Day to day, University of Hawaiʻi students move between classes, grab meals on campus, and take part in different programs without giving much thought to where their tuition money actually goes. Many assume the money they pay just stays within the university and covers the full cost of their education and amenities. But a new bill moving through the Hawaiʻi State Legislature would challenge that assumption.
Senate Bill 2602 would require that any unused money from the University of Hawaiʻi’s tuition and fees special fund at the end of each fiscal year would be transferred to the state’s general fund. This means that money paid by students could be redirected to support other state needs.
As lawmakers warn of economic uncertainty and reduced federal support, the proposal has sparked pushback from university officials who say the change could significantly disrupt campus operations.
Broader Context
Bill author Sen. Donovan Dela Cruz said the measure is part of a larger strategy to prepare Hawaiʻi’s finances for the future.
“We’re looking at all options and all different types of approaches to making sure that we have a balanced financial plan for the next six years,” Dela Cruz said. “Everything has to be on the table.”
He emphasized that the state is not dealing with a single issue, but a wide range of financial pressures.
“When you talk about the financial plan, we’re looking at income taxes, that’s GEP, visitor spending, different special funds, vacancies, programs that were once federally funded and may need to be supplanted,” he said. “I mean, there’s a lot of different things we’re trying to manage.”
Dela Cruz added that the state must ensure support for vulnerable communities as federal assistance becomes less certain.
“We have to ensure that Hawaiʻi’s most needy are going to also be given services so that we don’t exacerbate the homeless situation or all these other different issues that once the feds took care of, but they no longer are,” he said.
UH Leadership Opposes The Bill
In formal testimony to the Senate Committee on Ways and Means, UH President Wendy Hensel and UH Vice President for Budget and Finance and Chief Financial Officer Luis Salaveria opposed the bill, warning it would be a permanent structural change to UH’s funding model, making it harder to sustain operations, maintain infrastructure, and meet systemwide goals.
In their testimony, they said that redirecting tuition and fee revenues to the state general fund would undermine the university’s ability to plan financially and invest in long-term priorities. They emphasized that these funds are paid by students and are intended to support those students, not to fill state budget gaps.
They also pointed to growing uncertainty from federal policy changes and the loss of grant funding, arguing that this is exactly the time UH needs to retain financial flexibility, not lose it.
“It’s paid by the students and it should go back into the university’s operations,” said Luis Salaveria. Salaveria explained that under the current system, all tuition and fee revenue stays within UH.
“So any revenues that are collected, and the expenditures are basically handled within the university system,” he said. “We don’t lapse any money to the credit of the general fund and it remains for the university to be able to use to further our strategic initiatives, as well as make sure that we can defray some of our operational costs.”
Salaveria also noted that these reserves play a role in maintaining the university’s financial standing, explaining that they help UH sustain its credit rating and keep borrowing costs lower for major projects, such student housing and other infrastructure projects.
SB 2602 has already advanced through committee with amendments, signaling continued momentum at the Legislature. If enacted, it would mark a major shift in how UH manages its finances, removing its ability to carry over unused funds and redirecting them to the state.
Financial Safety Net
While SB 2602 targets what lawmakers describe as excess funds, UH officials say those balances are anything but extra.
“The tuition and fees special fund does provide a degree of cushion for the university operations,” Salaveria said. UH relies on multiple funding sources, including state appropriations and tuition revenue, to operate what Salaveria described as roughly a $1.2 billion system.
“The university gets over $600 million a year from the state,” he said. “But then we also get these big infusions of tuition revenue and what that does, it helps us defray the cost of operating the university system.”
He said that those reserves help UH prepare for financial shocks.
“We try to maintain what we call reserves, in the event that there is any tuition revenue that goes down significantly,” he said. “Or the state of Hawaiʻi is going through major fiscal hardships.”
The fund supports a wide range of needs, from salaries to future investments.
“It pays salaries, it pays operating costs, you name it,” he said. “Some of the strategic initiatives, investments into AI, facility type investments, upgrading and keeping our facilities modernized.”
Stability vs. State Needs
Dela Cruz acknowledged that UH wants to retain their funding, but said lawmakers must consider the entire state budget.
“It’s one thing for a lot of departments to say, I need that money,” he said. “But if you check the auditor’s report, we have hundreds of millions in special funds.”
He added that the state is trying to balance competing priorities.
“If we want to provide that tax relief, it’s going to be close to $2 billion that we have to make sure we can find,” he said.
At the same time, he called for more transparency from UH.
“They could have valid concerns,” he said, “but I think what’s really important is the leadership actually shows the details of their financial plan so that we were able to take a better assessment.”
Despite opposing the bill, Salaveria acknowledged the difficulty lawmakers face.
“Dela Cruz is dealing with the entire state,” he said. “It’s not just the university, but the Department of Health, Department of Education, it’s a big responsibility.” Showing how difficult it can be to manage resources across many departments. “Yet the tuition and fees special fund represents the most direct contribution that a student will make toward their university,” Salaveria said. “Maintaining those funds is critical.”
