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Mott Community College

Mott Community College. Board of Trustees Committee of the Whole Meeting June 19, 2006 BUDGET RESOLUTIONS. RELEVANT BOARD POLICIES: 3100 Budget Adoption. “Budget revisions will be brought forward for Board action as necessary, but not less than twice per year in January and June.”

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Mott Community College

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  1. Mott Community College Board of Trustees Committee of the Whole Meeting June 19, 2006 BUDGET RESOLUTIONS

  2. RELEVANT BOARD POLICIES: • 3100 Budget Adoption. “Budget revisions will be brought forward for Board action as necessary, but not less than twice per year in January and June.” • 3920,3930 Financial Stability, Fiscal Reserves. “The College will designate and set aside appropriate fund reserves to support plans for long-term capital and operating commitments.” • 5100 Compensation Philosophy. “The Board has determined based on long-term budget projections, and other related budget data, that total compensation/ benefits should not exceed 77% of the total operating budget.”

  3. FINAL FY05-06 AMENDED BUDGET

  4. FINAL FY05-06 AMENDED BUDGET • REVENUES: • Tuition & Fees -$411 thousand, -1.8% adj. – credit enrollment up; noncredit volume down • Property Taxes +127 thousand – actuals to date • Ballenger Trust -$65 thousand – market for 2Q 2006 is down • Other Revenue +$300 thousand – investment income up due to better interest rates, cash flow management changes • =Overall downward amendment to revenue is -$49 thousand -0.1% change from January 2006 amendment

  5. FINAL FY05-06 AMENDED BUDGET • EXPENDITURES: • Amended downward by $86 thousand, -0.1% change: • Salaries & Wages, and Fringe Benefits --savings on vacant budgeted positions (salary lag, elimination of Lapeer Corporate Services positions; hold on 50% of vacancies) • Contracted Services --savings in several areas, grant offsets, noncredit operations down • Rent, Utilities & Insurance --electricity, gas rate increases • Operations/Communications --savings in loan & Pell pro-rata refunds, bad debt, legal settlements • Transfers --add’l contribution to Maint/Repl. Fund to help 06-07 • Capital Outlay --timing of planned capital projects

  6. FINAL FY05-06 AMENDED BUDGET • NET RESULTS OF AMENDMENT: • FUND BALANCE : $37K additional • 0.8% Improvement over January Amended Budget

  7. FINAL FY05-06 AMENDED BUDGET GENERAL FUND BUDGET (fund 01) Target = 5% - 10% of Expenditure budget

  8. PROPOSED FY06-07 BUDGET

  9. PROPOSED FY06-07 BUDGET No Change in Budget Principles: • Budget must support Strategic Plans • Minimize/Offset Impact on Students • Avoid Overall Reduction in Staffing • Maintain Fund Balance/Reserves

  10. Jan.’06: Initial Forecast for FY06-07 • Key Budget Issues: • Employee Benefits cost increase: ($1.1M) • Salaries & Wages contracted increases:($1.8M) • Other expenses projected increase: ($2.1M) • Projected Total Revenue Increase: +$2.0M • = -$3.0M

  11. Jan’06 : Initial Forecast for 06-07 This forecast shows -$3.0M projected initially for FY06-07, and -$19M at the end of FY11-12, before steps were taken to balance 06-07 and future budgets. It shows what would happen if current trends were to continue. MCC must implement a balanced budget each year.

  12. PROPOSED FY06-07 BUDGET • BUDGET BALANCING STEPS-REVENUES • Revenue Enhancement will cover 14% of $3 million deficit: • Property Tax Revenue – Stronger property value growth is the main difference in revenues from January to June forecast • 4.9% Tuition & Fee Rate Increase offset by reduction in non-credit projections • Slight improvements in State Aid, Others

  13. PROPOSED FY06-07 BUDGET • KEY ASSUMPTIONS - REVENUES • TUITION & FEES • Credit side enrollment expected increase of 1% • 4.9% rate increases for credit side • Non-credit tuition is budgeted at $2.7 million, increased by 6.6% from expected FY05-06.

