Budget Scenario Planning FY2018 FY2020 December 14, 2016 - - PowerPoint PPT Presentation

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Budget Scenario Planning FY2018 – FY2020

December 14, 2016

Presenter: David Bea, Ph.D. Facilitator: Anthony U. Martinez, J.D.

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Overview of Study Session

• Foundational information
• Budget scenarios
• Questions
• Discussion
• Direction

General Fund $153.9 62% Restricted Fund $58.3 23% Capital Fund $19.1 8% Designated Fund $14.0 6% Auxiliary Fund $2.5 1%

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Foundational Tenets

• Institutional Financial Health

– Indicators

• Enrollment Trends
• Financial Health Indicators/Metrics
• College Business Model

– Revenue Sources – Cost Drivers

• Expenditure Limitation
• Future Needs

– Educational Master Plan, Strategic Plan

• Program Quality, Relevancy, Sustainability
• Pathways to Student Success
• Centers for Excellence
• Outreach Centers
• Organizational Challenges

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Financial Health Indicators

Audited Financial Statements & Management Letters

• Changes in Net Assets, Cash & Investments, Liabilities,

Statistical Section Information

• Ongoing concerns

Financial Ratios Budget and Operational Measures

• Revenue mix
• Fixed versus variable costs

– Personnel Costs Share of Total – Costs per student – Employees per student

Market Position/Costs

Key Red = Significant Concern = Improving Trend Orange = Moderate Concern = Maintenance of Trend Green = Minimal to No Concern

= Declining Trend

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2004-2016 Dashboard of Financial Indicators

Key Red = Significant Concern = Increase in Trend Orange = Moderate Concern = Maintenance of Trend Green = Minimal to No Concern

= Decrease in Trend

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Gauging the market and anticipating the future

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PCC Enrollment Summary

1992, 15,364 2016, 15,382

• 5,000

10,000 15,000 20,000 25,000

PCC FTSE

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Enrollment Potential

Age Pima County population % PCC students 18-24 116,000 58% 25+ 654,000 41% Pima CC Arizona United States

43% 37% Less than 30%

Percentage of students enrolling in CCs one year after HS graduation Percentage of students attending online, nights, or weekends

Pima CC Arizona

61% 63%

Source: Arizona 2020 Vision 2015 reports; U.S. Census Bureau 2010-14 American Community Survey five-year estimates

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Pima County population projections compared with Fulltime equivalent enrollment

5,000 10,000 15,000 20,000 25,000 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 Pima County Population Total Pop Other Ages 20-24 YO FTSE

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Market Comparison: Tuition

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2,000 4,000 6,000 8,000 10,000 12,000 14,000 16,000 18,000 20,000 50,000 100,000 150,000 200,000 250,000 300,000 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

Out of State Credits Taken In State Credits Taken

Year over Year Fall Credits Taken, In-State versus Out-of-State Tuition Codes

In-state Out-of-state

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$85,801

$95,661 $100,861

$60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Expenditure Limit (in $000's)

Expenditure Limitation Projections

Estimated Limit Flat Enrollment Grow 500/Yr Actual Expenses

Original Methodology SB1322 Methodology

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Expenses

General Fund

– Predominately personnel (~75%) – Operational expenses – little to cut/reduce – Capital expenses – need to operationalize/find a sustainable revenue source

Facts to Remember

– 1% increase in salaries and wages = $900,000 – Health care increases ~ $1 million per year – Depreciation is $8 million per year – 1 % increase for adjunct faculty = $150,000

Admin Fac Staff Other Benefits Operations Capital Transfers Contingency

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Historical Budget Summary: General Fund and Combined All Funds Budgets

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Al Other Funds $71.5 $76.2 $83.7 $105.2 $138.3 $137.4 $122.3 $107.8 $106.5 $94.0 General Fund $134.2 $142.7 $142.3 $172.3 $149.6 $161.5 $161.7 $158.4 $152.2 $153.9 $ $50 $100 $150 $200 $250 $300 $350

