sonoma county junior college district

SONOMA COUNTY JUNIOR COLLEGE DISTRICT

2013-14 BUDGET FORUMCOPING WITH THE STATE’S BUDGET CRISIS

Presented by Doug RobertsVice President, Business Services

Understanding Community College Funding

To understand the effect of the state’s budget on community colleges … you need to understand community college funding.

Some of the District’s revenues come with certain obligations … and these are referred to as “Restricted Funds”…

It is the “Unrestricted General Fund” (UGF) under which the primary mission of the District is conducted.

Restricted Funds

As stated, the District receives funds from a number of sources …

However, much of that money is “restricted” and can only be spent for restricted purposes.

To account for the various sources of funding, and their associated expenditures, the District has established specific “Funds”

Restricted Funds

Some of the District’s Restricted Funds are:

Measure A – General Obligation Bond FundCapital Projects Fund1972 Bond Redemption FundParking FundCollege FarmStudent Representation Fee Fund

General Fund

Even within the District’s “General Fund” … there is a subset of revenue that can only be used for the purposes for which it was received

Examples of this are: State categorical funds (EOPS, Matriculation, etc.)

Grants (Child Development, Workforce Innovation)

Student Health Fees

These funds are held in the … “Restricted General Fund”

Unrestricted General Fund

This is the fund under which the District carries out it’s primary mission.

Revenue-wise approximately 45% of the District’s revenue comes from “local sources.”

The primary sources are ...

Property Taxes and Student Fees.

The remaining 55% comes from State funding.

Components of Unrestricted Revenue

Total General Apportionment* $ 88,331,031 90.7%

Lottery Funding* 2,322,885 2.4%

Materials & Other Course Fees 1,386,756 1.4%

Non-resident Tuition & Fees 1,068,084 1.1%

Other State & Fed Revenues 3,287,962 3.4%

Other Local Revenues 1,016,442 1.0%

Total Revenue $ 97,413,160

* Revenue directly tied to reported enrollment (or ... “FTES”)

General Apportionment

Derived from the SB 361 funding formula … which has two basic components

1) “Basic Allocation” … is based on the number and FTES- size of each of the college’s sites.

2) “Workload Measure” …is based on the type and number of reported FTES*

* (FTES = Full Time Equivalent Student = 525 Student Contact Hours)

SB 361 Funding ModelSingle College

College Allocation $5.5M ≥ 20,000 FTES $4.4M ≥ 10,000 FTES $3.3M < 10,000 FTES

Per Center Allocation $1.11M ≥ 1,000 FTES $0.83M ≥ 750 FTES* $0.55M ≥ 500 FTES* $0.28M ≥ 250 FTES* $0.14M < 250 FTES** Only for “Grandfathered Centers

FTES Funding Rate

$4565 / Credit FTES

$3232 / CDCP FTES

$2745 / Non-Cr FTES

Rural District Allocation $0.55M

SB 361 Funding ModelMulti College

Per College Allocation $4.4M ≥ 20,000 FTES $3.9M ≥ 10,000 FTES $3.3M < 10,000 FTES

Per Center Allocation $1.11M ≥ 1,000 FTES $0.83M ≥ 750 FTES* $0.55M ≥ 500 FTES* $0.28M ≥ 250 FTES* $0.14M < 250 FTES** Only for “Grandfathered Centers

FTES Funding Rate

$4565 / Credit FTES

$3232 / CDCP FTES

$2745 / Non-Cr FTES

Rural District Allocation $0.55M


The Total General Apportionment to be received in any one year is normally calculated as follows: Base Revenue (which should be the prior year’s total revenue)

+ COLA +/- Growth/Decline + Stability Funding (offsets 1st year of decline)

- Deficit Funding = Total General Apportionment


And ... the way that the state calculates the amount of state-funding needed by the Community College System is as follows:

Total Calculated Apportionment

- Estimated Property Tax Collections (state-wide)

- Estimated Enrollment Fees (state-wide)

= Required State Funding (a fixed amount)

So, what happens if the fixed state amount isn’t enough? ...

