Lawmakers blasted the University of Hawaii for lax oversight of the struggling Cancer Center, which officials have cautioned will run out of money in two years, in a wide-ranging budget hearing Thursday at the state Capitol.
The Cancer Center, a research unit of UH-Manoa, ended last year with a nearly $10 million deficit and is draining its reserves to stay afloat. UH President David Lassner told members of the House Finance and Senate Ways and Means committees that the university isn’t sure what will happen if the reserves are depleted.
"You can sustain yourself for two more years … then what happens after that?" Senate President Donna Mercado Kim asked UH President David Lassner.
"We don’t have that answer here today," he said. "It is not clear — without support from some source — that Hawaii can maintain a (National Cancer Institute-designated) cancer center."
The center is one of 68 federally designated centers in the country, and its researchers attract about $20 million a year in federal research grants. But UH says the center is running in the red because of an outdated business plan that assumed UH’s share of the state cigarette tax would remain steady at close to $20 million a year to fund operations at the center.
As fewer people smoke, cigarette tax revenues have declined annually. Meanwhile, the recent expansion of the center’s Kakaako facility has left the center with an $8 million annual mortgage payment that it can’t afford.
"The assumptions were wrong. The cash flow assumptions were wrong. Where’s the checks and balances?" Kim (D, Kalihi Valley-Moanalua-Halawa) asked. "To say that you didn’t know tobacco use was going to go down — that’s something we wanted to do, that was the whole purpose — to not factor that in is very troubling."
Sen. Jill Tokuda, Ways and Means chairwoman, said she was disappointed the Cancer Center was allowed to reach this point.
"I think we’re in a very serious situation, probably more serious than you realize," Tokuda (D, Kailua-Kaneohe) said. "Yes, we have a very significant obligation to the health and wellness of the people of the state. But we have a fiduciary responsibility to the state as well."
Lassner said UH isn’t seeking a general fund bailout for the center at this point, in part because a revised business plan hasn’t been crafted.
"I don’t want to be someone who shows up asking for cash until we have something that we have vetted within the university," he said.
The university is finalizing a review of the center, which will include recommendations to rein in costs, seek additional revenue sources and maintain its NCI designation. The report is expected to help shape a new business plan.
One recommendation will be to seek legislation to tap into the state’s tobacco master settlement agreement, a class-action settlement with the tobacco industry from which Hawaii receives annual disbursements. Another will be a new tax on loose tobacco to add to the existing cigarette tax in hopes of generating more revenue.
Tokuda said any new revenue proposals would be heavily scrutinized.
"The Legislature is going to want to make sure that we see some sort of very solid and detailed business plan," she said.
She added that because legislators are dealing with multiple requests for funding from departments amid essentially flat revenues, it’s unclear whether lawmakers will be able to help the Cancer Center this year.
"There are a lot of asks going around," she said.
Dr. Jerris Hedges, who was named interim director of the center in November, said he’s looking at ways to cut costs by "right-sizing operations" and consolidating core functions of the center and the medical school, which share a campus. He said the center also is working with its community hospital partners to explore ways to generate additional revenue through clinical trials.
Lawmakers also criticized the university for not being more proactive in seeking additional revenue streams in such areas as commercializing inventions, licensing logo wear and attracting more foreign students, who pay higher tuition rates.
"I’m certainly concerned about what the university is doing overall to maximize your ability to raise funds," Kim said, "instead of just coming to the Legislature every year and saying, ‘We need more money.’"
The money committees next turned their attention to the Department of Education’s budget requests.
The DOE says it needs approximately $19 million in emergency funding from the Legislature this year to cover shortfalls in its school lunch and bus transportation programs or, officials warned, services would be cut.
House Finance Chairwoman Sylvia Luke (D, Punchbowl-Pauoa-Nuuanu) questioned why the department wouldn’t be able to find other programs or services to cut before cutting the bus and lunch programs.
"Unless you folks look internally and see what programs you can either do without or reduce, we’ll continue to face this problem," she said.
On the other hand, Sen. Michelle Kidani (D, Mililani-Waikele-Kunia), chairwoman of the Senate Education Committee, proposed the idea of creating dedicated funding for the DOE, which educates 175,500 public school students.
"I know no one wants to talk about increasing taxes, but I think everything should be on the table," she said.
