Governing Board Meeting FY2014-15 Tentative Budget Presented by: - - PowerPoint PPT Presentation

Yuba Community College District Governing Board Meeting FY2014-15 Tentative Budget

Presented by:

• Dr. Douglas Houston

Chancellor Kuldeep Kaur Chief Business Officer June 12, 2014

Governor’s May Revise (FY2014-15)

▫ State revenues are forecasted to increase by $2.4 billion

 The cost of health care, drought, and other programs have increased by essentially the same amount

▫ Despite the state achieving a solid balanced budget, number of risks threaten the state’s fiscal stability

 Overhang of fiscal debts  Growing long-term liabilities  Uncertainties regarding the cost of federal Affordable Care Act (ACA)

Governor’s May Revise (FY2014-15 cont’d)

Item 2013-14 Enacted 2014-15 January Proposal 2014-15 May Revision

COLA 1.57% 0.86% 0.85% YCCD: $357,974 (estimate) Access/ Restoration 1.63% 3% 2.75% YCCD: $0 Student Success and Support Program $99.18M $199.18M $199.18M Statewide YCCD: $396,506 (estimate) Student Success and Support Program (Equity) $0 $100M $100M YCCD: Unknown

Governor’s Budget May Revise (FY2014-15 cont’d)

Item 2013-14 Enacted 2014-15 January Proposal 2014-15 May Revision

Economic and Workforce Development $22.92M $22.92M $50M One-Time Statewide YCCD: Unknown (based on regional) Telecommunication and Technology Infrastructure $1.4M One-Time Statewide $4.6M Ongoing Statewide YCCD: Potential LMS Solution Physical Plant and Instructional Equipment $30M $175M $148M Statewide (Maintenance only) No match in 2014-15 YCCD: $1,036,000

LAO Comments on the May Revise

• Governor’s CalSTRS Plan a Bold Proposal

▫ Governor proposes a plan to fully fund $74 Billion unfunded CalSTRS Liability over 30 years.

 District contributions 57%, State 27%, Teachers 16%.

▫ There is no magic formula how these costs should be

• shared. Legislature have difficult choices to make

about cost sharing. ▫ LAO recommends that State end direct contributions to this program over time.

LAO Comments on the May Revise

• LAO projects $2.5 Billion higher revenues than

Governor’s proposal:

▫ Not a substantial difference given the State’ Operational Budget (exceeding $100B) ▫ State to collect significantly more capital gain taxes in 2014-15 than the Governor's proposal anticipated

• Anticipating Slightly Higher Revenues

(based on LAO projections):

▫ Higher Proposition 98 funding (favorable for CCCs)

▫ Assembly/Senate Budget Subcommittees on Education adopted Governor’s May revision proposals plus took actions on additional augmentations

 $34M more in one-time funds (in 2013-14)  $246M more in ongoing funds (largely to categorical programs and COLA doubled to 1.70%)

▫ Assembly/Senate Budget Committees passed their subcommittee

• packages. The differences to go to the conference committees.

 Major differences in the two budgets include: trailer bill language relating to CCCs to use state funds to cover ACCJC Special Assessment Fees greater than 2012-13 fee levels

Legislature Updates

FY2014-15 CalSTRS Proposed Employer Contributions

Fiscal Year Employer Employee (pre-2013 hire) Employee (post-2013 hire) State

2013-14 8.25% 8.00% 8.00% 3.10% 2014-15 9.50% 9.20% 8.08% 3.45% 2015-16 11.10% 10.25% 8.56% 4.89% 2016-17 12.70% 10.25% 9.21% 6.33% 2017-18 14.30% 10.25% 9.21% 6.33% 2018-19 15.90% 10.25% 9.21% 6.33% 2019-20 17.50% 10.25% 9.21% 6.33% 2020-21 19.10% 10.25% 9.21% 6.33%

Share of Solution $42B $12B $20B

FY2014-15 CalSTRS Proposed Employer Contributions (cont’d)

Fiscal Year Yuba CCD Contributions Contributions % % of Ongoing Operational Expenditures

2013-14 $ 1,466,301 8.25% 3% 2014-15 $ 1,684,869 9.50% 4% 2015-16 $ 1,900,619 11.10% 4% 2016-17 $ 2,118,503 12.70% 4% 2017-18 $ 2,338,524 14.30% 5% 2018-19 $ 2,544,174 15.90% 5% 2019-20 $ 2,768,211 17.50% 6% 2020-21 $ 2,994,388 19.10% 6% 2044-45 $ 3,825,175 19.10% 6%

FY2014-15 Budget Assumptions

• Tentative Budget Assumptions:

▫ Build the tentative budget based on the Governor’s May Revision

 Assumes .85% COLA: $357K  Assumes 0% Growth

• Expenditure Assumptions:

