Sonoma County Junior College District

1. Sonoma County Junior College District

2. Coping with the State’s Budget Crisis Presented by Doug Roberts Vice President, Business Services

3. Community College Funding • To understand the effect of the state’s budget on community colleges you need to understand a little about how community colleges are funded. • Although the District has a few “Restricted Funds” ... to account for revenues that can only be spent for restricted purposes ... • It is the “Unrestricted General Fund” under which the primary mission of the District is conducted.

4. Unrestricted General Fund • Revenue-wise approximately 52% of the District’s revenue comes from “local sources.” • The primary sources are ... Property Taxes & Student Fees. • The remaining 48% comes from state funding.

5. Components of Unrestricted Revenue • Total General Apportionment* $ 93,612,877 89.1% • Lottery Funding* 2,379,888 2.3% • Materials & Other Course Fees 2,326,375 2.2% • Non-resident Tuition & Fees 920,000 0.9% • Other State Revenues 2,531,315 2.4% • Other Local Revenues 3,333,372 3.2% • Total Revenue $ 105,103,827 * Revenue directly tied to reported enrollment (or ... “FTES”)

6. General Apportionment • Derived from a funding formula with two basic components • Funding based on the number and size of each college-site • Funding based on the number of reported FTES* * (FTES = Full Time Equivalent Student = 525 Student Contact Hours)

7. General Apportionment • 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

8. 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) - Enrollment Fee Collections (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)

9. General Apportionment • So, how does a District increase its revenues? • From the earlier formula ... Base Revenue + COLA +/- Growth/Decline + Stability Funding - Deficit Funding = Total General Apportionment • COLA and Growth are the only ways to significantly increase a district’s revenues ... (... and both of these are controlled by the State)

10. Historic COLA Increases

11. Historic COLA Increases

12. Historic Funded FTES

13. District 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.

14. Ending Fund Balance

15. 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 Increases 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?

16. Looking towards 2010-11 • The Governor’s January Budget for Community Colleges Included the following proposals: On the Positive Side … 2.2% Growth On the Negative Side … -0.38% COLA Further cuts to Restricted Fund, Categorical Programs More Categorical Programs added to “Flexibility Group” But, before we get celebrate this “net” good news … Let’s keep in mind the following …

17. Looking towards 2010-11 • Last year’s budget started with 3% Growth Funding … By the final budget … it was 0%. • All the same Legislative concerns that led to the 3.4% workload reduction (in 09/10) still exist. • The Governor’s budget currently projects less than a 1.8% reduction in property tax revenue. • The state budget relies on $6.9 Billion in Federal money … (which is not guaranteed). • The budget relies on additional and extended tax revenues … (which is politically opposed). • Last Year’s ARRA $’s were “one-time” – a $500,000 loss in funds used for federally mandated expenses.

18. Looking towards 2010-11 & Beyond • For the remainder of 2009-10, through the end of 2010-11, the State has a roughly $20 Billion budgetary shortfall. • The shortfall is primarily the result of losses in state revenues from income taxes and sales taxes. • The reduction in these revenues is the result of a weakened economy (unemployment and low consumer confidence) • According to many economists, the state’s recovery is several years away.

19. Coping with the State’s Budget Crisis • So, the question is … • How does the District deal with the state’s long-term fiscal crisis? • Recent history shows that the state’s budgetary process doesn’t provide solid budget-figures until well-after the academic year has begun. • So ... community colleges need to be proactive in preparing their budgets for the difficult times ahead. • ... and, look for solutions (beyond state funding) both internally and externally to meet budgetary gaps.

20. Questions?