DEFICIT FUNDING ! (i.e., funding at less than 100 cents on the dollar)


So, how does a District increase its revenues? Given that apportionment revenue is roughly

90% of all revenue sources, and, given the apportion formula…

Base Revenue+ COLA+/- Growth/Decline+ Stability Funding+ Deficit Funding = Total General Apportionment

COLA and Growth are the primary ways to significantly increase a district’s revenues ...

(... and both of these are controlled by the State)

Historic COLA Increases

Historic Funded FTES

Stability

A mechanism of community college funding (T-5, 58776)

It allows a district to … RECEIVE … “Full Base Funding” … in a year in which the district did not report sufficient FTES to … EARN such funding.

Prior to SB 361, the stability mechanism allowed a district 3 years to restore to base funding levels (as long as it recovered 1/3 of the original loss each year) without suffering any loss of apportionment funding.

Since SB 361, a district must restore FTES by the following year or risk losing apportionment revenues.

Workload Reduction

Another mechanism of community college funding

Or, rather … Funding Reduction

Under Workload Reduction … the State does not reduce its “Per-FTES-Funding-Rate …

It just reduces the number of FTES that the State will fund!

SRJC received workload reductions in 2009-10 and 2011-12

… and if Proposition 30 had not passed, another $6M in workload reduction would have been received for 2012-13!

Budgeting As soon as “total resources” are calculated, the District can

begin budgeting expenditures (Total Resources = Beginning Fund Balance + Current Year Revenues)

From the total resources available, the District makes budgetary allocations to fund the following:

Full-time Employee Salaries & Benefits

Part-time Faculty Salaries & Benefits

Retiree Health Benefits

Operational Expenses * * (includes expenditures for: supplies, equipment, contracted services, leases,

insurance, utilities, classified & student hourly staff, etc.)

Fund Balance / Reserve (State Minimum is 5% of expenditures)

If total District resources do not cover total uses, then expenditure-cuts are required.

Components of Unrestricted Expenditures

Faculty Salaries & Benefits* $ 47,392,536 48.5%

Classified Salaries & Benefits* 23,830,020 24.4%

Management Salaries & Benefits* 10,546,728 10.8%

Student & STNC Salary & Benefits* 1,931,271 2.0%

Utilities 3,229,665 3.3%

Leases & Contracts 2,497,199 2.6%

Insurance, Legal & Audit 1,734,832 1.8%

Fee Based Course Expenditures 1,399,290 1.4%

Other 4/5/6/7 Expenses & Transfers 5,141,809 5.2%

Total Expenditures $ 97,703,350

* Salaries & Benefits comprise 85.7% of total expenditures

Ending Fund Balance

The Budgeting Challenge

How does the District keep abreast of annual expenditure increases such as …

Healthcare Premium Increases

State Increases to Employer Salary Expense (STRS & PERS)

Contractual Salary Obligations

Utility Rate Increases

Insurance Premium Increases

Postage Rate Increases

Increases in the Cost of Goods & Services (due to inflation)

… when revenue increases are not keeping pace … or worse … as we’ve experienced …. when they’ve been cut!

SO … WHERE ARE WE WITH REGARDS TO 2013-14?

The Governor’s May Budget for 2013-14

$226.9M in increased apportionment funding. $87.5 M for COLA (1.57%)

$89.4 M for growth (1.63%)$50.0 M for the Student Success and Support Program

$179M to buy down existing deferrals (in 2012-13).• This would lower the total year over year deferrals from $801M to $622M.

$64.5M to buy down deferrals (in 2013-14).• This would lower the total year over year deferrals from $622 to $557.5 M.


Adult Education for K12 and CCCs.

Maintains status quo for existing K-12 and Community College Adult Education for 2 Years.

$30 M to be spent over the next two years to build consortia between schools and CCC’s.

