October 6, 2017
THE BUDGET IS EVERYONE'S RESPONSIBILITY
This year the South Orange County Community College District budget exceeds $800 million. This amount includes operating budgets, grants, and capital funds for construction and other large capital projects. Being entrusted with a budget of this size is serious business. Managing all of its various components can get quite complicated.
For the first time in our history, we held a districtwide budget workshop and special board meeting that focused on the budget and related items such as enrollment, income, and our various expenditure categories. Having a dedicated workshop allowed the board of trustees and others to discuss and understand common goals, the board’s budget philosophies, board guidelines, college priorities, challenges, and opportunities. This is a good place to be. We discussed how managing the budget is not just the district and college fiscal officers’ responsibility, but rather everyone’s responsibility. In managing travel, personnel requests, daily operations, or day to day purchases, all employees need to be mindful that their individual decisions impact the budget.
Here are a few facts about how our operating budgets are funded:
• The District Resource Allocation Council (DRAC) model follows the SB 361 legislation that guides how districts are funded by the state. This model funds our unrestricted general fund budget, which we call our operating budget.
• Funding levels are driven by Full-Time-Equivalent Student (FTES) numbers.
• Our district is community-supported, which means that, at this time, we are funded primarily by local property tax revenues. Because our revenues exceed the amount of FTES-based State funding that would otherwise be provided, the additional funds obtained through property taxes are managed by the Basic Aid Allocation Resource Committee (BAARC). They are used largely for one-time costs and special services such as legal assistance, scheduled maintenance, and capital construction.
• Both colleges are considered medium-sized institutions for funding purposes (FTES between 10,000 and 20,000).
• College funding is based on FTES over a three-year average to stabilize the funding flow to the colleges and give them time to recover from any FTES shortfalls.
What are our challenges ahead?
• Districtwide, all salaries and benefits consume 87.2% of the operating budget. We are evaluating budgetary needs and targeting 85% for greater efficiencies and budget flexibility. The more flexibility we have built into our operating budget, the better we can adapt to changing program needs and respond to unplanned expenses.
• Over the next few years, we can expect astronomical cost increases in PERS and STRS retirement contributions to make up for lower contributions that were previously authorized and have remained at underfunded rates. Now we have to make up the difference. We have been authorized by the board to fund these costs through basic aid through the year 2020, which assists operating budgets. We need to develop a long-term plan for funding this obligation beyond that year and plan for future continuing costs.
• Health and welfare benefits costs are up 5%. Given prevailing conditions, that’s not too bad. However, looking ahead, this area is quite uncertain and we need to continue to monitor our projections and impact to the operating budget.
• To provide funding for the development and implementation of new and sustainable programs, we need to incorporate funding for ATEP. We are going to provide $750,000 in “seed” money to cover start-up costs each year for three years as the colleges open up their new facilities at ATEP. This is especially important for instructional support. We will take the funding from basic aid for the first three years, but we need to review our DRAC model for potential adjustments or an addition to the funding of the model to include allocations for ATEP. The colleges will provide written plans for their seed money, including anticipated expenditures, to help inform discussions for future budget planning and ongoing operations at ATEP.
• We need to increase productivity and implement smart scheduling through districtwide enrollment management that supports student demand and program needs. Looking at data, we can see that over the past several years our productivity has dramatically decreased and those dollars could be used in other ways to support instruction and student learning.
• Budget and personnel strategies – as we say goodbye to 116 dedicated long time employees who are taking early retirement this year, we will analyze positions carefully. There are some job descriptions that have not been updated for many years and need to be assessed to determine how to best serve our students and instruction. We need to take this unique opportunity to look at our organizational structure and determine how to make it as functional as possible. We also want to review the number of NBUs, student workers, and non-salary items. We will analyze some important “job families” to assess job relevance, placement, and responsibility levels, and of course, involve our bargaining units in these discussions, when appropriate. All of these strategies will be accomplished in the spirit of continual improvement and regrowth.
We have an amazing opportunity this year to make smart adjustments to strengthen the organization. We can do this through ongoing, long-term planning and careful analysis that provides for uncertainties such as possible changes in state funding formulas, economic stability, enrollment swings and more.
As we take an introspective look, we can analyze what we are doing, how we are doing it, and make adjustments for the future. We will be better positioned to protect our future, offer high quality instruction, respond to workforce needs, and offer highly competitive compensation packages to employees.
Being proactive and being mindful of our budget is a good practice. We need to institutionalize these best budget practices. Making sure that we are all educated on our budgets and how to manage them is a priority.
I want to thank our fiscal team - Kim McCord, Carol Hilton, Davit Khachatryan, and Jim Buysse - for their collaborative efforts to ensure that our budget remains sound and secure. They are committed to making budget information transparent and sharing it widely. They are educated employees on the budget.
Thank you to our board of trustees for their continued support to ensure we use our public resources wisely and prudently, promote financial strength and stability, and maximize our resources for educational opportunities for our students.
And, thanks to each of you, especially our shared governance groups, who work together mindfully to ensure that resources follow planning and priorities. We are truly stronger together, and I sincerely appreciate all of the collaboration that is occurring across the district. Our students and communities will be the beneficiaries.
Thank you for doing your part, and I look forward to our continued progress!
Debra L. Fitzsimons