1

MHCC Budget Overview Prepared for Board and Staff of MHCCDRAFT 1-26-12Prepared by Jennifer DeMent, Jeff Forbis, Laurie Miller and Bill Farver MHCC Administrative Services

1

2

Contents

•1. Why is Budget Important? (slide 3) •2. What is the current revenue and

expenditure forecast indicating? (slide 5)•3. Comparative Cost of Attendance (slide 11) •4. How do we approach this challenge? Five

Tools to use (slide 17) •5. Role of Budget Review Team (slide 31)

2

3

Part 1. Why is a Budget Process Important? • We value what we spend money on. The process

provides a structured opportunity to discuss vision and policy.

• Our long term revenues do not keep pace with our expenditures.

• We will face another year of difficult trade offs. • We cannot look to the state for more money. • Our represented employee costs are fixed through

negotiated contracts. • We must look at what programs and services we

offer, how we deliver them, and how we support them.

3

Why is the Process itself important?•Greater information and involvement

leads to better decisions and more support for those decisions.

•Opportunity to discuss important policy issues across lines of departments and job classifications.

•Helps builds college identity and morale. •We learn about the college and ourselves.

4

5

Part 2: Current Revenue/Expenditure Forecast – released 11-9-11

•Deficit for FY12-13 estimated at $5.5 million •Number will likely change, though not

dramatically. •Requires ongoing reductions of expenditures,

or ongoing increased revenues. One time only money does not help this deficit.

• If we succeed, our current projected deficit for FY13-14 will be $1.7 million (plus state reductions which could total as much as another $2.8 million)

•Ongoing issue!

5

6

Major Assumptions in Forecast

• Innovation Fund spent with no return on investment. (conservative assumption: “easiest” place to close the gap IF we get good proposals)

• All contractual obligations met • Enrollment declines by 2% (each 1% = $100,000) • No change in tuition or fees (pressure from the

size of the deficit and other colleges to raise; each $1 = $210,000)

• “One time only” ending fund balance of 7% (for reserve fund at 3% and contingency at 3 to 5% meets Board policy

6

7

Causes of the Structural Deficit

• Declining state revenue support ($1.5 million already planned to be returned to state)

• Health care costs rising 15%

• PERS costs rising (every two years) (FY13 expected 3% increase adds another $1 m in costs)

• Salaries rising 3%

• Enrollment projected to decline 2% (projection, not our goal!)

7

Salary and Fringe

$50,200,655

75%

Materials & Services, $8,511,116 13%

Capital Out-lay,

$742,0001%

Debt Service, $2,221,4393

%

Grants In Aid, $1,285,000

2%

Fund Transfers, $250,0001%

Contingency, $3,570,4445%

General Fund Expenditures by Type (Object)

Adopted Budget 2011/12

8

2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10 2010/11 2011/12-5.00%

5.00%

15.00%

25.00%

35.00%

45.00%

55.00%

General Fund Revenue Sourcesas a Percentage of Total Revenue

Taxes Tuition/FeesOther State Support

9

10

State Funding Status

•State funding for all community colleges is based on $410 million for the two years FY11-12 and FY12-13; MHCC budgeted our share at $41 million

•Variables: State revenue still in decline: • 3 ½%; $1.5 million already held back • State may seek a 7% hold back in second

year; $2.8 million• Lower base for FY13-14

10

11

Part 3. Comparative Cost of Attendance

•Mt. Hood’s costs are average, as compared to the other 16 Oregon community colleges

•Mt. Hood is slightly higher than its neighboring community colleges, but no major differences

•For each $1 per credit hour tuition increase, approximately $210,000 in additional revenue is generated

•Some mid-year tuition increases being contemplated at other community colleges.

11

Centra

l

Umpq

ua

Clack

amas

Blue

Mou

ntai

n

Klam

ath

Portl

and

Chem

eket

a

Linn

-Ben

ton

Tilla

moo

k Bay

Stat

ewid

e Ave

rage

Mt.

Hood

Colum

bia

Gorge

Lane

Clats

op

Rogue

Trea

sure

Val

ley

Orego

n Coa

st

Sout

hwes

tern

$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

2011-12 Total Cost of Attendance

12

13

Typical Full-time Student Tuition and Universal Fees by

Term15 Credit Hours of Tuition, $84 per credit hour $1,260.00

Student Activity Fee, $3 per credit hour $ 45.00

Technology Fee, $4.75 per credit hour $ 71.25

College Service Fee, $30 per term $ 30.00 Total $1,406.25

Excludes course fees and optional fees such as parking.

14

$-

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$4,219 $7,046 $8,064 $8,789

$18,405

$33,640

Total 2011-12 Tuition and Fees, Fall through Spring

(15 credit hours, including per credit hour fees)

15

Reserve and Contingency • Overall reserves and contingency between 6% and 8%

Reserves will be set at 3% (un-appropriated) • Contingency will be set at 3% to 5% of general fund

based on comparable community colleges and public jurisdictions

• Set criteria for Board access: ▫ Emergency situations that may jeopardize health and

safety▫ Public commitment or contractual mandate ▫ Efficiencies ▫ No funding exists in current budgets ▫ Board may “designate” funds in increased contingency

for future decisions

15

16

Part 4: How do we approach this challenge?

• Multi year process of change

• Revenue enhancements ; Innovative approaches to expanding enrollment; New or expanded program offerings

• Potential Tuition and fee increases

• Program review based on completion, overall cost of instruction, employment potential, uniqueness, etc.

• Different approaches to instruction (e.g. differential tuition; class size; expanded times of instruction)

• Administrative efficiencies (e.g. Aquatics Center)

• Consistent, reliable data for future use; Employee salary and benefit costs review, especially health care and PERS

• Capital improvement plan and identified capital budgets

16

HOW DO WE DO IT? TOOLS?

