When the University of Hawai'i athletic department closes the books on the fiscal year June 30, it will be with the expectation of ending the heaviest financial drain in its history.

Four consecutive years of deficits have saddled UH athletics with $4.6 million in accumulated debt, according to an independent auditors report, money that needed to be made up by school general funds.

Athletic director Herman Frazier, on whose watch the last three deficit years have come, has pledged in a UH Board of Regents-mandated recovery plan to have the 19-sport department, which operates on a $20 million budget, balance its budget this year and pay off more than $1 million in loans by 2007.

Frazier has declined to be specific about where the department will come in this year but said through spokeswoman Lois Manin, "The figure (will) be somewhere between zero and wherever it lands."

UH officials say it is unlikely figures will be released until after the UH Board of Regents receives the independent audit.

While the latest stage of the five-year plan has come with the blessing of the UH administration and Board of Regents, it is not without criticism elsewhere on campus.

"The athletic department budget deficit is quite simply an outrage," said Noel J. Kent, a professor of Ethnic Studies and member of the UH Manoa Faculty Senate. "At a time when our students are being slammed with double-digit tuition increases each year and our classrooms, dormitories and other facilities are shameful, the athletic department is allowed to accumulate larger and larger deficits each year."

GOING, GOING GONE

Kent, a UH faculty member for 33 years, said, "Despite what the athletic department says, these resources will never be paid back. They are permanently lost to the UH's real mission, which is to educate our young people and serve our communities."

Kent said, "While departments cannot hire enough faculty to provide students with classes they need a ...coach like June Jones draws an enormously inflated salary. All of this reflects on the ability of president David McClain to govern our university in a sensible way."

Jones, the UH football coach, has an annual salary of $800,016, half of which the school says is paid through private donations.

UH Regents chairwoman Kitty Lagareta said the board has confidence in Frazier's recovery plan. "Herman hasn't gone out on a big spending spree," Lagareta said, "so I think we're still good."

It isn't just some faculty that are wary of the deficit. When Frazier had an assistant ask the board of 'Ahahui Koa Anuenue, the UH booster club umbrella organization, for an additional $50,000 loan Tuesday, people familiar with the meeting say leaders were upset. Frazier's representative was reportedly reminded it wasn't the first time athletics has come to the group, whose primary function is underwriting scholarships, for a loan and was warned it would be the last.

SUPPORTING ATHLETICS

UH President David McClain has said on several occasions that while he leaves the choice of how to distribute general funds up to the campus chancellors, he supports helping to underwrite athletics until they can be made self-sufficient.

In granting a loan and covering deficits, former chancellor Peter Englert said he gave the athletic department latitude rarely accorded "other units" on campus, in part because athletics provides "exposure that helps to give an image to the university."

Denise Konan, who has been the Manoa campus chancellor for about a year, said, "I'm very supportive of the concept of using general funds and student tuition funds to support athletics at the university. The athletic program, for us, really models much of the best of what we are as an institution. Its focus on competition; on being part of a team, on really performing, striving for excellence, something that embodies the best of the university and, at the same time, these are students."

McClain has said he believes "it is the case that many universities try to have their athletic departments be completely on their own bottom (line). But very few succeed. I don't know the hard numbers, but my impression is about a fifth of Division I-A programs are able to make it completely on their own bottom."

FALLOUT FROM SEPT. 11

Until the Sept. 11, 2001 terrorist attacks on the United States, the UH athletic department balanced the books on its own accord as ordered by a succession of administrations. Surpluses were deposited in a so-called athletic department "rainy day" account mandated by the legislature from which the department paid off any subsequent deficits or emergency purchases.

For example, a $1.3 million deficit resulting from the 0-12 1998 football season was covered by the "rainy day" account. It was replenished by funds from the $915,000 surplus the following year.

But the financial hit taken on travel and loss of contests in the wake of Sept. 11, along with needs elsewhere on campus, resulted in a $1.9 million deficit that reduced the account to less than $100,000.

Since then, a succession of deficits — $2.47 million (in 2003), $544,900 (2004) and $92,785 (2005) — have raised the accumulated debt.

To narrow its deficits, the audit said the department, "... has been forced to adopt deficit spending policies, including the use of advance ticket sales (receipts), loans from the university and working capital advances."

In 2003, the chancellor's office granted athletics an interest-free $1 million loan that was to have been paid back in three installments. But the auditor's report said "due to liquidity issues" repayment has been deferred.

A year ago, James P. Hasselman, audit partner at PricewaterhouseCoopers, characterized "the department's situation as very fragile," and the audit report recommended, "that the university administration play an active role in the development and implementation of the plan and closely monitor Manoa athletics' progress."

Since then, UH has raised fees on the premiums it charges season-ticket holders to sit in the most desirable locations at its events and negotiated new radio and television deals. It has also improved corporate sponsorships to $2.4 million this year, up from $899,000 three years ago.

Still, in each of the past two years, Aloha Stadium said it has had to wait for UH to make late payment on its rent and expenses. Stadium officials said they did not receive the final $341,000 that was owed from the 2005 season until after stadium authority chairman Kevin Chong Kee met with McClain in February. In 2005, stadium officials said they had to lay off 49 part-time workers until UH paid off the final $270,000 of its 2004 charges more than four months after the end of the season.

MAKING PROGRESS

Getting the athletic department's finances in order comes with incentive for Frazier, who last year was given a new five-year contract and salary raise to $250,000. A clause in that contract qualifies him for a $15,000 bonus "... if the athletics program operates with a net increase of assets for two consecutive years and the athletics program repays in full the $1 million note payable to the university."

Apart from funds to underwrite the deficit, the athletic department annually receives $1.36 million in state money, much of it for salaries and maintenance and operation of facilities in the lower campus, where the athletic department is located.

Frazier came to UH in 2002 from Alabama-Birmingham, his first job as athletic director. UAB historically has run at a deficit and the tab was $7.5 million when Frazier left after less than two years. Oliver Robinson, a former UAB basketball star and Alabama state representative, said Frazier inherited the deficit and was in the process of paring it down when he left for Hawai'i.

At UH, Konan said, "I'd say that I've been very impressed with how Herman has moved the athletics program into a more fiscally responsible position."

Reach Ferd Lewis at flewis@honoluluadvertiser.com.