▫ CalSTRS Employer Contribution Increase (1.25%): $218K ▫ Medical Employer Contribution Increase (Active Employees and Retirees) (8-15%): $489K ▫ Step and Column Adjustments: $60K ▫ COLA (.85%): $322K ▫ CalPERS: $37K

FY2014-15 Tentative Budget

• Projected Beginning Fund Balance (after close of FY2013- 14)

▫ $4.32M

• Anticipated Ongoing Revenues:

▫ $45.97M

• Anticipated Ongoing Expenses:

▫ $47.14M

• Anticipated Ongoing Structural Deficit:

▫ <$1.16M>

• Anticipated One-Time Revenue Projections:

▫ $0.00

• Anticipated One-Time Expenses:

▫ $298K

FY2014-15 Tentative Budget (cont’d) Ongoing Revenues Comparison

FY2014-15 Tentative Budget FY2013-14 (Unaudited Actuals)

Federal: $2,895 Federal: $2,895 State: $22,755,497 State: $22,397,523 Local: $23,219,665 Local: $23,215,679 Total Revenues: $45,978,057 Total Revenues: $45,616,097

FY2014-15 Tentative Budget (cont’d) Ongoing Expenditures Comparison

FY2014-15 Tentative Budget FY2013-14 (Unaudited Actuals)

Certificated Salaries:$19,655,452 Certificated Salaries: $19,069,410 Classified Salaries:$8,319,759 Classified Salaries:$8,410,114 Benefits: $9,691,024 Benefits: $9,074,109 Supplies & Materials: $691,656 Supplies & Materials: $641,596 Operating Expenses: $4,606,578 Operating Expenses: $4,980,987 Capital Outlay: $299,103 Capital Outlay: $317,074 Other Outgo: $3,876,669 Other Outgo: $3,715,814 Total Expenditures: $47,140,241 Total: $46,209,104

Major Liabilities

Unfunded

▫ Retiree Health Benefits – approx. $57M (growing! - ACA) ▫ Facilities (approx. $210M of renovations & construction)

Under-funded

▫ Facilities (Maintenance) ▫ Technology & Infrastructure

Potentially Under-funded

▫ State Pension reform ▫ Federal Health Care reform (ACA)

Funded – minimal risk

▫ Solar, YC Central Plant, Lighting & EMS Retrofits

Deficits = Short-sighted budgeting

• FY 10-11 budget surplus (ending balance 22%)

Surpluses caused by unforecasted one-time revenue windfall and by over-budgeting expenditures (substantially)

• FY 11-12 tentative budget = 10% deficit
• FY11-12 deficit 5.4% (ending balance 17.2%)
• FY12-13 deficit 4.6% (ending balance 12.1%)
• FY13-14 budgeted deficit 1.5% (ending 10.4%)

Deficits caused by unforecasted revenue shortfalls and by budgeted spending exceeding budgeted revenues

Short-sighted budgeting

FY 10-11 Budget Surplus:

▫ Did not anticipate one-time retroactive payment for WCC College-level funding

No contingency for property tax revenue shortfall!

▫ Historically over-budgeted for expenditures

>$2 M surplus “unspent budget”

▫ No set-aside for unfunded liabilities

Short-sighted budgeting

FY 11-12 Tentative Budget (10% deficit!)

▫ Anticipated Workload revenue reduction

Did not adjust expenditures for reduced workload No contingency for property tax revenue shortfall!

▫ Over-budgeted for certain expenditures; eg:

 Utilities > $1.5 M when typical costs were < $1M included ‘contingency for “bad year”  Legal > $600K when typical costs were <$100K included contingency for litigation

▫ No set-aside for unfunded liabilities

Structural Deficit: Fixed Costs

Fixed Costs typically increase between $600K and $800K annually … and mostly unfunded

• Health Benefits Increase
• Step & Column Increase (not fully funded!)
• State Pension costs (PERS/STRS)
• “Pay-As-You-Go” Retiree health benefits

($2.3 M in FY 13-14; $2.57 M in FY 14-15 = 5.47%

• f budget)
• Operating Expenses (Utilities, Fuel, etc.)
• SW license fees (typically increase 15-18%)

Budget Reduction/Balancing

• Improve student debt collection
• Improve internal controls (reduce waste/mistakes)
• True-up budget to reduce borrowing need/cost

▫ Build revenue shortfall contingencies into one-time funds ▫ Shift expenditure contingencies from ongoing to one-time ▫ Start-up YC Sutter Center with one-time funds ▫ Shift technology refresh from ongoing to one-time funds ▫ Cover STRS settlement from Retiree Benefit fund ▫ Cover LMS out of technology grant until State solution ▫ Move Chartwells subsidy into one-time to phase out

Budget Reduction/Balancing (cont’d)

