Community Center and has served as chairwoman of the Judicial Selection Commission and the Hawaii Civil Rights Commission.

Sen. Donna Mercado Kim

She is vice president of the state Senate. She has been in the Senate for the past 31/2 years and has served as chairwoman of the Senate Tourism Committee. Kim previously served on the Honolulu City Council for 14 years, 13 of which she served as chairwoman of the Zoning Committee. Before that, she served in the House of Representatives for three years. She attended the University of Hawaii until her junior year and graduated cum laude from Washington State University.

Dr. Ralph Moberly

He retired from the University of Hawaii in December 2002 after 43 years as a faculty member and administrator. He was a professor of geology and geophysics. Additionally, he served in various positions including as chairman of the Department of Geology and Geophysics, chairman of the Department of Ocean Engineering, and associate director of the Hawaii Institute of Geophysics. He continues teaching undergraduate courses part time.

Rep. K. Mark Takai

He is the chairman of the House Higher Education Committee. He has been in the state Legislature for nine years, serving as vice chairman of the Higher Education Committee for seven years. He graduated from UH-Manoa with a bachelor's degree and a Master of Public Health degree. As a student, he served as the ASUH president and as editor-in-chief of Ka Leo O Hawaii, the UH-Manoa campus newspaper.

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