December 16, 2010 Budget Sub-Committee Report to College Planning Council Introd uction Since the start of this academic year, the Budget Sub-Committee has focused its attention on understanding and analyzing both the one-year budget for FY2010-11and the five-year projections through FY2014-15. Notwithstanding the uncertainty and confusion that remains around state funding for the current year never mind five years out, the Sub-Committee has been able to discern revenue and expenditure trends that lead it to believe that serious action is required in order to assure fiscal solvency over the five years. The nature of that action is such that it is beyond the scope of the Sub-Committee and must be referred back to the College Planning Council in the undernoted recommendation. Work Done by the Sub-Committee to Date The Sub-Committee has fully analyzed the "final" budget for FY2010-11 which was approved by the Board of Trustees in October. It has been clearly stated that the budget is not final at all and will be subject to change due to state funding uncertainties coming not only out of the state budget approved 100 days into the fiscal r.ear but also the very real likelihood of mid-year funding cuts. In addition, the Sub-Committee has tracked the changes in budget between this fiscal year and last and compared the changes to the assumptions that were contained in year 1 of our five-year projections. By and large, the changes mirrored the assumptions that had been previously identified. However, there were some changes to expenditure budgets that were unplanned such as increased benefits costs and increased costs associated with the academic reorganization, consequent to negotiations, but these were offset by operating savings in utilities as a result of initiatives first discussed by the Budget Task Force last year. The following revenueslwere carefully analyzed because the numbers ultimately (and currently) confirmed by the state were different from the numbers projected in our one-year budget for FY2010- 11: • Base Revenues • Growth Fundin ~ • Categorical and Restricted Funding • One-time Funding • Mandate Funding • Funding Deferrals In addition, conslderatlon was given to the widely-predicted possibility of cuts to state funding in early 2011. It appears that grbwth funding and mandate funding might be the most vulnerable as neither has actually yet been paid t6 districts. CODwill initially include both in its updated FY2010-11 budget as well
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December 16, 2010
Budget Sub-Committee Report to College Planning Council
Introd uction
Since the start of this academic year, the Budget Sub-Committee has focused its attention onunderstanding and analyzing both the one-year budget for FY2010-11and the five-year projectionsthrough FY2014-15. Notwithstanding the uncertainty and confusion that remains around state fundingfor the current year never mind five years out, the Sub-Committee has been able to discern revenue andexpenditure trends that lead it to believe that serious action is required in order to assure fiscal solvencyover the five years. The nature of that action is such that it is beyond the scope of the Sub-Committeeand must be referred back to the College Planning Council in the undernoted recommendation.
Work Done by the Sub-Committee to Date
The Sub-Committee has fully analyzed the "final" budget for FY2010-11 which was approved by theBoard of Trustees in October. It has been clearly stated that the budget is not final at all and will besubject to change due to state funding uncertainties coming not only out of the state budget approved100 days into the fiscal r.ear but also the very real likelihood of mid-year funding cuts. In addition, theSub-Committee has tracked the changes in budget between this fiscal year and last and compared thechanges to the assumptions that were contained in year 1 of our five-year projections. By and large, thechanges mirrored the assumptions that had been previously identified. However, there were somechanges to expenditure budgets that were unplanned such as increased benefits costs and increasedcosts associated with the academic reorganization, consequent to negotiations, but these were offset byoperating savings in utilities as a result of initiatives first discussed by the Budget Task Force last year.
The following revenueslwere carefully analyzed becausethe numbers ultimately (and currently)confirmed by the state were different from the numbers projected in our one-year budget for FY2010-11:
In addition, conslderatlon was given to the widely-predicted possibility of cuts to state funding in early2011. It appears that grbwth funding and mandate funding might be the most vulnerable as neither hasactually yet been paid t6 districts. CODwill initially include both in its updated FY2010-11 budget as well
The Sub-Committee will continue to focus on the changing budget as new information from the statebecomes available and ~ill provide updates to the College Planning Council on a regular basis. Inaddition, it will work cI sely with Council on identifying the budget ramifications of the structuralchanges that the latter evelops.
as the other revenue changes noted above but it will not create any corresponding expenditure budgets.Rather, the revenues will be projected to flow into reserves and should the funding ultimately be cut thereserves will be reduced again without the need to cut expenditures.
ConclusionsThe Sub-Committee has been informed that our FY2010-11 budget is fairly secure even if mid-yearfunding cuts are sustained. The budget reflects the action plan that was developed last year to makesavings from each of the employee groups, reductions in programs and services, and savings from thenon-replacement of leadership retirements and vacancies.That action plan will be fully achieved. Theproblem is more likely to emerge in years 2 to 5 of the five-year budget. Actions plans have already beendeveloped which include further projected savingsfrom employee groups in years 3 through 5,curtailment of any additional benefit costs to the district over all 4 years, and some operating savings aswell. Evenwith these planned actions identified, it is acknowledged that fiscal solvency (as evidenced bythe existence of any reserves) cannot be maintained in year 5 and all reserves may be consumed by year4 if any of our revenue and expenditure projections prove to be inaccurate. Consequently, the BudgetSub-Committee has reached the conclusion that further action needs to be planned over the next 4years that can only come from cutting expenditures permanently in programs and services. This action,the Sub-Committee feels, can only come from a reassessment of the College's mission and goals and adeliberate narrowing of the programs and services to be offered to students.
RecommendationGiven that current five-I ear budget projections cannot assure fiscal solvency in year 5 in spite of theaction plans currently blUilt into the projections, the Sub-Committee recommends to the CollegePlanning Council that structural reductions throughout the College should be contemplated that willresult in the necessary budget reductions. Such structural reductions can only be done in an orderlymanner by the College Planning Council using something of the reverse process to that which it hasadopted in connection with planned growth of the College. It is recommended that the balance of thisacademic year and probably much of next year be dedicated to the careful consideration of a smallercollection of programs and services the cost of which will allow the five-year budget projections to shiftto a positive outcome.
DESERT COMMUNITY COLLEGE DISTRICT2010 - 2011 FINAL BUDGET