Plan is for $500 M to be appropriated in 2015-16 to operate the consortia with at least $350 M to current providers.


Withdraw of any changes for Apprenticeship.

• However, the funds for Apprenticeship is removed from Categorical “Flexibility”.

Rescission of a Change to Community College Funding. • At least for 2013-14.

• As part of the 2014-15 Budget, a broad-based framework is to be built to improve student success and establish appropriate incentives to encourage course and degree completion, as well as cost effectiveness


The January Proposed 90-unit cap for students

(Withdrawn).

Alter Part B BOG fee waivers applications

(Moved to 2014-15).

• Provides students one academic term to collect all documentation

necessary to validate financial need and demonstrate emancipation..

Budgetary Process

• The Governor came out with his May Revise on May 14th.

• Of course, the Legislature will (again) have their opportunities to weigh in on the revised budget, and

• By Statute, the Legislature should be providing the Governor a budget by June 15th.

• So, there is still a long way to go, before the actual state budget … and its impact on Community Colleges … is known.

What we do Know

This is a “positive” budget … (first one in a while)

Current “guesstimations” are that the District will receive approximately $3.6 Million in “additional” funding.

However … this is not enough to overcome the District’s current $6 Million “structural deficit.”

What we Anticipate

A 9% ~ 10% increase in Healthcare premiums … at a cost of roughly $800,000.

An increase in the PERS rate … from 11.42% to 13.3% … at a cost of roughly $440,000.

Step increases at a cost of roughly $480,000.

These cost-increases ($1.7M) seriously erode the ($3.6M) benefit of increased revenue in 2013-14.

… and hampers our ability to decrease our structural deficit through new state revenues.

So how did we get to a six million dollar “structural deficit?”

Simply put …

… it was a series of State-inflicted revenue reductions …

… compounded by … (primarily) … external cost-increases.

The 2012-13 $6 Million Structural Deficit

Since 2008-09, Community Colleges have been hit with a series of “workload reductions.”

In a “workload reduction,” the State does not reduce the funding a community colleges receives on an FTES* basis …

…it just reduces the number of FTES* that will be funded.

(*FTES stands for “Full Time Equivalent Student” which is equal to 525 student contact hours)


Revenue Reductions

By 2011-12 … Apportionment Funding (related to FTES) … wound up being over $10 million less than the District’s State-calculated funding for 2008-09.

Lottery funding… (which is also related to reported FTES) … is now “off” by over $300,000.

Other “on-going” apportionment reductions (principally to

the apprenticeship and adjunct programs) have added an additional $1 million to the list of State-inflicted reductions.


Expenditure Increases

Compounding the District’s fiscal situation has been a four-year, $1.9 million increase in the cost of health benefits

The California Public Employees Retirement System (PERS) has annually increased the employer’s rate … (from 9.428% at the end of 2008-09 to 11.42% for 2012-13) … adding another … $500,000 (plus) to District expenses.

And, due to the State’s unprecedented rate of unemployment, the District’s cost of unemployment insurance has gone up by over $500,000 as well.


District Action

Per the wishes of the Board … despite the losses in revenue … there have been no layoffs of regular/full-time employees.

Because “workload reductions” create the potential for unfunded FTES, the District has worked to balance total course offerings* to that level that serves the FTES that the State will fund.

* This has lead to a reduction in course offerings … and the expenses related to offering those courses.)


District Action (continued)

The District has worked with employee groups to reduce the District cost of employee health benefits

Since 2009-10, the District has “re-engineered” over 50 regular, reducing the need for several regular positions and eliminating the need for over 125 STNC positions.

Several retirement-positions remain unfilled, while others have seen lengthy a delays in replacement.

And, (annually), the District has worked with its employee groups, AFA, SEIU and the Management Team, on … one-year concession-agreements … to help ends meet.


Considering all of the revenue losses inflicted on the District by the State …

And … adding to that … the increases in expenditures that are beyond the District’s control …

These (revenue & expenditure) factors have inflicted a $14 M “hit” to the District’s Bottom Line.

