University of Hawaii President David McClain confirmed yesterday that a “;state of fiscal exigency”; exists at the university.

The determination is the first step toward possible layoffs under Article XVI of the contract between UH and the University of Hawaii Professional Assembly, the union representing faculty.

“;This declaration is the first step in a process under which our campus chancellors can identify for the Board of Regents areas for programmatic retrenchment that will produce general funds budget savings,”; McClain said in a news release.

According to the contract, “;retrenchment refers to the termination of the employment of any Faculty Member during any appointment as a result of lack of work or other legitimate reason ... such as fiscal exigency.”;

McClain said negotiations with the faculty union are ongoing “;but have not yet produced the adjustments we believe we need.”;

UH spokeswoman Carolyn Tanaka said McClain has spoken to the board about the retrenchment process, but she said the board has not yet been asked to approve any layoffs.

She said chancellors on each campus will have to determine the need to cut programs before going to the regents for approval.

“;It is important to understand that the larger the compensation adjustments we can achieve through collective bargaining, the smaller the programmatic adjustments that will be required,”; McClain said in the news release.

On Friday, during a news conference announcing pay cuts for UH executives, McClain said he is hoping to avoid layoffs.

The faculty contract requires the regents to formally notify the union of the names of faculty members affected and a list of vacancies throughout the UH system. The union then has 30 days to submit its recommendations, and layoffs cannot occur until 45 days after the formal notification.

UHPA Executive Director J.N. Musto was off island and did not immediately return a phone call and e-mail asking for comment.