$ Millions

General Fund Al Other Funds

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Staffing Levels

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National Community College Data Comparisons:

Integrated Post Secondary Education Data System

2014-2015 Staffing Comparison

Average of Sample 2-Year Colleges PCC PCC’s Rank Headcount 17,025 39,912 20 FTSE 7,469 15,799 36 FTSE/FT Faculty 45.7 45.1 174 FTSE/FT Total Staff 26.3 11.8 308 FTSE/FTE Total Staff 11.7 9.5 258

2013-2014 Expenditure Comparison

FY14 Total $/FTSE $11,308 $11,620 148

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y = 0.0544x + 55.613 R² = 0.7701

200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 5,000 10,000 15,000 20,000 25,000

# FT Staff FTSE

Full Time Staff Comparison: 2014-15 FTSE/FT Staff, 333 2-yr Colleges

Regression for FT Staff Ratio with Estimated Reduction Impact FTSE FT Staff

• Vs. PCC

% Pos. Cut 14,000 817

• 527
• 39%

15,000 872

• 472
• 35%

16,000 926

• 418
• 31%

17,000 980

• 364
• 27%

18,000 1,035

• 309
• 23%

19,000 1,089

• 255
• 19%

20,000 1,144

• 200
• 15%

21,000 1,198

• 146
• 11%

22,000 1,252

• 92
• 7%

23,000 1,307

• 37
• 3%

PCC 1,344

www.pima.edu y = 10.733x + 3669.1 R² = 0.9225

50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 10,000 20,000 30,000 40,000 Total Expenditures ($000s) FTSE

IPEDS Expenditure Comparison, FY2014 Peer Institutions Total Expenses and FTSE

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Future State Realities

• Fewer Resources
• More Competition
• Faster Speed of Change
• Increased Accountability
• Increased Regulatory Compliance

Requiring colleges to:

• Be More Nimble, Adaptive, and Responsive

– Innovative, Entrepreneurial, and Inventive

• Continuously Improve

– Employ Evidence and Data-Based Decision Making – Assess Effectiveness

• Improve Coordination & Communication

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Revising and Renewing Pima Community College: What We’ve Done & What We Need to Do

• Recognize new reality

– Reorganize and improve efficiency – Adapt to state changes

• State budget reduction
• SB1322
• Strategic Enrollment Management

– Maximize Pima County enrollment

• Recruitment, Enrollment, Retention, Completion

– Lifelong Learner tuition program, Tuition cap

– Stimulate and support out-of-state and international enrollment

• Anticipate the future and adapt

– Educational Master Plan

• Programmatic needs and capabilities
• Reinvestment

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Funding the Renewal of the College

• Educational Master Plan Priorities

– Ensure program quality, relevancy, and sustainability – Create pathways to student success – Establish centers for excellence – Emphasize outreach centers and leverage adult education

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Finance and Administration

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Financing the Educational Master Plan Priorities: Revenue Bonds

• Revenue bonding authority defined in ARS Title 15,

Chapter 12, Article 5

– Board Authority to Issue – Inform Joint Committee on Capital Review (JCCR) – Annual debt service limited to 8 % of annual expenditures

Sample Finance Tables for various Rev. Bond Scenarios with Finance Metrics Bonds ($mil) $ 40.0 $ 50.0 $ 40.0 $ 40.0 $ 60.0 Interest Rate 5.0% 5.0% 5.0% 4.0% 5.0% Years 20 20 10 20 15 Annual Payment ($mil) ($3.21) ($4.01) ($5.18) ($2.94) ($5.78) % Rev Bond Capacity 22% 27% 35% 20% 39%

• Est. Viability Ratio (>1.0 goal)

2.3 1.8 2.3 2.3 1.5

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Budget Scenarios

• Scenario A: Delay Impacts for Now with Larger Tuition Increases

– Small to no reductions for FY18 and FY19. Plan for $15 mil reduction in FY20 – Continue to reduce via attrition – Mitigate cost increases and Expenditure Limitation impacts with larger tuition increases – No funding to implement Educational Master Plan or other strategic changes until FY20 – Large reduction pending due to Expenditure Limitation

