1

MHCC Budget Overview Prepared for Board and Staff of MHCCDRAFT 11-2-11Prepared 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 8) •3. How do we approach this challenge? (slide

12) •4. Role of Budget Review Team (slide 22)•5. What factors are relevant to understanding

how we got here? (slide 25)

2

3

Part 1. Why is Budget Important?

• We value what we spend money on. • 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

4

Ongoing, “Structural” Deficit

• Business model unsustainable • State reducing direct funding and not

addressing rising fixed costs, such as PERS and health care

• Up to local jurisdictions to innovate and/or cut services/positions and/or renegotiate labor agreements

• College has the ability to increase revenue by increasing enrollment

• Increasing tuition and fees limited by mission and competition

4

5

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)

•Salaries rising 3%

•Enrollment projected to decline 2%

5

2002

-03

2003

-04

2004

-05

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

Estim

ated

2011

-12

Budge

ted

2012

-13

Fore

cast

ed $-

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Comparison of MHCC Revenues to Expen-ditures (excluding transfers in)

Fiscal Years 2002-03 to 2012-13

OtherTuition/FeesState Support TaxesExpenditures

In T

housands

6

7

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: the state may seek a 7% hold back in second year (in addition to current 3 ½% holdback, resulting in a lower base for FY13-14

• PERS rates for FY11-12 are based on a 2009 valuation; PERS rates for FY13-14 will be based on a 2011 valuation.

7

8

Part 2: Current Revenue/Expenditure Forecast

•Deficit for FY12-13 currently 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 is $1.7 million (plus state reductions which could total as much as $2.8 million)

•Ongoing issue!

8

9

Major Assumptions • 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 = $200,000)

• “One time only” ending fund balance (for reserve fund at 3% and contingency at 4% meets Board policy (7%?)

9

2001

/01

2001

/02

2002

/03

2003

/04

2004

/05

2005

/06

2006

/07

2007

/08

2008

/09

2009

/10

2010

/11

Estim

ated

2011

/12

Budge

ted

-

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

16,000,000

Unrestricted Ending Fund Balance

General Fund All other funds

10

11

Contingency Fund• Set at 3% to 5% of general fund based on

comparable community colleges and public jurisdictions (overall reserves and contingency between 6% and 8%) (Nov. Board meeting)

• 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

11

12

Part 3: How do we approach this Challenge?

• Multi year process of change

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

• New or expanded program offerings

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

• Increase administrative efficiencies

• Employee salary and benefit costs review, especially health care and PERS (agree on costs for future discussions)

• Capital improvement plan and identified capital budgets

• Innovative approaches to expanding enrollment

12

13

A. Innovation Fund• Fund approaches that will generate additional

revenue above cost and/or increase completion rates

• Balance the budget through expansion and contraction

• Use $1,000,000 of under-spending from FY10-11

• Carefully monitor progress and verify results

• Risk awareness – either way!

14

Examples for Innovation Fund •Strategies to increase enrollment

▫New or expanded “profitable” programs ▫Quicker financial aid turnaround (draft proposal)▫Outreach to local high schools ▫Outreach to veterans seeking education and

training•Strategies to increase retention / completion

▫Increased mentoring/advising (e.g. ABS; GED) ▫Better articulations; better pathways

14

15

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

Christie Plinski or Rodney Barker. Process will go through Hiring Committee and then to Budget Review Team (BRT).

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

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

• BRT members available to read and give feedback.

15

16

B. Systematically analyze what we teach 1.Does it cover its costs?

•Step 1 Analyze courses/academic programs to determine whether they pay for themselves

•Use Cost of Instruction tool (based on average instruction costs, not specific instructors)

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

16

17

2. Can it cover its costs?

•Step 2: Can the course/program be made more efficient through any of the following: ▫Differential tuition ▫Fees ▫Change of ILCs▫Change of class size

18

3. If not, should the program be retained? If so, why? •Step 3: If course/program still losing

money test it against a multi-factor algorithm; for example consider, ▫Uniqueness of program▫Employability of graduates▫Wait list ▫Completion rate (being mindful that state

will fund more on “completion” in the future)

▫Other facrtors

19

C. Fully develop Issue Papers

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

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

20

D. Departmental Budget Review •Have all departments prepare a narrative

with their budgets with outcomes and output measures.

•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.

21

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 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).

22

Part 4: Role of Budget Review Team in Budget Process

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

•Wear “college hats”

•Advises President; October to March; 8:45 to 10 am Fridays; Board Conference Room.

•Develops and frames policy choices through issue papers

22

23

Role of Budget Review Team (con’t) • Identifies policy choices through input

from Board and college stakeholders

•Frames menu of options

•Seeks agreement among stakeholders on financial impact of different choices

•Pursues an open, clear process

24

Budget Review Team Timelines

• October – December: Solicits ideas from stakeholders; develops and discusses issue papers framing policy options; reviews revenue/expenditure forecast

• Jan. – Feb.: Frames menu of choices

• March: Delivers options to President for decisions

• 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

24

25

Questions ?

25