Budget FAQs - 4/19/10
In response to the President’s budget framework discussion that was presented to the Mt. Hood Community College (MHCC) Board of Education April 1, 2010 the following is a list of frequently asked questions that have been posed to the president and other administrators during subsequent town halls, budget forums, conversations, e-mails and written suggestions. The questions and responses are categorized accordingly:
What is the estimated shortfall for 2010-11?
Currently, it is estimated that expenditures will be greater than revenues by approximately $5.8 million. A summary of the 2010-11 Estimated General Fund Budget is available online.
How did the College get itself into this budget shortfall position?
For the past five years, the College has spent more than received in revenues, thereby depleting General fund reserves. Two graphs that show how this happened are online: Comparison of MHCC Revenues to Expenditures and Ending Fund Balance.
As Mt. Hood Community College (MHCC) explores this budget crisis, how is this situation going to be brought in line with the timing of the contract negotiations? How can the members of the various associations trust that this is not an attempt to “force” a contract?
The budget timeline is specified by Oregon Local Budget Law, which requires that the MHCC District Board of Education adopt a budget on or before June 30, 2010. The Board has scheduled a meeting on June 23 to adopt the budget for the 2010-11 fiscal year. Oregon Local Budget Law also requires that the approved budget be submitted to the Tax Supervising and Conservation Commission (TSCC) at least one month prior to the Board adopting the budget. Therefore, the Board’s Budget Committee has scheduled a meeting on May 19 to approve the budget, which will then be submitted to the TSCC by May 21. The timing of the budget process is designed to be in compliance with Oregon law. Contract negotiations have their own timeline requirements, which are unrelated to the budget timeline.
What are the timelines to make adjustments to our budget?
After the budget is approved by the Board’s Budget Committee on May 19, changes may be made as long as such changes are less than 10 percent of the total expenditures for the fund. After the budget is adopted, it may be amended by either Board resolution or by a supplemental budget process.
How can we avoid being put in a state of reductions like last year?
It is the College’s responsibility to ensure that actual spending stays in line with budgets. Having adequate reserves allows the College to weather mid-year changes in revenue from the State without having to take mid-year cuts.
Can information on budget numbers and updates be posted on the Web?
Yes, information is available on the MHCC Web site.
If we don’t have money, why are we doing the following?
- Hiring consultants
- Investing in a master plan
- Investing in posters and other advertising around the campus
- Purchasing new furniture for offices
One goal of the budget process we are now undertaking is to enhance revenues and/or reduce costs in such a way that the core mission of the college is supported and sustained into the future. The business of the college continues. Singling out these items listed over others that could also be named is the essence of what a trade-off discussion is about.
Will the college have enough money to meet the July payroll?
This is a rumor that has been circulating for a number of months. Yes, the College is able to meet the payroll now and in the future.
How is grant money affected by the budget shortfall?
Grant money is restricted in its use by the terms of the particular grant in question. When the College accepts a grant, it agrees to abide by the terms of that grant. Therefore, grant money is not directly impacted by a budget shortfall in the General Fund, though grant programs do frequently face reductions in funding from the granting agencies on a case-by-case basis.
How does having a reserve affect our credit rating? How much of a reserve are we required to have, and who decides this amount?
Having adequate reserves is one of the criteria that bond rating agencies consider when determining the credit rating of the College. Neither Oregon Local Budget Law or accounting rules and regulations specify a required reserve amount. The more volatile the revenue sources and the more risk of unknown expenditures, the greater the need for reserves. The MHCC District Board of Education decides how much the College should keep in reserves and may specify either a specific amount or a percentage of expenditures. Reserves totaling one month’s cost of operations would be about 8.3 percent or close to $5 million.
In terms of our CX systems and staffing needs, when are we going to be able to do budget transfers, time sheets, etc. on CX? How can we better streamline our operations and avoid the “paper shuffle”?
Enhancements to the CX system are among the projects waiting for prioritization of funding from the to-be-formed Technology Advisory Council.
Are we looking at efficiency measures? What steps are we taking to make work and procedures as simple and efficient as possible, allowing us to conserve our resources for employees and students?
Improving procedures and efficiency is a major focus of the College’s new leadership team. Please e-mail suggestions to Dr. Ski or to email@example.com.
Enrollment and Financial Aid
Our enrollment is growing. Why are we experiencing a budget shortfall?
