The Governor’s 2015-16

Budg et Proposa l

February 11, 2015 Presented to the Board of Trustees

“THE GOVERNOR HAS A RELATIVELY GENEROUS BUDGET PROPOSAL FOR THE CALIFORNIA COMMUNITY COLLEGES (CCC), INCLUDING FUNDING FOR 2 PERCENT ENROLLMENT GROWTH, A 1.6 PERCENT COST-OF-LIVING ADJUSTMENT, AND $200 MILLION FOR STUDENT SUPPORT—ALL ON TOP OF A $125 MILLION UNALLOCATED BASE INCREASE.... THE GOVERNOR ALSO WOULD RETIRE ALL PAYMENT DEFERRALS FOR COMMUNITY COLLEGES AND PAY OFF MOST OF THE COMMUNITY COLLEGE MANDATES BACKLOG.” - LEGISLATIVE ANALYST’S OFFICE JANUARY 13, 2015

“WITH CALIFORNIA’S IMPROVING REVENUE OUTLOOK, POLICY MAKERS SHOULD ADOPT A MORE BALANCED APPROACH THAT PROVIDES A PLATFORM FOR BROADLY SHARED GROWTH AND PROSPERITY.” -CA BUDGET PROJECT

THE GOVERNOR’S BUDGET “MISSES AN IMPORTANT OPPORTUNITY TO RESTORE YEARS OF CUTS TO CALIFORNIA’S SAFETY NET PROGRAMS AND TO EXPAND HEALTH CARE COVERAGE TO THE REMAINING UNINSURED.” - CA PAN ETHNIC HEALTH NETWORK

NATIONAL ECONOMIC TRENDS STATE ECONOMIC TRENDS GOVERNOR’S BUDGET – OVERVIEW GOVERNOR’S BUDGET – CCCS STRS & PERS FUNDING PLANS NEXT STEPS

US economy continues to show positive activity International Monetary Fund projects healthy

increase in annual GDP growth Equity Market Rebounding Globally becoming more self-reliant

* Estimated for 2014, projection for 2015 Source: International Monetary Fund (IMF) October Work Economic Outlook The Wall Street Journal

China 7.1%

U.S. 3.1%

Eurozone 1.3%

Japan 0.8%

-2%

0%

2%

4%

6%

8%

10%

2011 2012 2013 2014 2015

Annual Change in the Gross Domestic Product (GDP)*

Source: CNN Money

Dow Jones Industrial Average

Sources: Eurostat. U.S. Federal Reserve; CEIC Data; IMP; China’s National Bureau of Statistics via CEIC; Japan Center for Economic Research; European Central Bank, Bank of England; World Bank; U.S. Labor Department; People’s Bank of China via Xinhua *2012 for the U.S. and Japan The Wall Street Journal

54%

51%

44%

31%

28%

26%

25%

15%

14%

13%

South Korea

Germany

Eurozone

U.K.

Russia

China

India

Japan

U.S.

Brazil

Exports as a share of the GDP, 2013*

California’s Economy is Rebounding Job growth increasing, although still ‘soft-ish’ when

compared to the broader US numbers Manufacturing output has surpassed pre-recession

levels with broad-based gains in motor vehicles, machinery and petroleum

Record levels of Exports Housing markets are booming especially along the

coastal areas Personal Income Stock market gains translate directly into robust

capital gains Forecasts for personal income growth are healthy Lower energy prices result in more discretionary

income Income disparity is a growing concern (CA has nation’s highest poverty rate by many standards)

Source: Employment Development Department, 2014

California Unemployment Rate

2008 2009 2010 2011 2012 2013 2014 2015

5.9%

7.3%

9.7%

11.7% 12.3% 12.4% 12.1%

11.9% 11.0% 10.6%

9.8% 8.7% 8.9% 8.7% 8.3%

7.0% 6.3%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Jan July Jan July Jan July Jan July Jan July Jan July Aug Oct Jan Dec Projected

Source: School Services of CA, Inc.

California Personal Income Forecast

4.2% 4.6%

5.1% 5.0%

6.6% 6.7%

4.4% 4.5%

5.2%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

2014 2015 2016

LAO, November 2014

UCLA, December 2014

2015-16 Governor's State Budget

Personal Income (Percent Change)

Source: 2015-16 Governor’s Budget Summary

CA General Fund Net Activity

-$50.0

-$40.0

-$30.0

-$20.0

-$10.0

$0.0

$10.0

Source: School Services of CA, Inc.

Investment in K-12 and Community College Education (Prop 98 Funding in Billions)

$56.6

$49.2

$51.7

$49.6

$47.3

$57.9 $58.7

$63.2

$65.7

$40.0

$45.0

$50.0

$55.0

$60.0

$65.0

$70.0

$75.0

2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16

Proposed

General Fund Budget Summary 2014-15 2015-16

Prior-Year Balance $5,100 $1,423

Revenues and Transfers $108,042 $113,380

Total Resources $113,142 $114,803

Total Expenditures $111,719 $113,298

Fund Balance $1,423 $1,505

Budget Reserve:

Reserve for Encumbrance $971 $971

Special Fund for Economic Uncertainties

$452 $534

Budget Stabilization Account / Rainy Day Fund

$1,606 $2,826 Proposed

Expenditures of $113.3 Billion Source: 2015-16 Governor’s Budget Summary

I. Pays Deference to CA’s Cyclical Economic Cycle A. Proposition 2 B. Proposition 30

II. Restores the massive cuts to Public Education A. Prop 98 increase of 4% B. Elimination of all Apportionment Deferrals C. Commitment to Adult Ed& CTE

III. Restores the Fiscal Health of Public Employee Retirement Systems A. CalSTRS and CalPERS Plans B. Significant Increased Employer Contributions

IV. Supports Public Transportation A. Funds the high speed rail project B. Funds ATP

Proposed Expenditures of

$113.3 Billion

A good start… but we’ve got a ways to go!

