mott community college

Mott Community College

Board of Trustees Committee of the Whole

MeetingJune 19, 2006

BUDGET RESOLUTIONS

2

RELEVANT BOARD POLICIES:

3100 Budget Adoption. “Budget revisions will be brought forward for Board action as necessary, but not less than twice per year in January and June.”

3920,3930 Financial Stability, Fiscal Reserves. “The College will designate and set aside appropriate fund reserves to support plans for long-term capital and operating commitments.”

5100 Compensation Philosophy. “The Board has determined based on long-term budget projections, and other related budget data, that total compensation/ benefits should not exceed 77% of the total operating budget.”

3

FINAL FY05-06 AMENDED BUDGET

4

FINAL FY05-06 AMENDED BUDGETREVENUES:

•Tuition & Fees -$411 thousand, -1.8% adj. – credit enrollment up; noncredit volume down

•Property Taxes +127 thousand – actuals to date

•Ballenger Trust -$65 thousand – market for 2Q 2006 is down

•Other Revenue +$300 thousand – investment income up due to better interest rates, cash flow management changes

=Overall downward amendment to revenue is -$49 thousand

-0.1% change from January 2006 amendment

5


EXPENDITURES:

• Amended downward by $86 thousand, -0.1% change:

•Salaries & Wages, and Fringe Benefits --savings on vacant budgeted positions (salary lag, elimination of Lapeer Corporate Services positions; hold on 50% of vacancies)

•Contracted Services --savings in several areas, grant offsets, noncredit operations down

•Rent, Utilities & Insurance --electricity, gas rate increases

•Operations/Communications --savings in loan & Pell pro-rata refunds, bad debt, legal settlements

•Transfers --add’l contribution to Maint/Repl. Fund to help 06-07

•Capital Outlay --timing of planned capital projects

6


NET RESULTS OF AMENDMENT:NET RESULTS OF AMENDMENT:

FUND BALANCE : $37K additional

0.8% Improvement over January Amended Budget

7


GENERAL FUND BUDGET (fund 01)

Target = 5% - 10% of Expenditure budget

04-05 05-06 05-06ACTUAL AMEND #1 AMEND #2

Revenues 61,136,513$ 62,873,587$ 62,824,497$ Expenditures 60,728,794 62,723,514 62,636,989

Excess Revenues Over Expenditures 407,719$ 150,073$ 187,508$

Fund Balance - Beginning 4,184,340 4,592,059 4,592,059 Fund Balance - Ending 4,592,059$ 4,742,132$ 4,779,567$

Fund Balance Percent 7.56% 7.56% 7.63%

8

PROPOSED FY06-07 BUDGET

9


No Change in Budget Principles:

1. Budget must support Strategic Plans

2. Minimize/Offset Impact on Students

3. Avoid Overall Reduction in Staffing

4. Maintain Fund Balance/Reserves

10

Jan.’06: Initial Forecast for FY06-07

• Key Budget Issues:

a) Employee Benefits cost increase: ($1.1M)

b) Salaries & Wages contracted increases:($1.8M)

c) Other expenses projected increase: ($2.1M)

d) Projected Total Revenue Increase: +$2.0M

= -$3.0M

11

Jan’06 : Initial Forecast for 06-07

This forecast shows -$3.0M projected initially for FY06-07, and -$19M at the end of FY11-12, before steps were taken to balance 06-07 and future budgets. It shows what would happen if current trends were to continue. MCC must implement a balanced budget each year.