Enrollment increases do not necessarily mean increased revenue. Increased enrollment this year means increased costs for this year, while the state revenue only begins to count these students in their distribution formula next year. The state formula recognizes 40 percent of the students for the prior year and 30 percent for each of the two years before that. It takes three years for the full enrollment impact to be reflected in state revenue.
Why are we not getting more money from the state?
Having more students does not automatically translate into more revenue from the state. The state revenue pie for all 17 community colleges is fixed each biennium, when the state adopts its budget. MHCC only receives more money if the College adds more students than other community colleges, thereby increasing our relative standing among all community colleges in the state and resulting in a larger proportion of the state revenues.
How long does it take for us to see the revenue gained from the state due to the increased enrollment we are experiencing at the College?
It takes three years for the increase in students this year to be fully weighted in the state revenue distribution formula: 40 percent of this year’s increased enrollment will be included in the 2010-11 distribution formula for state revenue; 30 percent in 2011-12; and 30 percent in 2012-13.
If a person wants to register in January for a class that takes place in March, why can’t we take their money early?
We are working on the system to allow such early payments.
If we receive tuition payments earlier, how would that affect our cash flow?
Cash flow may be improved, depending upon the number of students that pay early. This figure is difficult to predict.
Do we experience a loss resulting from financial aid? If so, what is that annual amount?
For the current year, it is projected the College will have to repay to the federal government approximately $500,000 for students who received financial aid and withdrew (or quit attending) without giving back the financial aid. The College is responsible to the federal government for repaying this money if the students do not.
What can we do address this loss?
Starting with the Fall 2010 term, we will be instituting a change in disbursement of student financial aid. The change may entail disbursing aid on the seventh or eighth day of the term instead of at the beginning. This will allow faculty to verify attendance before we give out aid, which will greatly reduce the amount of aid students have to repay. This will support several objectives:
- Help keep students out of repayment situations.
- Get more financial aid to more students.
- Reduce avoidable costs to help the College budget.
- Detect students early who don’t attend so we can help them succeed.
These disbursement changes are consistent with the majority of colleges in Oregon.
Does the College receive a percentage of fees collected for Associated Student Government (ASG), technology or clubs?
The ASG fee (currently $2.50 per credit hour and increasing to $3.00 for the summer 2010 term), technology fee ($4.75 per credit hour for a maximum of 15 credit hours) and club dues and participation fees go directly and in their entirety to those respective activities.
Who negotiates the increase in ASG or technology fees?
The students request the increase in the ASG fees, and the MHCC District Board of Education approves the increase. An increase in technology fees would have to be proposed by the College president and approved by the Board to take effect.
If the ASG’s fund balance appears to be more than it needs for the year, why are we increasing it?
- The athletics program raises more than $100,000 a year. The funds it has raised during the past two years are all designated for specific sports and activities.
- The finance councils are working on facilities upgrades with the additional revenue that is in reserves (for example, the athletic locker room renovation and ASG legacy project), and next year they have budgeted to add drainage to the outfield of the baseball field. These facilities that are essential to the success of the teams and student life would not be realistic with district funds.
- The co-curricular finance council and athletics agreed that they should fund an Oregon Student Association (OSA) campus organizer to help with student advocacy issues, which will cost $33,000 per year.
- Athletics will be hiring an intramural coordinator to start intramural sports which will also be a new and ongoing expense of around $20,000 annually.
- Two employees who had been funded out of the district that directly supported athletics are now included in the ASG fund budget for next year.
How do MHCC’s ASG and technology fees compare with similar fees at other community colleges?
Information about how MHCC’s tuition and fee structure compares to that of other community colleges is available online on pages 27-28 of the 2009 MHCC Fact Book..
Can we receive clarification on what the technology fees can and cannot be used for?
A Technology Advisory Council is in the process of being formed. This committee will be charged with determining the priority for funding of technology and technology-related projects. Currently, the Technology Fund is dedicated to technology projects.
Are these fees reimbursable through student aid dollars?
Yes, the ASG and technology fees are covered by student financial aid.
What other avenues have been examined to increase the College’s revenue? Have we considered increases in parking fees, tuition rates and facilities rental fees?
These sources of revenue are included on the trade-off list.
What does it cost to operate the College?
The College’s General Fund revenue is expected to be $56.8 million in 2010-2011, while the total cost to operate the College – including the federal student loan program, federal and state grants and other funds – is about $82 million.