  14. PROPOSED FY06-07 BUDGET • KEY ASSUMPTIONS - REVENUES • PROPERTY TAXES • Up $1.1 million from 05-06 due to a 6% property value increase. • Millage Rate is rolled back, from 1.9907 to 1.9896

  15. PROPOSED FY06-07 BUDGET KEY ASSUMPTIONS - REVENUES • STATE AID – (PENDING) • Total net +1% increase as headed to Conference Committee (SB1082) • Shown by state as +1.8% in base; net increase is less because of a one-time restoration payment in FY05-06. • Conference Committee meeting not yet scheduled…

  16. Data as of June 2006; Source – MCC Audited Financial Statements and Budgets

  17. PROPOSED FY06-07 BUDGET • KEY ASSUMPTIONS - REVENUE • OTHER REVENUE • Projected decrease of 3.7%, including Ballenger Trust income, unrestricted grants and donations, and facilities rentals. • Overall Revenues for 06-07 are projected to increase by 4% from the final 05-06 budget, better than the 2.8% increase we expect this year.

  18. GENERAL FUND REVENUE SOURCES

  19. PROPOSED FY06-07 BUDGET • BUDGET BALANCING STEPS- EXPENDITURES: • Cost Reductions of $2.6M will cover 86% of the $3 million deficit • Holds on ½ of vacant positions • TAP lower by 1.5 FTE • 2.4% cut in non-salary line items • Early transfer to Maint/Replacement Fund made in 05-06

  20. PROPOSED FY06-07 BUDGET • KEY ASSUMPTIONS-- EXPENDITURES: • Overall increase of $2.4 million or 3.8% over the final 05-06 budget. • Salaries & Wages: +5.5% includes step and pay scale increases (compared to +5.2% the prior year) • Fringe Benefits: +6.7% to account for health insurance and retirement contribution rate increases • Total compensation = 77%, as required by policy • Non-Salary: -2.4% due to necessary spending restraint

  21. PROPOSED FY06-07 BUDGET • SUMMARY--BUDGET BALANCING STEPS: • 4.9% Credit Tuition & Fee Increase • 6.6% Increase in non-credit training revenue • Continue holds on filling ½ of 50 vacant positions • TAP lower by 1.5 FTE • 2% reduction in non-salary lines • Fund 06-07 planned contribution for Maintenance/ Replacement with 05-06 savings

  22. PROPOSED FY06-07 BUDGET 86% of projected deficit: • Cost cuts, $2.6M 14% of projected deficit: • Revenue enhancements, $0.4M

  23. PROPOSED FY06-07 BUDGET GENERAL FUND BUDGET (fund 01) Target = 5% - 10% of Expenditure budget

  24. PROPOSED FY06-07 BUDGET Planned Results: • Balanced budget, with small surplus in general fund • Continued commitment from General Fund to cover capital needs in maintenance & replacement fund • No new employee FTEs; No Reduction in Force • Short-term savings achieved through position vacancies • Intentional constraint on non-salary (discretionary) spending base • Strategic Goals (AQIP process) and 7-year impact considered throughout process

  25. PROPOSED “OTHER FUNDS” FY06-07 BUDGETS • Main Point is Impact on Operating Budget: • Designated Fund—$1.8 million budget • (Scholarships, Student Enrichment, Copy Machines, Paid Parking, Designated Technology Fee) • $ 347,000 funded with General Fund budget (expense) • Auxiliary Enterprise Fund--$709,000 budget • (Catering, Day Care, Vending, Bookstore, Computer Lab Printing, Lapeer Campus Auxiliary) • $351,900 net “profit” supplements General Fund (revenue)

  26. PROPOSED “OTHER FUNDS” FY06-07 BUDGETS • Main Point is Impact on Operating Budget: • Debt Retirement Fund—no General Fund impact • Millage Rate stays same, at 0.69 mill; Property taxes restricted • Capital Funds—repair, upgrade of buildings, equipment, technology, vehicles ($100 million in net value) • Instructional Technology Fee = $1 Million per year • $1.8 million per year planned transfer from General Fund still needed ; 06-07 transfer lowered to $1.2 million because of early transfer in 05-06 • $15 million in Series 2006 Bond Proceeds will fund projects through FY06-07 and into FY07-08