• $65.7 Billion in Prop 98 Funding (4% increase over 2014/15 revised levels)

• $28.7 Billion Higher Ed funding • Additional $4 Billion for K-12 Local Control

Funding Formula • Base augmentations of $120 million to UC

and $116 million to CSU to avoid a student fee increase (TBD)

• Additional $4.0 Billion of one-time funding to education

(Amount in Billions)

Proposition 98

K-12

CCCs

• Restoration/Growth Funding, increase of $106.9 Mil

• Up to 2%. Priority given to districts identified as having the “greatest unmet need” in their respective communities

• Based on the new funding model, Ohlone would certainly be limited in its growth cap--TBD

• Cost of Living Adjustment (COLA) of 1.58%, increase of $92.4 Mil

• Approximately $675,000 to Ohlone College • Additional Base Allocation, increase of

$125 Mil (approx. 2%) • To assist Colleges with increasing operating

costs including STRS and PERS increases, technology and converting PT to FT faculty

• Approximately $900,000 to Ohlone College "I do not think that the flexibility the Governor recommended in the $125 million increase to our base allocation will stand in the Legislature. I think lawmakers are likely to want to be more specific in how those funds are allocated." – Chancellor B. Harris, in his monthly newsletter to CEOs

• Student Success, additional $100 Mil • To increase orientation, assessment, placement,

counseling and other education planning services. • Allocation formula to be developed by the

Chancellor’s Office • Impact to Ohlone College – TBD

• Student Equity, additional $100 Mil • To close achievement gaps in access and

achievement of underrepresented student groups • Allocation formula to be developed by the

Chancellor’s Office • Impact to Ohlone – TBD

• Apportionment Deferrals, $300 Mil • To completely eliminate all remaining deferrals • No impact to Ohlone College

• Adult Education, $500 Mil • To support continued development of CCC and

K-12 consortia efforts • Ohlone College participating

• Deferred Maintenance & Instructional Equip, $350Mil

• Through the reimbursement of Mandated Claims • Other one-time expenditures may be eligible • Ohlone College share est. at $400,000 to $500,000

• Prop 39, Clean Energy Act, $39.6 Mil • To encourage energy efficiency projects • Ohlone’s share $150,000 to $200,000

• Career Technical Education, $48 Mil • To support Pathways Program at Chancellor’s

Office • To expand and develop programs to help CCCs

meet regional labor market demands • No direct impact to Ohlone College

Based on 2014-15 staffing levels and annual step & column increases

CalSTRS Employer Rate

Ohlone College’s REQUIRED

Annual Contribution (General Fund)

2014-15 8.88% $1.4 Million

2015-16 10.73% $1.7 Million

2016-17 12.58% $2.0 Million

2017-18 14.43% $2.3 Million

2018-19 16.28% $2.6 Million

2019-20 18.13% $2.9 Million

2020-21 19.10% $3.1 Million

CalSTRS Employee Rate

2014-15 8.15%

2015-16 8.56%

2016-17 9.205%

Based on 2014-15 staffing levels and annual step & column increases

CalPERS Employer Rate (est.)

Ohlone College’s ESTIMATED

Annual Contribution

2014-15 11.88% $1.8 Million

2015-16 13.30% $2.1 Million

2016-17 14.72% $2.3 Million

2017-18 16.14% $2.5 Million

2018-19 17.56% $2.7 Million

2019-20 18.98% $2.9 Million

2020-21 20.40% $3.2 Million

Based on 2014-15 staffing levels and annual step & column increases

CalSTRS CalPERS Ohlone College’s Annual Contribution

2014-15 $1.4 Mil $1.8 Mil $3.2 Mil

2015-16 $1.7 Mil $2.1 Mil $3.8 Mil

2016-17 $2.0 Mil $2.3 Mil $4.3 Mil

2017-18 $2.3 Mil $2.5 Mil $4.8 Mil

2018-19 $2.6 Mil $2.7 Mil $5.3 Mil

2019-20 $2.9 Mil $2.9 Mil $5.8 Mil

2020-21 $3.1 Mil $3.2 Mil $6.3 Mil

BASED ON THESE NUMBERS, OHLONE COLLEGE WLL EXPEND IN AGGREGATE $10.6 Million

MORE DOLLARS – in the next six(6) fiscal years– COMPARED TO WHAT IT EXPENDS IN 2014-15 on RETIREE HEALTH BENEFITS FOR

ITS EMPLOYEES.

February 2015 Budget Trailer Bills Mar – April 2015 Budget Subcommittees May 2015 Governor’s May Revision May/June 2015 Budget Subcommittees June 2015 Arm Wrestling in Sacramento (Big 5) June 30, 2015 Final Budget

Questions?