What are the sources of income that produce our cash flow?
The College’s General Fund gets about 57 percent of its funding from state support and property taxes; 36.6 percent of the College’s income is generated by tuition and fees; and the remainder is primarily from administrative charges on grants, interest earnings and other miscellaneous sources. A graph of the General Fund revenue sources is available online.
Why is the college placing most of the burden on students?
An important factor for anyone deciding on our tuition increase proposal is that the Pell grant increase for next year would be greater than a $5/credit tuition increase for many of our neediest students. For full-time students receiving full Pell grant, it is the taxpayer and the federal government, through Title IV financial aid, that is covering the tuition increase to the tune of $200,000 per year for each 1,000 full-time students receiving a full Pell grant.
Source of data on Pell grant maximum amounts: http://studentaid.ed.gov/PORTALSWebApp/students/english/PellGrants.jsp.
- Maximum Pell grant for 2009-10 is $5350.
- Maximum Pell grant for 2010-11 is $5550.
- That’s a $200 per year increase.
- A $5/credit tuition increase would be $60/term for a student in 12 credits.
- For Fall-Winter-Spring, a student in 12 credits would pay $180 more in tuition for the year. The student would come out $20/year ahead despite the tuition increase.
- Another example: a student in 14 credits each term Fall-Winter-Spring would pay 14 X 5 X 3 more per year, or $210 more a year. The net cost to the student after the Pell grant would be $10 per year to cover the tuition increase. Very minimal impact. Under 3 cents a day.
- Are the costs of not having reserves going to outweigh the risk?
The plan is to restore some minimum level of General Fund reserves in 2010-11.
If the Board is requesting a 5-percent reserve, what legal obligation does that have on our organization?
The MHCC District Board of Education is the governing body of the College, so its requests are typically honored. Board resolutions do not have the same force as state or federal laws. There is currently no official Board policy requiring a specified reserve level.
We have heard that a large part of our costs are personnel. What are the percentage and comparison of human costs (salaries, benefits, etc.) as compared to non-human costs?
Salaries and fringe benefits account for 80 percent of the College’s costs, with only 20 percent being used for supplies and materials, utilities, debt service and transfers to other funds.
How often is an actuarial study conducted on the Early Retirement Plan?
The requirement for an actuarial study of the early retiree plan is new this year and has to be conducted every two years.
PERS Pension Bond Fund
Why are we taking money out of this fund?
General Fund money was transferred into this fund as a reserve against the Oregon Supreme Court settlement of the last legislative changes to the PERS system. The Oregon Supreme Court rulings did not trigger a repayment requirement, so we can now use that money at our discretion.
Every time the economy worsens, there is a clamor about the Public Employees Retirement System (PERS). How likely is it that PERS will undertake another major restructuring to resolve issues down the road?
Though we cannot speak for PERS, to date, PERS has not given any indication of pursuing such an undertaking.
How will tapping into this money affect retirement benefits?
This money is not the same as either the employer payments of the employee’s 6 percent contribution to the IAP or the employer’s obligation to the PERS system. Retirement benefits are determined by PERS and not by the College.
It was mentioned that “trade-offs” may need to be made to weather this financial crisis. Can you give examples of “trade-offs”? Have these trade-offs been discussed with president’s cabinet, administrators, etc?
Please see the list of trade-offs. Yes, there have been College-wide discussions with all employees and these are on-going.
Have we considered additional cost-saving measures such as working four-day weeks, increasing mandatory furlough days or adding voluntary furlough days?
Yes, these options are part of the trade-offs we are considering.
Are there classes, programs or services that are lower priority than others?
This is one of the many topics we hope to discuss with the larger College community as we weigh the trade-offs to balance this budget.
Do we have any assets that could be sold?
We may. However, the process for selling assets takes longer than one year and may not immediately help the 2010-11 budget. Also, such sales proceeds are a form of one-time only revenue and, as such, are not a sustainable source to cover on-going operating costs.
Trust Fund Money
- In the fall, when we are waiting for our revenue to come in, can we use any of these funds?
The entire Trust Fund has about $300,000 in it, and a portion of it is restricted. More information is available online.
- Why are these funds not available to assist with cash flow issues until we receive our state revenue?
A portion of these funds is restricted by trust agreements. A more detailed description of the Trust Fund is available online.
For More Information:
Attend the upcoming Budget 101 training session and budget forums:
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