•1. Innovation Fund •2. Issue Papers •3. Systematic Instructional Program Review

•4. Departmental Review with Program offers

•5. Constraints

17

18

1. Innovation Fund• Fund approaches that will generate additional

revenue above cost and/or increase completion rates

• Pilot approaches useful for next year • Balance the budget through expansion and

contraction • Use under-spending from FY10-11• Carefully monitor progress and verify results• Use Innovation Fund if proposal generates

revenue/leads to savings and should be piloted now.

• Risk awareness – either way!

19

Sample Innovation Fund proposals •Strategies to increase enrollment

(examples)▫Quicker financial aid turnaround

(proposal to Board 12-14-11)▫New or expanded “profitable” programs

(e.g. light▫auto repair certificate) ▫Outreach to local high schools (e.g. Go Van;

College Now; Upward Bound) ▫Increased outreach to veterans

19

Sample Innovation Fund Proposals •Strategies to increase retention /

completion (examples) ▫College Start Lab (Increased

mentoring/advising) ▫Better articulations; better pathways ▫Emphasis on reenrolling current students ▫Diversity Center ▫Mandatory Human Development classes

20

21

Guidance for Developing Proposals • If proposals involves new full time faculty,

contact Christie Plinski or Rodney Barker. Process to Hiring Committee and Budget Review Team (BRT).

• If proposals do not involve full time faculty, contact Jennifer DeMent. Proposals to BRT.

• Iterative process. Feel free to send drafts, seek financial and goal setting advice. Expect rewrites.

• BRT members available to read and give feedback.

21

22

2. Issue Papers

•40 potentially worthwhile areas to analyze and determine whether they will increase enrollment or reduce expenditures by at least $100,000

•Examples: ▫Aquatics Center ▫Parking fee ▫Outreach to high schools ▫Reduce uncollectable tuition costs

23

3. Systematically analyze what we teach a. Does it cover its costs?

•Analyze courses/academic programs to determine whether they pay for themselves

•Use Section Expense Tool (based on average instruction costs, not specific instructors)

• If they do, can they be made more efficient?

23

24

b. Can it cover its costs?

•Can the course/program be made more efficient through any of the following:

▫Differential tuition / fee increase ▫Change of ILCs▫Change of class size

25

c. If not, should the program be retained? If so, why? • If course/program still losing money test it

against a multi-factor algorithm which takes into consideration a variety of factors

•Educational Assessment Committee currently reviewing this issue to try and agree on criteria that should be used and how they should be weighted.

26

4. Departmental Budget Review •Have all departments prepare program

offers with their budgets with outcomes and output measures. (next slide)

•Discuss how the budget enables the program to fulfill its goals.

•Discuss “small” opportunities for investments to save money or expand revenue.

•Discuss impacts of additional reductions.

Budget Request Forms

• Provides a narrative of specific function • Offers can show impact of reductions and/or

increases • Issue papers should be reflected in budget

request forms (alternatives to current practice) • Ask each program to generate program offer(s)

that provide(s): ▫a concise narrative of program purpose ▫ measureable outcomes and outputs (potential

management tool) ▫a budget to achieve those goals.

27

5. Constraint budgeting

•Theoretically, could assign a target of 9% across the board to each area.

•Ask the area to explain how a combination of increased revenues and reduced expenditures could reach that goal. Consistent analysis across departments. Forced choice analysis.

•Document the consequences through budget request forms. Show what a base level program offer buys and what a reduced level buys.

28

Constraints/Percentages/Amounts

29

Area%

of BudgetBudgeted Amount

9% Target Reduction

Instruction / Academic Support 55% 36,692,299 3,302,307

Administrative Services / Facilities /President's Office / Board 15% 10,227,793 920,501

Student Services 8%

5,241,047 471,694

Information Technology 6%

4,095,641 368,608

College Advancement / Research & Planning / Human Resources 4%

2,737,791 246,401

Fixed Costs / Debt Service 4%

2,680,639 n/a

Transfers / Waivers / Contingency 8%

5,105,444 459,490

100% $66,780,654 $5,769,001

6. Decision Making: Use all the tools•Use all three methods – different vantage

points – “art, not a science” • Issue Paper analysis – policy options •Documented though budget request forms

– program description and measurement •Use Departmental review – fairness and

consistency •Avoid using only “across the board”

decisions •Don’t double count savings/revenues

30

31

Part 5: Budget Review Team

•Membership drawn from all college stakeholders (full and part time faculty; deans; classified/administrative support; students)

•Wear “college hats”

•Advises President; October to March; Friday mornings ; Board Conference Room.

•Develops and frames policy choices through issue papers

31

32

Budget Review Team (con’t)

• Identifies policy choices through input from Board and college stakeholders

•Helps frame menu of options

•Seeks agreement among stakeholders on financial impact of different choices

•Pursues an open, clear process

33

Budget Review Team Timelines

• October – Feb. Solicits ideas from stakeholders; develops and discusses issue papers framing policy options; reviews revenue/expenditure forecast . Frame menu of choices.

• March: Delivers options to President for decisions ; review menu of options with college community.

• March/April: Budget Office verifies decisions and incorporates into President’s budget

• April: President presents budget to Board for discussion, amendment, and approval

• June: Tax Supervising & Conservation Commission (TSCC) reviews and certifies and Board adopts budget

33

34

Personal Challenge for Each of Us•Mt. Hood is a “learning institution”; we

can all understand and assist with this. •Overreliance on tuition and fees may be

self defeating. •We need to be flexible and involved.

Developing a good issue paper and a good program offer takes time and participation.

•To the extent we do not fully succeed, the challenge will fall directly on us in future years in discussions of salary and benefits. (That’s 75% of the college’s budget).

Questions?

35