Forecasts:>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Amend #1

05-06 06-07 07-08 08-09 09-10 10-11 11-12

Revenues: 62,873,587 64,913,969 67,287,933 69,755,474 72,320,446 74,986,864 77,758,916

Expenditures: 62,723,514 67,949,983 70,402,747 73,352,994 76,439,083 79,667,598 83,045,457

Surplus/(Deficit): 150,073 (3,036,013) (3,114,813) (3,597,520) (4,118,637) (4,680,733) (5,286,541)

Fund Balance: 4,742,132 1,706,119 (1,408,694) (5,006,214) (9,124,852) (13,805,585) (19,092,126)

12


BUDGET BALANCING STEPS- REVENUES

Revenue Enhancement will cover 14% of $3 million deficit:

• Property Tax Revenue – Stronger property value growth is the main difference in revenues from January to June forecast

•4.9% Tuition & Fee Rate Increase offset by reduction in non-credit projections

• Slight improvements in State Aid, Others

13


KEY ASSUMPTIONS - REVENUES

• TUITION & FEES

• Credit side enrollment expected increase of 1%

• 4.9% rate increases for credit side

• Non-credit tuition is budgeted at $2.7 million, increased by 6.6% from expected FY05-06.

14



•PROPERTY TAXES

• Up $1.1 million from 05-06 due to a 6% property value increase.

• Millage Rate is rolled back, from 1.9907 to 1.9896

15



•STATE AID – (PENDING)

• Total net +1% increase as headed to Conference Committee (SB1082)

• Shown by state as +1.8% in base; net increase is less because of a one-time restoration payment in FY05-06.

•Conference Committee meeting not yet scheduled…

16

Data as of June 2006; Source – MCC Audited Financial Statements and Budgets

MCC State Appropriations Revenue

14,183,727

14,571,38614,429,78514,894,743

16,133,077

15,848,900

16,369,072

15,715,623

13,000,000

13,500,000

14,000,000

14,500,000

15,000,000

15,500,000

16,000,000

16,500,000

17,000,000

1999

-200

0

2000

-200

1

2001

-200

2

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6C

urre

nt

2006

-200

7P

roje

cted

Source: MCC Audited financial statements and budgets (as of June 2006)

17

KEY ASSUMPTIONS - REVENUE

• OTHER REVENUE

• Projected decrease of 3.7%, including Ballenger Trust income, unrestricted grants and donations, and facilities rentals.

Overall Revenues for 06-07 are projected to increase by 4% from the final 05-06 budget, better than the 2.8% increase we expect this year.


18

GENERAL FUND REVENUE SOURCES

35.3% 36.7% 37.4%

34.3% 35.5% 35.9%

24.4% 23.0% 22.3%

4.8% 3.4% 3.3%

0%5%

10%15%20%25%30%35%40%45%50%55%60%65%70%75%80%85%90%95%

100%

FY04-05 Actual FY05-06 Amended FY06-07 Proposed

Tuition and Fees Property Taxes State Appropriations All Others

19


BUDGET BALANCING STEPS- EXPENDITURES:

Cost Reductions of $2.6M will cover 86% of the $3 million deficit

•Holds on ½ of vacant positions

•TAP lower by 1.5 FTE

•2.4% cut in non-salary line items

•Early transfer to Maint/Replacement Fund made in 05-06

20


KEY ASSUMPTIONS-- EXPENDITURES:

Overall increase of $2.4 million or 3.8% over the final 05-06 budget.

• Salaries & Wages: +5.5% includes step and pay scale increases (compared to +5.2% the prior year)

•Fringe Benefits: +6.7% to account for health insurance and retirement contribution rate increases

Total compensation = 77%, as required by policy

•Non-Salary: -2.4% due to necessary spending restraint

21

General Fund ExpendituresProposed 2006-07 Budget:

Transfers, 3.1%

Bond Retirements, 0.0%

Capital Outlay, 0.3%Operations/Comm., 6.2%

Utilities and Insurance, 4.6%

Materials and Supplies, 2.6%

Facilities Rent, 0.2%

Contracted Services, 6.0%

Fringe Benefits, 22.9%

Salaries and Wages, 54.2%

22


SUMMARY--BUDGET BALANCING STEPS:1. 4.9% Credit Tuition & Fee Increase2. 6.6% Increase in non-credit training revenue

3. Continue holds on filling ½ of 50 vacant positions

4. TAP lower by 1.5 FTE

5. 2% reduction in non-salary lines

6. Fund 06-07 planned contribution for Maintenance/ Replacement with 05-06 savings

23

86% of projected deficit: Cost cuts, $2.6M

14% of projected deficit: Revenue enhancements, $0.4M


24


GENERAL FUND BUDGET (fund 01)

