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The Honolulu Advertiser
Posted on: Sunday, May 16, 2004

Let's talk about financing universities

By Wick Sloane

J.R.W. "Wick" Sloane is chief financial officer at the University of Hawai'i.

Imagine your reaction to this headline:

University of Hawai'i closes; 25 states now out of higher ed

This is no fantasy. This drama is under way across the nation. The storyline so far is that healthcare and public safety costs finally have squeezed out higher education.

Often each day as chief financial officer of the University of Hawai'i, I wonder how I missed the meeting where the nation decided to exit public higher education. The trouble is, each state is dealing with the situation alone.

I do not have easy answers to this money crunch.

My purpose in writing here is to launch a conversation in the community on some of these issues.

Simply ascribing local tensions about UH to state partisan politics or personality conflicts is wrong and wastes valuable time. I know that as a nation, we face no bigger question than how to finance public higher education in the new century.

And I know that Hawai'i has the people to lead the way.

Nothing would improve the Hawai'i conversations more than the realization that the strains we face here are national, not local. Healthcare is putting public higher education out of business.

Hawai'i can find a way out — as other states have.

This conversation could begin by acknowledging to each other that repairing public higher education is an immense, complicated problem. Discussions in sound bites are not likely to work. A five-day summit with dozens of community leaders, legislators, university stakeholders would only begin to lay out, with time for understanding, the issues, concerns and ideas.

That's how big this problem is.

What does a community conversation need to consider?

• University finances today.

Independent auditors again have verified that the University of Hawai'i system is solvent. Concerns about spending policy — how money is spent — are legitimate. We can learn only so much, though, from the rear-view mirror.

To set future spending policy for our university, Hawai'i needs to define what it wants. For example, how many resident students should receive degrees each year and in what fields.

• Where does the university fit relative to other state needs?

This is the crippling issue in all 50 states. Soaring Medicaid and healthcare costs take up any new dollar a state can generate. Behind this is public safety, infrastructure, K-12 education and prisons.

Is there any economic scenario that will generate enough new state money for all these needs?

• The university faces no greater risk than its overdependence on state general funds: Fifty percent, which is about the highest in the nation. Any enterprise can lower risk by diversifying income. The issue is addressing the fear that any new money the university generates will lead to cuts in state funding. This is a hard question but one that other states have worked out.

Am I writing this out of despair? Not at all.

The University of Hawai'i has a faculty second to none that can keep classrooms full and provide an education valid anywhere. In the nation, the number of college-aged students is rising. It's a good time to be a higher-education provider. Just next door, Cal State is capping enrollment because of budget cuts. That's a market for Hawai'i.

Yes, the first priority is residents. Aren't students from around the world, though, worth more than any tourist? Students come and go for years.

Then, in the public sector, universities alone have the ability to bring in other revenues. The discussion on revenues could also take days to lay out. The UH has low tuition, low ticket prices, low dormitory costs, and worn-out buildings. We have a tradition of discussing these all as independent issues. This tradition will weaken the future.

For example, tuition policy depends on commitments for scholarships.

Yes, California raised tuition 30 percent last summer. In that plan, though, California did not raise tuition for those from low-income households.

This is not a sound-bite issue.

Endowment income is essential to public universities. Yet UH has a total endowment of about $150 million. The University of Delaware, in a state with 65 percent of the population of Hawai'i, has an endowment of $868 million.

The wealth all the various bank sales generated in the past few years could fix this overnight. U.S. Rep. Neil Abercrombie is already at work on innovations to permit extra tax benefits for donations to endow needs-based scholarships.

Our current discussions, in Hawai'i and in the nation, head us toward exiting public higher education. This leaves college for only those already wealthy. Facing down this situation is scary and difficult and time-consuming. At least here in Hawai'i, we are so much closer to success than we think — as long as we get going.

How will we feel if we fail to try?