UH athletics department faces $1.5 million deficit
By Stephen Tsai and Ferd Lewis
Advertiser Staff Writers
The University of Hawai'i athletic department is reporting a record $1.5 million deficit for the fiscal year that ended June 30.
• Revenue Shortfall $440,000 — Stadium Endowment Fund $300,000 — Interest from football-ticket sales $50,000 — Logo income (pending UH administration decision) $39,000 — Cancellation of two Wahine volleyball matches $13,260 — UH-Fresno State football refund • INCREASED OR UNBUDGETED EXPENSES $199,988 — Purchase of baseball scoreboard $141,000 — Summer school/fifth-year scholarships $100,000 — WAC bowl expenses $72,800 — Consultant services $52,900 — Purchase of competition boats for National Sailing Championships $35,400 — Legal fees (regarding basketball fees) $33,308 — Baseball office renovation $29,250 — Athletic director search $7,500 — Additional audit fees $2,954 — Swimming pool office renovation • Total: $1,517,360
The 19-sport department is projecting revenue of $15.2 million. But with expenses projected at almost $16.8 million, the department expects a deficit of just more than $1.5 million when a university-subsidized audit is completed this fall.
UH AD budget problems
The athletic department will use nearly all the money from its so-called "rainy-day fund" to make up the shortfall. The fund, created from budget surpluses, has a balance of $1,545,726. After paying for the shortfall, the balance will be $11,791.62.
UH will need to find new money to cover any future deficits because a budget surplus is needed to replenish the fund.
In the next year, UH needs to find money to pay for raises for coaches and administrators and make the $600,000 drop in the television guarantee this academic year compared to last.
"We knew early on, when 9/11 came along, there would be some ramifications from a budget standpoint," said outgoing UH athletic director Hugh Yoshida. "This is something we knew was forthcoming."
Yoshida, who will hand control of the department to Herman Frazier tomorrow, said he notified interim Manoa chancellor Deane Neubauer of the impending deficit in February.
This will be the third fiscal year to end with a deficit in the past 10 years. The athletic department incurred a $1.3 million deficit in fiscal year 1999, due in large part to an 0-12 football season in 1998 and construction work on the Stan Sheriff Center.
In fiscal year 1994, the $1 million deficit, approved in advance by then-UH president Kenneth Mortimer, was directly linked to the purchase and installation of the Sheriff Center scoreboard.
The "rainy-day fund" was used to pay for those deficits. In addition, in 1997, Mortimer withdrew $300,000 to offset a cut in budget appropriations from the Legislature.
Frazier said he was told of the projected deficit. "I knew it would be ... I didn't know the exact amount, but was told it would be between $900,000 and $1.5 (million)," he said.
As for the effect of the deficit, Frazier said, "It means I know I'll be ready to roll up my sleeves when I get there."
Frazier inherited a $7.5 million deficit at his previous school, Alabama-Birmingham, in 2000, and said he expected to have it reduced by $1.2 million by his departure.
In June 2001, UH associate athletic director Jim Donovan prepared a projected budget of $16.2 million for fiscal year 2002. That was before the athletic department incurred more than $800,000 in revenue shortfall and more than $675,000 in increased or unbudgeted expenses.
Among the shortfalls were $440,000 from the Honolulu Stadium Endowment Fund, $300,000 in interest from football-ticket sales, and $52,260 for two canceled Rainbow Wahine volleyball matches and ticket refunds for the football game against Fresno State. The stadium fund was created from the sale of Honolulu Stadium property in 1976. UH received a dividend of $938,000 in fiscal year 2001. Because of the drop in the stock's value, Donovan anticipated UH earning a dividend of $750,000 for the last fiscal year. Instead, the dividend was $310,000.
Money earned from football-ticket sales is deposited into a bank account. In the past, the athletic department was allowed to keep the interest. But in February, UH president Evan Dobelle notified all UH departments that interest from school accounts would go into the general fund.
UH also had to pay almost $200,000 for a new scoreboard at Les Murakami Stadium, an additional $141,000 for summer school and fifth-year scholarships, and $110,000 as its share in offsetting the Western Athletic Conference's $1 million deficit incurred by the Silicon Valley and Humanitarian bowls. The WAC, of which UH is a member, is a partner in both postseason football games.
"I put this (budget) together in June 2001," Donovan said. "All of these expenses came after June. They were never originally budgeted."
Yoshida said the department knew a deficit was possible soon after the Sept. 11 attacks. In February, the projected deficit swelled to $1 million. Yoshida said it would have been disruptive to insist on budget cuts for UH teams competing in the spring.
It is not known how UH will pay Frazier's salary, plus the salary increases of men's basketball coach Riley Wallace, men's volleyball coach Mike Wilton and women's volleyball coach Dave Shoji. Football coach June Jones will begin negotiating a contract extension at the end of the coming season. UH administrators not involved with the athletic department have handled recent negotiations over coaches' salaries as well as the television contract and the Leigh Steinberg marketing agreement.
The athletic department received $1.3 million from the school's general fund, of which $500,000 must be used to pay for maintenance of the lower campus. That's a sharp drop-off from the $2.2 million the athletic department received in 1993.
