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Budget Outlook Pierce College Council April 28, 2011

Budget Outlook Pierce College Council April 28, 2011. Ken Takeda Vice President, Administrative Services. Presentation Outline. Budget Allocation Process State Budget Status LACCD Budget: Impacts Allocation Model Budget Scenario 1 Budget Scenario 2 Budget vs. Expenditures

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Budget Outlook Pierce College Council April 28, 2011

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  1. Budget OutlookPierce College CouncilApril 28, 2011 Ken Takeda Vice President, Administrative Services

  2. Presentation Outline • Budget Allocation Process • State Budget Status • LACCD Budget: • Impacts • Allocation Model • Budget Scenario 1 • Budget Scenario 2 • Budget vs. Expenditures • Possible Budget Solutions for Pierce • FPRC Recommendations • What’s Next • Questions and Answers

  3. Budget Allocation Process

  4. State Budget Status • Jan 10: Governor releases prop. 2011/12 budget. • Mar 18: Legislature passes 2011/12 Budget Act, cutting $14 billion in spending, but does not approve special election to extend taxes expiring Jun 30. • Mar 24: Governor signs Budget Act. • Mar 29: Governor ends negotiations with Republican legislators to call special election. • For California Community Colleges: • $290 million cut to apportionment and workload • $10 increase in enrollment fee per unit, effective Fall 2011

  5. State Budget Status (cont.) • Feb 10: Legislative Analyst’s Office (LAO) issues memo identifying $13.5 billion in budget solutions, including these affecting community colleges: • $685 million in total funding cuts and revenues on top of Governor’s $400 million solutions • 90-unit cap per student on state-funded credits ($250 mil) • Increase enrollment fees to $66 a unit ($170 mil) • Reduce rate for credit basic skills to rate for non-credit basic skills ($125 mil) • No funding for intercollegiate athletics ($55 mil) • No funding for repetition of credit PE & fine arts (‘activity’) classes ($55 mil) • No funding for non-credit PE & fine arts (‘activity’) ($30 mil)

  6. LACCD Budget—Impacts • Budget Act (assumes extension of tax rates): • Loss of $25.76 million in state apportionment • Reduction of 5,828 full-time equivalent students (FTES) • Depletion of reserves from $87.2 to $70.9 million • Worst-case scenario (all cuts; LAO proposal): • Loss of $71.51 million in state apportionment • Reduction of 16,178 FTES • Depletion of reserves from $87.2 to $25.2 million • Tentative Budget Plan: • All-cuts budget is likely (but no state allocation yet) • Prepare Tentative Budget based on Budget Act (‘Scenario 1’) but prepare for worst-case (‘Scenario 2’)

  7. LACCD Budget—Allocation Model • LACCD follows SB 361 funding formula to distribute state general revenue to colleges, with some modifications • Each college receives basic or ‘foundation’ allocation based on college size (FY2010/11 funding rates shown): • FTES>= 20,000 $4,428,727 large college • FTES 10,000-19,999 $3,875,136 medium college • FTES < 10,000 $3,321,545 small college • Non-SB 361: Small colleges receive supplement of $553,591 (FY2010/11) to their foundation funding; Trade-Tech receives $500,000 for high-cost programs • In addition to foundation funding, each college receives funding for credit, noncredit and enhanced noncredit FTES at state-funded rates (FY2010/11 funding rates shown): • Credit FTES $4,564.83 • Non-credit FTES $2,744.96 • Career development & college prep (CDCP) $3,232.07

  8. LACCD Budget—Allocation Model (cont.) • Base funding = foundation funding + per-FTES funding • If budgeted by the state, funding for enrollment growth is provided to colleges at per-FTES rates, and up to percentage caps, set by the state. • All rates adjusted by state-declared COLA, except Trade-Tech’s supplement • Lottery revenue distributed based on prior-year FTES • Other revenues: Non-resident tuition, dedicated • Each college is assessed for centralized and District Office services and 5% District Contingency Reserve based on share of total FTES • Balances are retained by colleges and District Office

  9. LACCD Budget—Unrestricted GFScenario 1

  10. LACCD Budget—Unrestricted GFScenario 1 (cont.)

  11. LACCD Budget—Unrestricted GFScenario 2

  12. LACCD Budget—Unrestricted GFScenario 2 (cont.)

  13. Budget vs. Expenditures • Budget = expected revenues • Expenditures = actual or projected spending on wages, benefits, printing/supplies, contracts/utilities, equipment, offsets of other fund deficits • Most of the LACCD colleges spend beyond their current year’s budget allocation: • Those with prior-year surpluses may use a portion of those balances • Others generate a deficit that is covered by the District’s reserves and must be repaid over several years • In order to balance to reduced state funding for 2011/12 the colleges and district office must cut their spending, not just their budgets

  14. Budget vs. Expenditures (cont.) • Spending-reduction targets for 2011/12 have been calculated in different ways by the colleges: • 5% of 2009/10 actual expenditures • 5% of 2010/11 projected expenditures • Difference between 2011/12 projected expenditures and 2011/12 budget allocation • Pierce used the third method to calculate its spending-cut target at $7.7 mil.

  15. Possible Budget Solutions--Pierce

  16. FPRC Recommendations • Districtwide reduction targets were calculated at $34.37 million while $23.35 million in solutions were proposed, leaving a gap of $11 million • In response, the District Fiscal Policy Review Committee (FPRC) adopted the following recommendations: • Colleges must submit realistic budgets reflecting 5% cuts • Allow colleges to use up to $5 million of their fund balances to cover remaining shortfall • Colleges may request access to District balances after meeting all of the following criteria: 1. Cut at least 5% of 2010/11 expenditures 2. Insufficient funding to maintain offerings to meet enrollment target 3. Has used all available fund balance (pursuant to ‘B’ above)

  17. FPRC Recommendations (cont.) • Suspend college debt repayments until 2012/13 and restructure from 3 years to 5 years • District to maintain contingency reserve of at least 5% and ending balance of 10%, including college reserves and balances • FPRC recommendations approved by Cabinet 4/6/11; expected to go to District Budget Committee on 5/18/11 for approval

  18. What’s Next • May 13: Last day to load Tentative Budget • May 16: Revised Governor’s Budget • Jun 30: Tentative Budget • Sep 15: Final Budget

  19. Questions and Answers My apologies but we are out of time so I cannot entertain any questions or offer any answers. Have a great day!

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