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 2014-15 2014-15 Enacted January May Revision Proposal COLA 1.57% 0.86% 0.85% YCCD: $357,974 (estimate) Access/ 1.63% 3% 2.75% Restoration YCCD: $0 Student Success and $99.18M $199.18M $199.18M Statewide Support Program YCCD: $396,506 (estimate) Student Success and $0 $100M $100M Support Program (Equity) YCCD: Unknown

Governor’s Budget May Revise (FY2014 -15 cont’d) Item 2013-14 2014-15 2014-15 Enacted January May Revision Proposal Economic and $22.92M $22.92M $50M One-Time Statewide Workforce YCCD: Unknown (based on Development regional) Telecommunication $1.4M One-Time Statewide and Technology $4.6M Ongoing Statewide Infrastructure YCCD: Potential LMS Solution Physical Plant and $30M $175M $148M Statewide Instructional (Maintenance only) Equipment 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

Legislature Updates • 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

FY2014-15 CalSTRS Proposed Employer Contributions Fiscal Year Employer Employee Employee State (pre-2013 hire) (post-2013 hire) 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 $42B $12B $20B Solution

FY2014-15 CalSTRS Proposed Employer Contributions (cont’d) Fiscal Year Yuba CCD Contributions % % of Ongoing Contributions Operational Expenditures 8.25% 2013-14 $ 1,466,301 3% 9.50% 2014-15 $ 1,684,869 4% 11.10% 2015-16 $ 1,900,619 4% 12.70% 2016-17 $ 2,118,503 4% 14.30% 2017-18 $ 2,338,524 5% 15.90% 2018-19 $ 2,544,174 5% 17.50% 2019-20 $ 2,768,211 6% 19.10% 2020-21 $ 2,994,388 6% 19.10% 2044-45 $ 3,825,175 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% of 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