• Scenario B: Rejuvenate the College

– Reduce current operations by $5 mil per year in each of next 3 years – Identify programs for elimination and begin phasing out – Reduce infrastructure/staffing – Implement most of the first 5 years of the Educational Master Plan (EMP) – Rely on GO Bonds for some EMP projects

• Scenario C: Revolutionize the College

– Reduce current operations by about $10 mil per year in each of next 3 years – Identify programs for elimination and begin phasing out – Eliminate at least one location – Significantly reduce infrastructure/staffing – Large and immediate investment in Educational Master Plan – Ensure future financial stability and ability to grow

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FY18 Incremental Budget Scenario Examples ($mil)

Scenario A B C Tuition $ 3.5 $ 1.5 $ 1.5 Property Tax Growth $ 1.5 $ 1.5 $ 1.5 Property Tax Increase $ 2.0 $ 2.0 $ 2.0 Subtotal Revenues $ 7.0 $ 5.0 $ 5.0 Health Insurance $ 1.0 $ 1.0 $ 1.0 Contractual Obligations $ 2.0 $ 2.0 $ 2.0 Salary Increases $ 2.0 $ 2.0 $ 2.0 Subtotal Expenses $ 5.0 $ 5.0 $ 5.0 Operational Reductions $ - $ (5.0) $ (10.0) Net Change $ 2.0 $ 5.0 $ 10.0 New Financing Payment $ - $ 3.0 $ 6.0 Financial Impact/Funding Depreciation $ 2.00 $ 2.00 $ 4.00 Expenditure Limitation Impact $ 1.50 $ (1.50) $ (6.50)

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$85,801

$95,661 $100,861

$60,000 $70,000 $80,000 $90,000 $100,000 $110,000 $120,000 $130,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Expenditure Limit (in $000's)

Expenditure Limitation Projections for Budget Scenarios

Estimated Limit Flat Enrollment Actual Expenses Scenario A Scenario B Scenario C

Original Methodology SB1322 Methodology

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Reductions: There is no magic wand

• Reduce staff

– Eliminate positions – Convert positions to partial FTEs

• Eliminate obsolete programs
• Reduce locations

– Sell/lease vacant space

• Streamline service delivery – do not provide all services

at all locations

• Decrease Benefits costs

– Health premiums – Vacation/holiday benefits

• Increase contract and tuition revenues

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Key Takeaways

• Impact of continued enrollment declines
• Upcoming expenditure limitation problems
• Tracking fiscal health and ensuring good

stewardship of public funds

• Need for strategic renewal and investment
• Difficult decisions at hand

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Next steps

• Board feedback
• Communications plan

– College community feedback

• Governance and leadership groups
• Forums on Educational Master Plan and Budget

– External community feedback

• Governing Board Meetings

– January: Update on FY17 Financial Reports – February: Property tax outlook – March: Tuition, benefits, and budget update

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Budget Decision Criteria

Expectations and base assumptions to guide budget development:

• Decisions concerning allocation, cuts, income, and

investment will be reached through a process that is evidence-based, collaborative, transparent, defensible, and consistently applied

• Decisions will be openly and widely communicated
• When applicable, performance and formula metrics will

be developed and implemented with stakeholders at all levels of the College in order to justify funding, staffing, and resources. These formulas and metrics should be published and distributed internally throughout the College

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Budget Decision Criteria (continued)

Criteria for budgetary decisions:

• Resources will be allocated to ensure the success of the College’s

Mission, Goals, and Strategic Plan

• All regulatory and compliance requirements will continue to be met

and funded

• All programs and services will be evaluated in terms of their

benefits, costs, relevancy, and impact to our students and external community

– Once identified, under performing areas should be modified or eliminated – As needs arise, it will be necessary to fund new programs and services

• Human Resources should be optimally assigned throughout the

District

– Employee assignments will correspond to real needs, student enrollment, and organizational demands – All services need not be offered at all locations