  27. STRATEGIC INITIATIVES FOR 06-07: LINKED TO BUDGET PROCESS and to new AQIP METHODOLOGY

  28. STRATEGIC INITIATIVES FOR 06-07 • Allocation for 06-07 is $650,000, including both AQIP and department level projects • Department/Division level planning produces requests for annual funding • Top Three AQIPAction Projects : • 1) Provide on-going, cross-functional training to develop all employees' professional skills. • 2) Cooperative education and experiential learning. • 3) Advising for degree completion and transfer students.

  29. 7-YEAR FORECAST

  30. 7-YEAR FORECAST What changed from January 2006 to Now? • Property Taxes -- Higher property values for 05-06 and 06-07 added $2.5 million over 7 years • State Aid – Added $0.9 million over 7 years, based on 05-06 supplemental restoration and 1% increase for 06-07 not expected • Tuition, Fees, Other Revenues • Subtracted $0.7 million from forecast over 7 years based on 05-06 and 06-07 projections, mainly noncredit impact =REVENUES: $2.7 M higher than Jan’06 forecast

  31. 7-YEAR FORECAST What changed from January 2006 to Now? • Salaries & Fringes • $9.3 million (2.4%) higher over 7 years: MPSERS rate increase expected to be higher than previously forecast; assumes all vacant positions filled in future years • Non-Salary Lines • Decrease of $3.3 million (0.6%) over 7 years: 05-06 and 06-07 cuts factored in EXPENDITURES = $6.0 million higher over 7 years than Jan’06 forecast

  32. 7-YEAR FORECAST • Bottom Line • Current Forecast is -$22 Million at end of FY11-12 • This is $3 Million worse than Jan’06 Forecast • The Forecast still assumes 0.65 Mill Voted Operating Millage is renewed for FY08-09 and beyond • Property Value growth continues to makes significant improvement in revenue base • Short-term savings and flexibility continues to be key • Long-term strategy of reducing compensation costs continues as focus on expense side

  33. 7-YEAR FORECAST Employee “Pro Rata” Contributions to date: 6 Groups have met “pro rata” request with 3-year contracts; Faculty met over half of request with 2-year agreement expiring August 2006.

  34. 7-YEAR OPERATING FORECAST(in millions)

  35. CAPITAL FUNDING

  36. Capital Funding • Funding Sources : • $45 M Voted Bond Authority Passed June 2004 • $15 M Series 2004 spent by June 30, 2006 • $15 M Series 2006 proceeds • $15 M Remaining voted authority • $13 M Commitment of Operating Funds • $ 7 M projected from Student Tech. Fees • $50 M Secured from now through 2011 • $4 M pending approval from State Capital Outlay • Future needs will require ongoing deferral and continued requests for state capital outlay assistance

  37. FUTURE OUTLOOK: Next Steps and Key Issues for Consideration

  38. FUTURE OUTLOOK: Key Issues • 0.65 Operating Millage will need to be renewed/increased before expiration at end of 2007-08 • Reducing Compensation costs – Long-term budget challenge remains to control rising expenditure levels • Academic and Service Operations continue to be studied for strategic fit; efficiency; feasibility • State’s budget – diminishing proportionate support • 2007-2012 Strategic Planning through AQIP requires continuous improvement methods

  39. FY06-07 BUDGET Next Board Actions— • FY05-06 Audit Acceptance: • Oct’06 • FY06-07 Budget Amendment: • Winter`07

  40. Questions or Comments?For More Information:Details are Provided with Board Resolutions 1.65 and 1.67 MCC Board of Trustees Committee of the Whole Meeting June 19, 2006 Kelli Sproule, Chief Financial Officer 810-762-0525, Kelli.Sproule@mcc.edu

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