05-06 Budget Update

1. 05-06 Budget Update Campus Forum May 16, 2005

2. Agenda • Welcome Dr. Van Der Ploeg • Process Update Doug Bentz • Enrollment Update Ric Machuga • Financial Update Martha Wescoat-Andes • Future Dr. Van Der Ploeg • Questions Doug Bentz

3. Input President’s Planning Guidelines Reviewed by EC and BDC Programs Prioritize Implement Budget Plan Input Summer Fall Leadership Teams Prioritize Board Budget Criteria BOT Review & Approve • Reviewed annually by: • Executive Council (EC) • Budget Development Committee (BDC) • Board of Trustees (BOT) Input Share Approved Recommendation EC Review & Prioritize Spring BDC Review & Make a Recommend President Review & Approve Where we are in the process

4. Enrollment Update

5. Assisted Learningaka Directed Studies

6. 05-06 Budget List 4 Planning Components • Revenue Projections (pages 1-2) How much new money can we count on? • Fixed Cost Projections(pages 3-4) How much will certain costs automatically increase? • Planned program reductions (pages 5-10) How much have programs identified in reductions? • Augmentation requests (pages 11 – 14) What new costs must we fund?

7. 05-06 State Revenue Budget Picture • January Budget + COLA at 3.93% + Growth if a district grows • Transfer cost of STRS • No equalization • No restoration of PFE prior year cut • No non-credit

8. 05-06 State Revenue Budget Picture • May Revise • Increase COLA to 4.23% • $40M Equalization System Wide • Restoration of 04-05 PFE cut, but contingent on individual district accountability • One-time funding in selected areas • STRS cost transfer still in

9. 05-06 Butte Revenue Projections (Reminder: Looking only at unrestricted revenue) • Largest single source • COLA • Other potential sources • Growth - only if we grow beyond what we need to replace; trying to avoid decline • PFE cut - Reinstate 04-05 year, not new money – Mainly faculty positions hired years ago on PFE • Equalization - 50% 2nd installment: needed to help new ongoing expenditures for 05-06; 04-05 allocation used to balance the budget • Hope to see during the Legislative Process: • More Equalization • State STRS cost not transferred to District/employees

10. 05-06 Butte Revenue Projections • Pre-May Revise Revenue Forecast includes • COLA 3.93% $1,705,672 • Need to update for 4.23% -- approximately $130K more • May be decreased by Governor’s transfer of 2% STRS cost to Districts to negotiate <$428K> • Growth – budget year 05-06 • Plan for through Enrollment Management, budget expenditures to pursue, but do not budget revenue in the current year until received • Why? • Most growth has been going for replacement FTES • Growth has been slow due to local demographics • Hope to avoid decline

11. 05-06 Butte Revenue Projections • Growth (04-05) $708,644 • Growth achieved 04-05 will be budgeted 05-06 • Equalization TBD • amount depends on individual district distribution • PFE Restoration TBD • Other non-State sources • Trying to develop but not yet ready to budget • Foundation • Non-resident students/International enrollment • Contracts/grants

12. 05-06 Butte Revenue Projections • Pre May-Revise Estimate (List pg 2) $2.4 M • May Revise: • $130K in COLA • Our portion of Equalization TBD • PFE Restoration TBD • STRS deduct to be addressed <$428K>

13. Fixed Cost Increases • Employee Compensation • Step/Column/Longevity $ 500 K • Potential 05-06 Salary Increase $1.644 M • Health Benefit increase $ 461K • STRS cost transfer ???? • 04-05 Salary Increase <$228K> Subtotal @$2.4 M • Retiree Health Benefit increase$449K • 35% cost increase • GASB 43/45 future – ongoing budget - $1M (Current: One-time funds to liability $1.5 M) • Insurance/Contracts/Student-related @$550K Total (List page 4) $3.4M

14. Structural Funding GapRevenue inadequate to cover Expenses • Projected New Revenue $2.4M • Estimated Fixed Cost Increases $3.4 M • Deficit <$1.0 M> • Need to cut to make budget balance from fixed cost adjustments

15. Structural Gap04-05 Compensation Increase > Revenue • 04-05 Compensation Model Cost • Step/Column/Longevity $ 500,000 • 4.166% Salary Increase $1,271,449 • Health Benefit Increase $ 894,632 • Subtotal $2,653,745 • Two main sources to pay • 04-05 COLA increase $1,038,142 • 04-05 Growth increase $ 723,106 • 04-05 Deficit <$ 17,333> • Subtotal $1,743,915 • Deficit <$909,830>

16. New Message • Used to say • “We need to grow to fund our fixed cost increases.” • Now it looks like our message will be • “State COLA and growth revenue combined are not enough to cover the cost increase of our compensation model; therefore, we need to make program reductions to cover compensation costs as well as other fixed cost increases.” • Such as full-time faculty obligation, retiree health benefits, insurance, contracts, and utilities.

