UH-Manoa Chancellor Tom Apple plans to ask the University of Hawaii Board of Regents to forgive the athletic department’s $11.3 million — and escalating — accumulated net deficit as part of a major restructuring effort.
The request would follow a recommendation from John Holzman, chairman of UH’s Task Group on Intercollegiate Athletics, at Thursday’s meeting that Apple "present to us in May a plan to balance the books and reconcile the accumulated deficit in as transparent a manner as possible."
An independent auditor’s report in January pegged the deficit, which has been mounting since 2002, at $11.3 million with the expectation that it could hit $13 million by the time the current fiscal year closes June 30.
Asked afterward whether he would forgive the entire sum, Apple said, "Almost certainly. That will depend upon whether the regents, at the next meeting, approve the plan. But, that’s part of the plan, to retire the deficit that exists there."
Apple said he and athletic director Ben Jay will present a plan that "works toward" ending deficits. He declined to go into specifics except to say, "I think we have a pretty good, solid plan going forward."
Jay said he and Apple have been working on a financial restructuring plan. "I appreciate Tom’s support to give us a fresh start," Jay said. "I want to make sure that we are coming back with a plan and a vision to go in a new direction."
The last fiscal year ended with a $1.8 million annual deficit on expenditures of approximately $33 million.
Football coach Norm Chow said, "I heard something like (the debt retirement) might happen. It would be encouraging, very encouraging."
Kristeen Hanselman, associate executive director of the UH Professional Assembly, the faculty union, said, "I have not had any specific discussion about this athletic situation with our leadership," but she said the membership was likely to view such a bailout "with suspicion. But that is pretty much standard for how they are viewing the administration. The faculty don’t have a lot of trust and confidence now."
The athletic department has finished in the black just twice in the past 10 years, and one of those years, 2008, was due to the football team’s appearance in the Bowl Championship Series Sugar Bowl, which carried a $4 million payout.
Athletics had operated with a so-called "rainy day" reserve fund until 2002. The impact of Sept. 11, 2001, depleted its surplus — because of canceled games and decreased ticket sales resulting in loss of revenue — and started the department on the way to the first of six consecutive annual deficits as spending climbed.
In 2005 auditors began characterizing athletic finances as "fragile," and regents periodically expressed concern. In 2010 then-Chairman Howard Karr directed athletics to "run more like a business."
In November, in the wake of the Stevie Wonder debacle, the regents created the eventual four-member Task Group to look into athletics oversight and make recommendations. Soon after, an independent auditor’s report described UH athletics as "technically insolvent," saying, "the condition of the athletic department is a concern."
Apple has told the regents that UH athletics, which receives 32 percent of its funds from the state and students, is undersubsidized compared with its peers. Apple said the only non-BCS school with a smaller subsidy than UH was Fresno State at 27 percent and that Hawaii has significantly higher travel costs.