Target = 5% - 10% of Expenditure budget

04-05 05-06 06-07ACTUAL AMEND #2 PROPOSED

Revenues 61,136,513$ 62,824,497$ 65,347,665$ Expenditures 60,728,794 62,636,989 65,037,447

Excess Revenues Over Expenditures 407,719$ 187,508$ 310,218$

Fund Balance - Beginning 4,184,340 4,592,059 4,779,567 Fund Balance - Ending 4,592,059$ 4,779,567$ 5,089,785$

Fund Balance Percent 7.56% 7.63% 7.83%

25


Planned Results:

Balanced budget, with small surplus in general fund

Continued commitment from General Fund to cover capital needs in maintenance & replacement fund

No new employee FTEs; No Reduction in Force

Short-term savings achieved through position vacancies

Intentional constraint on non-salary (discretionary) spending base

Strategic Goals (AQIP process) and 7-year impact considered throughout process

26

PROPOSED “OTHER FUNDS” FY06-07 BUDGETS

Main Point is Impact on Operating Budget:

•Designated Fund—$1.8 million budget

(Scholarships, Student Enrichment, Copy Machines, Paid Parking, Designated Technology Fee)•$ 347,000 funded with General Fund budget (expense)

•Auxiliary Enterprise Fund--$709,000 budget

(Catering, Day Care, Vending, Bookstore, Computer Lab Printing, Lapeer Campus Auxiliary)

•$351,900 net “profit” supplements General Fund (revenue)

27

PROPOSED “OTHER FUNDS” FY06-07 BUDGETS

Main Point is Impact on Operating Budget:

•Debt Retirement Fund—no General Fund impact•Millage Rate stays same, at 0.69 mill; Property taxes restricted

•Capital Funds—repair, upgrade of buildings, equipment, technology, vehicles ($100 million in net value)

•Instructional Technology Fee = $1 Million per year

•$1.8 million per year planned transfer from General Fund still needed ; 06-07 transfer lowered to $1.2 million because of early transfer in 05-06

•$15 million in Series 2006 Bond Proceeds will fund projects through FY06-07 and into FY07-08

28

STRATEGIC INITIATIVES FOR 06-07: LINKED TO BUDGET PROCESS and to new AQIP METHODOLOGY

29

STRATEGIC INITIATIVES FOR 06-07

• Allocation for 06-07 is $650,000, including both AQIP and department level projects

•Department/Division level planning produces requests for annual funding

•Top Three AQIPAction Projects :

1) Provide on-going, cross-functional training to develop all employees' professional skills.

2) Cooperative education and experiential learning.

3) Advising for degree completion and transfer students.

30

7-YEAR FORECAST

31

What changed from January 2006 to Now?• Property Taxes -- Higher property values for

05-06 and 06-07 added $2.5 million over 7 years• State Aid – Added $0.9 million over 7 years,

based on 05-06 supplemental restoration and 1% increase for 06-07 not expected

• Tuition, Fees, Other Revenues– Subtracted $0.7 million from forecast over 7

years based on 05-06 and 06-07 projections, mainly noncredit impact

=REVENUES: $2.7 M higher than Jan’06 forecast

7-YEAR FORECAST

32

What changed from January 2006 to Now?

• Salaries & Fringes– $9.3 million (2.4%) higher over 7 years:

MPSERS rate increase expected to be higher than previously forecast; assumes all vacant positions filled in future years

• Non-Salary Lines– Decrease of $3.3 million (0.6%) over 7

years: 05-06 and 06-07 cuts factored in

EXPENDITURES = $6.0 million higher over 7 years than Jan’06 forecast

7-YEAR FORECAST

33

• Bottom Line– Current Forecast is -$22 Million at end of

FY11-12– This is $3 Million worse than Jan’06 Forecast– The Forecast still assumes 0.65 Mill Voted

Operating Millage is renewed for FY08-09 and beyond

– Property Value growth continues to makes significant improvement in revenue base

