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BUDGET UPDATE

BUDGET UPDATE. Budget Task Force 2 -9-09 By Dr. Edwin Deas Vice President, Administrative Services. LOOKING AT THE FINANCIAL FUTURE (2008/09 through 2011/12). 1. An assessment of the cloudy state funding picture; 2. It’s affect on College of the Desert;

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BUDGET UPDATE

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  1. BUDGET UPDATE Budget Task Force 2-9-09 By Dr. Edwin Deas Vice President, Administrative Services

  2. LOOKING AT THE FINANCIAL FUTURE (2008/09 through 2011/12) • 1. An assessment of the cloudy state funding picture; • 2. It’s affect on College of the Desert; • 3. A framework for discussion of a multiple-year response plan by the College. 

  3. MULTIPLE YEAR BUDGET ASSUMPTIONS(Based on a summation of State information over the last four (4) months) Funding No COLA 2008/09 – 2011/12 Growth + 2% 2008/09 – 2011/12 $700,000 per year Appropriations 2008/09 - $1.8m reduction 2009/10 - $0.5m reduction 2010/11 - $1.15m reduction 2011/12 - $1.15m reduction

  4. Expenditures 2008/09 – 2011/12 Steps $ 500,000 per year Reclasses 30,000 per year Insurances 350,000 per year Growth & New Expenditures 200,000 per year 1,080,000 Conclusion COD faces a deficit each year between $1m and $2m, even if no salary increases paid for the next four years.

  5. Financial Status of the General Fund based on Funding Assumptions and Before the Response Plan ($000)

  6. Financial Status of the General Fund based on Funding Assumptions and After the Response Plan ($000)

  7. The Latest Indications from the Governor’s New Years Eve 18-month Budget Projection • Funding • COLA – No change from assumptions. • Growth – 3% 2008/09, assumed no change in other years. • Appropriations – No actual reductions in 2008/09 & 2009/10. No change in 2010/11 & 2011/12 assumptions. • Cash Deferrals - $2 million from 2008/09 (January & February). Not paid until 2009/10 (July) and repeated each year. • Expenditures – No change from assumptions. • Conclusion – COD will still face a deficit of between $1 million and $2 million per year in 2010/11 and 2011/12, even if no salary increases are paid. For COD in 2008/09 and 2009/10, the challenge might become more of cash flow than implementing expenditure cuts.

  8. THE THREE COMPONENTS OF THE BUDGET • FUNDING FROM THE STATE, COMMUNITY, AND STUDENTS • ALTERNATIVE SOURCES OF REVENUE • THE EXPENDITURE PLAN NECESSARY TO ACHIEVETHE COLLEGE OPERATIONAL GOALS

  9. Funding from the State, Community, and Students • There is not a lot that the College can do to influence funding that the average citizen can’t do. • Tell the community college story; stressing it is the best public investment in state economic recovery and societal development. • Move off the position that student tuition needs to be the lowest in the nation if increasing it will benefit colleges directly and lead to increased access and quality of services.

  10. ALTERNATIVE SOURCES OF REVENUE • This has not been a particular focus of COD. • It challenges the belief that publicly funded education should remain pristine and ought not to be considered a business. • COD has good, if underutilized, facilities and talented faculty and staff. In addition, it enjoys a unique location. • We need to create an incentive-based climate that encourages the development of revenue-generating programs and services.

  11. International Education leading to internationalization of the College with a net inflow of revenue. • Center for Training and Development – the flexible, responsive complement to our state-funded base programs. • The Auxiliary arm of the College managing space rentals and spin-off ventures like the College Golf Center. • This is not a Panacea • It takes time to establish • We need to spend money to make money

  12. THE EXPENDITURE PLAN NECESSARY TO ACHIEVE THE COLLEGE OPERATIONAL GOALS • The Expenditure Plan must be related to revenues, deficit spending is not sustainable. • Move away from the maxim of the expenditure budget being what we got last year plus….. • Zero-based budgeting is NOT the answer but continuous review of what we do and how we do it, costed relative to the revenues we have at our disposal in any particular year, should be ingrained in our planning culture. • In times of fiscal restraint, such as we face right now, strategic responses are better than indiscriminate, across-the-board responses.

  13. Redefining the expenditure budget in any significant way requires a creative, cooperative, and consultative process – status quo is not an option, ideas can come from anyone, openness of process and information will lead to understanding and support of the outcomes, the tough decisions will ultimately be made by the most senior members of the College. • Cutting expenditure budgets traditionally exposes the quantity versus quality dichotomy. Can it instead lead to doing different things and doing things differently yet still achieving our institutional goals? • Example: Creation of a Steps Trust

  14. CREATION OF A STEPS TRUST • A reserve held at COD that funds all step increases. • We do not have to depend on COLA or Growth Funding or Expenditure Cuts to pay for steps. • The Steps Trust can also be utilized on a non-recurring basis for other expenditures. • The Steps Trust can even be borrowed from with appropriate collateral.

  15. How do we create the Steps Trust? • Every new regular position in the General Fund must be costed at the top of the scale • The difference between the top of the scale and the actual placement of the incumbent is held in trust • Will require a significant investment to cover all existing regular positions • Creating the investment can be built into our multiple budget plans, particularly if actual revenues from the State are higher than assumptions

  16. THE FRAMEWORK OF THE RESPONSE PLAN 2008/09 Cancellation of Winter and short Summer Intersessions Projected savings: Salaries and benefits $413,000 Operating costs 50,000 463,000 Less lost revenue in Int’l Education: 15,000 $ 448,000 Provision for Mid-Year Budget reductions included in the COD original budget: 841,816 Elimination of Provision for Tentative Expenditures included in the COD original budget: Adjuncts 200,000 Uncommitted contingencies 130,184 Overtime growth 80,000 Insurance 100,000 510,184 Total $1,800,000

  17. PATHWAY TO A MULTIPLE YEAR BUDGET • Formulate the best possible planning assumptions on revenues and expenditures; they will change over time. • Agree targets for budget change: They can change as assumptions change. • Establish a principled approach to both increasing revenues and reducing expenditures. • Create multiple year plans – openly developed, widely understood, subject to ongoing modifications. • Continue to connect future education, technology, and facilities plans to the multiple year fiscal plan.

  18. The development of a new, multiple-year Expenditure Plan will be led by the President’s Cabinet, in consultation with the College Planning Council and Budget Task Force, and will engage any formal and informal group of employees and students, including representatives of the unions, that wishes to participate. The final budget is always subject to the approval of the Board of Trustees. The process of development should exude creativity; sensitivity; mutual respect; inclusiveness; open-mindedness; realism; vision; honesty; and accurate forecasting.

  19. The End

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