And, yet, the District has managed to weather the fiscal storm … So far …

But … We still have a $6 million structural deficit!


Although Proposition 30 was passed by the voters last November…

And, although it is being credited with the additional revenues recently seen by the State,

Proposition 30 did nothing to enhance the revenues that the District will receive in 2012-13.

It did, however, avert an additional state-cut, which would have caused SRJC to lose an additional $6.3 M … (if Prop 30 had failed).

But, What about the Prop 30 Money?

The increase in State revenues per the Governor’s May Revise is hopefully a harbinger of the future.

But, keep in mind … the manner in which new money is received (COLA, Growth) comes with its own set of associated expenses.

So, an increase in funding …(by itself) … does not translate into a dollar-for-dollar reduction to the structural deficit.

What about the New Money in 2013-14?

Then there is the “offsetting effect” of … new expenses … on the ability to reduce the structural deficit by … new money.

When you take the projected new money for 2013-14 … $3.6M (from an earlier slide)…

And, reduce that by the $1.7M in new expenses

The net-effect is $1.9M…

Which would still leave the District with a $4.1M structural imbalance (before the effects of any negotiations)

What about the New Money in 2013-14?

What, me worry?

What can we Do?

The District’s current problem is basically a revenue problem.

The State did not create the District’s structural imbalance over a one year period.

And, given the State’s slow economic recovery … it’ll undoubtedly take more than one year for the State to restore the District to prior funding.

Looking at Data

The District is currently looking at its revenues and expenditures, and comparing them to that of our peer-districts,^ to help understand our situation & identify improvements.

(^ Single-college districts whose FTES are within 1/3 that of SRJC. The other nine districts are: Cerritos, El Camino, Glendale, Long Beach, Palomar, Pasadena, San Joaquin Delta, Santa Barbara, and Santa Monica)

Some interesting factoids have emerged that require additional scrutiny, such as: The District ranks 66th when it comes to apportionment funding per FTES The District ranks 50th when it comes to Total UGF funding per FTES The District ranks 39th when it comes to FTES produced per FTE-Instructor. The District has a higher expense for Utilities. The District has a higher expense for Non-academic instructional salaries*. The District has a higher expense for supplies and materials*.

(See comparative Table – next slide)

Looking at Data

Expenditure Type Object Code(s)

SRJC Expenditure per FTES

Benchmark Group Avg. Expenditure per FTES

Placement within Benchmark Group

Statewide Avg. Expenditure per FTES

AcademicInstructional Salaries

1100 & 1300 $ 1,735 $ 1,793 6th of 10 $ 1,816

Academic,Non-instructional Salaries

1200 & 1400 $ 492 $ 425 2nd of 10 $ 481

Classified Non-instructional

2100 & 2300 $ 921 $ 983 7th of 10

$ 1,017

ClassifiedInstructional Aides

2200 & 2400 $ 139 $ 115 4th of 10 $ 125

Employee Benefits 3000 $ 952 $ 1,072 9th of 10 $ 1,199

Supplies & Materials 4000 $ 110 $ 62 2nd of 10 $ 78

Other Operating Expenses

5000 $ 417 $ 454 6th of 10 $ 587

Equipment Replacement

6420 $ 0.35 $ 6 5th of 10 $ 6

Total Expenditures

$4,788 $ 4,910 7th of 10$ 5,310

What can we Do?

Obviously, the District needs to look into each and every variance it finds … and determine if such a variance has significance, or is anything the District wants to emulate.

In the mean-time, the District will continue its efforts to diversify its revenue sources … (such as increases in non-resident student fees) …

And, seek further cost containment …

So that we remain fiscally stable for 2013-14 … and beyond.

QUESTIONS?

sonoma county junior college district

Documents

cdcp ftes

credit ftes

ftes size

number of reported ftes

state funding

funding formula

lottery funding

districts restricted