Comments to the Board of Education 4/1/10
Good morning, colleagues!
Following are the comments I gave at the Mt. Hood Community College District Board of Education meeting on April 1. As you know, I am committed to always being open, honest and transparent. These comments are being shared with you in that spirit.
While I did ad-lib some during the presentation, for the most part, the comments reflect what I actually said during the meeting. If you have any questions or need additional information, please let me know. Thank you!
Good evening, board members! Even though you are not meeting as a budget committee until I propose the College’s budget to you in May, I hope you will listen and hear what I am going to discuss with you tonight as if you were our budget committee. Thank you for meeting with me tonight to listen to an overview of our College’s current financial situation and for allowing us to change this budgeting process where we will now have the framework presented, then I will propose a budget and then you will act on a budget. This new way will allow for more meaningful input, I believe.
Before I begin, please note that tonight’s comments are only intended to frame the upcoming month-long conversations we will have about the College’s budget and determining – TOGETHER – how we are going to strategically, mindfully and imaginatively address our situation. Please let me reiterate that tonight’s comments are only intended to provide you with an update on our findings and frame the process we will engage in over the next month. The focus of this message and our time together this evening is not to focus on solving the challenges and opportunities we face – there will be forums for those discussions.
Having had the honor and privilege to serve you and this College for the past year and a half, I learned quickly that this learning enterprise is very fortunate to have intelligent, creative, selfless and collaborative professionals committed to finding solutions to ways to excel at providing innovate education and training engagements rather than placing blame. Therefore, I will share my framework with you and look forward to engaging all of us in this room and beyond in productive, solution-oriented discussions that will enable us to demonstrate an agility and responsiveness to exceed the ever-changing requests from our service region.
As you know so well, we spent a large part of the first year of my tenure listening to hundreds of internal and external constituents through nearly 100 town hall meetings. This active engagement afforded us, as a college community, an opportunity to develop a defining three-year strategic plan entitled BE STRATEGIC.
Through that process, we learned that our communities needed us to commit ourselves to TRANSFORMING LIVES AND BUILDING COMMUNITIES by focusing on three goals: (1) teaching and learning, (2) community engagement and (3) resource development.
In an effort to move us forward over the past year, I implemented many of the enhancements you and our organization (through my SWOT analyses) told me were needed. I listened to our College community and, in general, made enhancements to our organization that are preparing us for the future. Knowing we were deficient in some areas, I hired consultants to review our operations and make recommendations on how to improve our systems/activities and attracted a new leadership team to the institution. For example, currently, of the six professionals who serve on president’s Cabinet, only one, Nancy Szofran, was on Cabinet before I arrived, and two of them have been here less than one year. Currently, of the 13 academic deans and associate deans, only four were in those roles before I arrived while the others have only been in their roles since September 2009.
Since these professionals clearly represent a new leadership team for the College, we have spent several months reviewing our budgets and, more intently over the past three months, have spent a significant amount of time examining and learning more about ways to enhance our budgeting and planning processes. Colleagues, I am very proud to inform you that these new leaders, in cooperation with a dedicated cadre of College employees, are committed to being a part of the solution on becoming a high-performing organization. In fact, during the past academic year, these individuals and others worked very hard at eliminating $800,000 of mid-year cuts without laying off individuals, a promise of mine until we could get a better understanding of the budget and engage the entire community in providing solutions to our situation. For the $500,000 in furlough days taken by most employees and a permanent reduction of three days by the non-represented group, I want to thank them publically for their individual and collective sacrifices!
We are currently estimating our budget shortfall to be approximately $5.8 million with no reserves or contingency in 2010-11:
- As you can see in the chart on the white page, beginning in 2005, yet another treasure we inherited, the College has been spending more money than it receives in revenue. As a result, the reserves in the General Fund are now fully depleted.
- To give you a sense of the magnitude of the budget challenges we face, consider that $5.8 million represents about 10 percent of the total General Fund budget.
- If we tried to fill this $5.8 million hole with just a tuition increase, we would have to increase tuition by $23 per credit hour, a figure the college community and you do not have an appetite for.
- If we tried to fill this $5.8 million hole by just reducing the number of employees we have, we would lay off:
- 53 of our current 156 full-time faculty; that would be a full one-third of our teachers; or
- 79 (50 percent) of our 154 classified staff; or
- All the vice president and dean and still have a hole of almost $2 million left to fill
Within this sobering context, the purpose of tonight’s meeting is to:
- Share our estimates of revenue for the 2010-2011 budget year
- Outline the assumptions we used in determining the expected costs for the next fiscal year
- Provide you with a list of trade-offs that we are considering as we explore all options for balancing the budget
- Discuss next steps in the budgeting process
Revenue: Please take a look at the purple page titled “General Fund Budget Estimates,” which is simplified on one page.
- We are in the second year of the biennium, so the State of Oregon’s estimate of revenues is fairly reliable and not expected to fluctuate much. We also assumed the usual 3-percent increase in property taxes.
- We are counting on enrollment holding steady into next year after this year’s increase of 11 percent. Therefore, the only change in tuition and fees assumed in this estimate is the additional $650,000 expected to be raised by the new College service fee per credit-seeking students, increased distance learning fees and increases in certain course fees.
- Other revenue (e.g., indirect costs, interest earning accounts, etc.) is expected to hold steady at historical averages.
- What is missing is the one-time revenue we received this year from the energy credits of $850,000 and the transfers into the General Fund from other funds.