– Short-term savings and flexibility continues to be key

– Long-term strategy of reducing compensation costs continues as focus on expense side

7-YEAR FORECAST

34

7-YEAR FORECASTEmployee “Pro Rata” Contributions to date:

FY03-04 FY04-05 FY05-06 FY06-07 TOTALExempt 0.0% 1.8% 1.8% 3.6%Faculty 0.0% 2.4% 2.4%M&O 0.0% 1.6% 1.8% 3.4%Pro Tech 0.0% 2.4% 2.0% 4.4%PSO 0.0% 1.5% 1.5% 3.0%Secretarial 0.0% 1.8% 1.8% 3.6%S&M 0.0% 1.0% 1.4% 2.4%

Average Annual Increases for Negotiated Periods 1.1%

6 Groups have met “pro rata” request with 3-year contracts; Faculty met over half of request with 2-year agreement expiring August 2006.

35

7-YEAR OPERATING FORECAST(in millions)

Amended Proposed Forecasts:>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Budget Budget

05-06 06-07 07-08 08-09 09-10 10-11 11-12

Revenues

Tuition and Fees 23.1$ 24.4$ 25.5$ 26.6$ 27.8$ 29.1$ 30.4$ Property Taxes 22.3 23.4 24.3 25.3 26.3 27.4 28.5 State Appropriations 14.4 14.6 14.9 15.2 15.5 15.8 16.1 All Others 3.0 2.9 3.0 3.0 3.1 3.1 3.2

Total Revenue: 59.8$ 65.4$ 67.8$ 70.3$ 72.8$ 75.5$ 78.3$

Revenue Increases: 2.8% 4.0% 3.6% 3.7% 3.7% 3.7% 3.7%

Expenditures

Salaries 33.4$ 35.2$ 38.6$ 40.1$ 41.7$ 43.4$ 45.2$ Fringe Benefits 14.0 14.9 16.2 17.7 19.3 21.0 22.9

All Others 15.3 14.9 16.1 16.6 17.1 17.6 18.1

Total Expenditures: 15.3$ 65.0$ 70.9$ 74.4$ 78.1$ 82.1$ 86.2$

Expend. Increases: 3.1% 3.8% 9.1% 4.9% 5.0% 5.0% 5.0%

Surplus/(Deficit): 44.5 0.4 (3.2) (4.2) (5.3) (6.5) (7.9)

Fund Balance - End: 4.6$ 5.0$ 1.9$ (2.3)$ (7.6)$ (14.1)$ (22.0)$

CAPITAL FUNDING

37

Capital FundingFunding Sources :

$45 M Voted Bond Authority Passed June 2004

$15 M Series 2004 spent by June 30, 2006$15 M Series 2006 proceeds$15 M Remaining voted authority$13 M Commitment of Operating Funds$ 7 M projected from Student Tech. Fees$50 M Secured from now through 2011$4 M pending approval from State Capital Outlay

Future needs will require ongoing deferral and continued requests for state capital outlay assistance

38

FUTURE OUTLOOK: Next Steps and Key Issues for Consideration

39

FUTURE OUTLOOK: Key Issues

1. 0.65 Operating Millage will need to be renewed/increased before expiration at end of 2007-08

2. Reducing Compensation costs – Long-term budget challenge remains to control rising expenditure levels

3. Academic and Service Operations continue to be studied for strategic fit; efficiency; feasibility

4. State’s budget – diminishing proportionate support

5. 2007-2012 Strategic Planning through AQIP requires continuous improvement methods

40

Next Board Actions—

• FY05-06 Audit Acceptance: – Oct’06

• FY06-07 Budget Amendment:– Winter`07

FY06-07 BUDGET

Questions or Comments?For More Information:

Details are Provided with Board Resolutions 1.65 and 1.67

MCC Board of Trustees Committee of the Whole Meeting

June 19, 2006

Kelli Sproule, Chief Financial Officer

810-762-0525, [email protected]

mott community college

Documents

budget principles

balanced budget

budget adoption

budget revisions

total operating budget

longterm budget projections

amended budgetfinal

key budget issues