• Reorganize for student success & efficiency

▫ Reduce district administration ▫ Reduce service contracts, travel & supplies (centralize) ▫ Implement ‘paperless’ solutions ▫ Consolidate management (eg. M&O, Registrar) ▫ Reengineer process workflow to reduce staffing needs ▫ Shift staffing to student support functions (inc. “Phase 2”) ▫ Braid categorical & grant funding

• Optimize Class Schedules for student access
• Optimize facilities & instructional resources

Contingencies

Move risk from on-going budget to fund balance

• Revenue shortfall contingencies (no mid-year cuts)

▫ This is main reason for maintaining a fund balance above 5% reserves; the other is to reduce need for short-term borrowing (and avoid borrowing costs)

• Expenditure contingencies; savings so far > $1M

“True-up” ongoing budget to actual/average ongoing expenditures (not “worst-case”); use one-time contingencies for emergencies

Use of one-time funds

FY 13-14 one-time expenditures … all from beginning fund balance

▫ Accreditation Visits (YC & WCC): $29.5K ▫ Gas & Electricity Contingency: $110K ▫ Computer Replacements: $130K ▫ Learning Management System: $143K ▫ Report Server: $15K ▫ Food Services (Chartwells): $153K ▫ Retirement Incentive: $42K

Reduce/Consolidate Administration

• Eliminated & reorganized:

▫ Vice Chancellor, Administrative Services ▫ Director, Governmental/Public Relations ▫ Director, Facilities Planning ▫ Director, Purchasing

• Reduced/Consolidated:

▫ M&O Directors (General Funds savings) ▫ A&R Directors (Redirected BFAP Funds)

Ending Fund balance

End-of-year General Fund balance = reserves & contingencies; FY 13-14 fund balance (9.24%)

▫ Minimum prudent reserve (5%) ▫ Contingency for tax revenue shortfall (4%?!) ▫ Contingency for utilities overrun ▫ Contingency for litigation costs ▫ Contingency for RDA tax shortfall

Retiree Health Benefit Trends

Fiscal Year Pay-As-You-Go Net Increase/ Decrease % Change % of Ongoing Operational Budget

2009-10 $ 1,514,069 $ 74,978 5.21% 3.34% 2010-11 $ 1,869,227 $ 355,158 23.46% 4.01% 2011-12 $ 2,150,945 $ 281,718 15.07% 4.59% 2012-13 $ 2,134,561 $ (16,384)

• 0.76%

4.81% 2013-14 $ 2,342,761 $ 208,200 9.75% 5.07% 2014-15 $ 2,576,669 $ 233,908 9.98% 5.47%

Average Increase Since 2009-10: 10.45% Average % of Ongoing Operational Budgets: 4.55%

Long-term Strategies

• ‘Self-funding’ Energy solutions/renovations

▫ Solar & YC Central Plan ▫ Campus Lighting Retrofits ▫ YC Well & Campus EMS Controls

• Finance unfunded liabilities

(ideally not with the General Fund!)

• Expand/enhance program partnerships
• Fund-raising/Grant-writing
• Regional collaboration/partnerships

(economy of scale)

FY2014-15 Tentative Budget (cont’d)

• Strategies for Balancing the Budget:

▫ Establish an Irrevocable Trust (Local Board Authority) ▫ Mitigate the Retiree Health Benefits Liability (Currently $57M liability) ▫ Borrow on a Certificate of Participation (COPs) to fully fund the Trust ▫ Cover a portion of the pay-as-you-go for retiree health benefits for FY2014-15 from COPs ($1.16M out of the COPs

borrowing to cover $2.5M pay as you go)

FY2014-15 Tentative Budget (cont’d)

• Strategies for Balancing the budget:

▫ For the succeeding years, set a debt service around $1.1M to $1.5M until year 2025-26. ▫ Pay balloon payments (as a result of freed up General Fund monies from Solar Project/Central Plant Debt Service obligations) ▫ Fully Fund the Retiree Health Benefits liability in the next 30 years

FY2014-15 Tentative Budget (cont’d)

• Projected Ending Fund Balance (if strategies for

balancing the budget do not materialize) ▫ $2.86M (6.04%)

• Projected Ending Fund Balance (if strategies for balancing

the budget are materialized) ▫ $4.02M (8.70%)

FY2014-15 Tentative Budget (cont’d)

• Risks:

▫ Reduced Fund Balance if strategies in balancing the budget are not materialized

 No Fund Balance for invention or startup of new programs  No Fund Balance for contingencies in addressing any revenue and/or expenditure uncertainties  No Fund Balance for computer replacements  Fund Balance below the Minimum Prudent Reserve of 5% if the District does not reach the Enrollment Targets for attaining base funding

Questions

?????????????????????????