- The result is that we expect the amount of money we have next year to be $1.7 million less than the amount we will receive this year.
- As you know, approximately 80 percent of our costs are spent on salaries and related benefits. Our estimates for 2010-11 only include the step increases for eligible employees and the increase in the health insurance premium. No other compensation increases are assumed, and we will not be including any adjustments in COLAs and other items in this budget.
- Despite predictable inflationary cost increases, we are assuming that we will not spend any more on materials and other services next year than we are spending this year.
- We have doubled the capital outlay budget for maintenance and facilities, and at $347,500, it remains woefully inadequate to meet our needs, as the recent electrical emergency clearly demonstrates. As you know colleagues, the electrical emergency and its temporary and possible permanent fix are part of the more than $350 million deferred maintenance expenses we currently face. This issue will be addressed at the next MHCC District Board of Education meeting.
- Debt service includes the payments on the new debt for the Johnson Controls energy projects, which is offset by a corresponding reduction in estimated utility costs.
- In addition, we have the usual General Fund support to programs tracked in other funds. The $1,350,000 for maintenance projects, required match to the federal student loan program and support for the early childhood program are unchanged from this year.
- The result is expenditures are estimated to total $62.7 million, which is $4.1 million higher than the current year.
In summary, the revenue decline of $1.7 million coupled with the expenditure increases of $4.1 million cause a projected budget shortfall of $5.8 million.
Since I’ve arrived and, especially during the last faculty negotiating session, I heard often that (historically) there is money “hidden” in other funds. Since I want to be as open and transparent as possible about all the College’s resources, I am sharing with you that various individuals/teams identified approximately $4 million in other funds that could legally be transferred back to the General Fund. These funds are strictly one-time monies that should NOT be used for ongoing and recurring operational costs. Therefore, we will be proposing that, if those funds are tapped, they be used to create the General Fund reserves. Using one-time monies to establish reserves is a wise financial approach as borne in financial literature and used by other institutions of higher education. This approach also means the cuts do not have to be even bigger than the $5.8 million already identified.
List of Trade-Offs. Please see the golden rod page. It is not my intention to go through this list, because each of you and those behind me will comb through these within a matter of minutes and hopefully provide other trade-offs we may consider.
- We are defining a “balanced budget” as one in which we only spend as much as we actually receive in revenue.
- The budget can be balanced through a combination of increasing revenue and reducing expenditures.
- The list of trade-offs captures our best thinking on the wide variety of OPTIONS available to us to bring this budget into balance. I want to make this clear: The trade off list we are presenting is just a number of ideas for possible consideration. Nothing - let me repeat - nothing on this list is definite. I know there will be a lot of discussion, especially among our faculty about this list and rumors will take on a creative life of their own; however, I felt it necessary to list as many items as possible so we can begin a healthy, lively and solution-oriented discussion about these and (hopefully) hundreds of other ideas to balance our budget. Again, even though I know some faculty will have a hard time believing me as I say this, nothing (and I mean nothing) on this list should be seen as a target on anyone’s back, as I heard mentioned during full-time faculty negotiations last year. All of the trade-offs listed on this sheet are intended to be seen as discussion starters not stoppers.
- Revenue-generating ideas include not only increasing tuition and fees but COULD include instituting a charge for parking, increasing charges to third parties who use our facilities and working with the Foundation Board members on how they can partner with us to address these budget issues.
- Not all expenditure-cutting options are in the Board or management’s ability to decide. Since 80 percent of our costs relate to salaries and benefits and since the majority of our employees are represented by a collective bargaining unit, the trade-off list indicates choices that could only become decisions through a collective bargaining process and they are asterisked on the page.
- These are very hard choices that we will present to you for your final decision. We have tried to be as comprehensive as possible in listing those options that have real potential to be implemented in time to realize savings in the 2010-11 year.
- There were many other good ideas presented throughout this planning process with numerous employees. In addition, we used the lists of great ideas e-mailed to us early this year during our mid-year budget crisis and have combed through them to determine which ones would be able to assist us in the 2010-11 year. I especially want to thank Marilyn Pitts who has kept us focused on this list.
- We are also planning to post the trade-off list onto the Web site and invite that MHCC employees, students and board members to indicate the ones we should implement. It is our hope that we can develop a combination of strategies to employ to balance the budget.
- Now that we have told you the magnitude of the budget shortfall, we will spend the month of April listening to feedback, questions and ideas. Unfortunately, we had to postpone the meetings this week because of our electrical emergency and the first week of classes. We are rescheduling the meetings held for this week to next week. To that end, we have scheduled various open budget forums both at the Gresham and Maywood Park Campuses. In addition to these forums, we will be engaging all employees in a creative, enterprising discussions through division meetings and other forums. We will also engage our local business, education and government leaders throughout our service region.
- As you would expect, we are going to use all available methods of communication to keep everyone informed about our budget challenges and the emerging solutions that are being presented by everyone who cares deeply about this life-changing institution.
After engaging our community in positive-spirited discussions over the month of April, we will present our proposed balanced budget and budget message earlier in May, enabling you time to “sit with it” before coming to the Budget Committee on May 19.
As always, I want to thank you, as elected volunteers, for your support and dedication to our mission of transforming lives and building communities. I remain confident that we – TOGETHER – will not only find ways to balance our 2010-11 budget but find ways to ensure our future is one we can sustain and that makes all of proud to be associated with this institution of higher education!
“We are all faced with a series of great opportunities brilliantly disguised as impossible situations.” – Charles R. Swindoll