17. 05-06 Program Reductions • Asked for 2.5% at the beginning of the year • Expectation that we would use the Budget Planning Reserve funds to lessen the program reductions for 05-06 • Told programs we would use reserve funds for 05-06 if greater cuts were needed • Programs identified $1.2 M or 2.42% • List pages 5–9 • 4th year of reductions and no layoffs proposed for 05-06

18. Reductions: An Ongoing Requirement Year Amount • 05-06 $1.2 M • 04-05 $2.4 M • 03-04 $5.3 M • 02-03 $1.4 M

19. New Critical Needs Augmentations • Fixed costs increases do not include critical needs of new costs • Other new critical needs to be addressed: • Full-time Faculty obligation – 5 positions • Enrollment Management Initiatives to replace FTES • New Classified staff in high priority areas • Recruitment costs to replace retirements • Continuation of one-time funding for ongoing programs: Journalism, Staff Development, Marketing • More on the list…

20. New Critical Needs Augmentations • Nature of the Augmentations • Have-to-have • Revenue-related • Many are compliance driven • New buildings on line • Prior year commitments

21. Strategic Use of One-Time Funds • Using reserves (one-time funds) to fund augmentations on a temporary basis • Summary of Reserves • 5% Contingency – Unavailable for Allocation $3.9M • Transportation – Restricted $119K • Retiree Health Benefit Transfer– Restricted $1.5M • Unpaid Student Fees – Restricted $710K • Budget Planning – Available for budgeting $3.3M TOTAL (as of 3rd quarter) $9.6M

22. Strategic Use of One-Time Funds • Using reserve (1x funds) to cover critical augmentations • 2 ways being handled with reserve funds: • Permanent staff - allocate 3 yrs. of 1x funds • Provides some stability • Total: $2,239,008 • Use $672,496 in 05-06 • Use $783,256 in 06-07 • Use $783,256 in 07-08 • Other than permanent staff – 1x funds for 1 year • Total: $2,923,943 • Half due to Retiree Health Benefit contribution • 3 year TOTAL $5.163M • $3,596,439 needed in 05-06

23. Strategic Use of One-Time Funds • Sources to Pay:$5.1 M is more than we have in Budget Planning Reserve. Therefore, using both: • Reserve for Budget Planning $3.3M • Anticipated carryover funds from 04-05 – Amount TBA • Amount based on availability: Final1X Allocations will be based on the availability of funds from the Reserve for Budget Planning and the 04-05 year-end carryover. • Timing: Exact amount will become known during the summer when the revenue picture, fixed cost increases, and year-end carryover are known. • If more ongoing revenue/less fixed costs: Will move augmentations to ongoing funds if possible. • Continue some level of planning reserve: Both the BDC and the Cabinet request to maintain some level of Reserve for Budget Planning to provide a safety net into the future.

24. Reality of Using One-time Funds • Deficit spending • Temporary measure – one-time • Cannot be sustained over time to cover ongoing fixed costs • Context - District has over $6 M in cash outflow every month. • Using the entire Budget Planning reserve at once would only get us through ½ month. • Does not meet Board’s Budget Criteria for balanced budget

25. Future • Push for more revenue, lower fixed costs, and program cuts will be our expected practice into the future given our structural gap and the use of one-time funds for ongoing needs.

26. Budget Strategies used to date • Grow/Replace Enrollment • Increase Retention • Develop Alternative Revenue Sources • Any new funding used to minimize need for further cuts, not program expansion (eg. Equalization) • Reduce operating budgets • Freeze vacancies • Change benefits plans • Save one-time funds • Allocate reserve funds as possible

27. Future Program Reductions • Reduction likely to be more painful after 4 years of cutting • 05-06 planning for 06-07 • Planning process to identify reductions • Freezing vacancies likely again • Layoffs and program eliminations possible • Target % will be known in the late summer

28. Future Planning • Two ways to solve any budget crisis • Generate more revenue (State and non-State) • Growth Argument • Decrease costs to stay within available revenue • Reduction argument We need to work on both sides of the equation.

29. Planning is Critical • Often hear after the fact: “Well it wasn’t as bad as you said it might be” or “You always work it out.” • Implication – didn’t need to plan • Our collective objective is to maintain programs/services and positions for students and employees. • We all work very hard to plan and have options so that we can minimize the need for more drastic measures such as layoffs and program eliminations. • As a College we can’t maintain the institution without extensive planning and work by all groups and individuals.