D. Smith February 24, san josé evergreen COMMUNITY COLLEGE DISTRICT - PDF

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D. Smith February 24, 2015 san josé evergreen Economic Review & Outlook District Property Tax Overview State Budget Proposal Rainy Day Fund Proposal Employment Demographics 50% Law Review Board

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D. Smith February 24, 2015 san josé evergreen Economic Review & Outlook District Property Tax Overview State Budget Proposal Rainy Day Fund Proposal Employment Demographics 50% Law Review Board Principles, Review, Discuss, Take Action Mark Schniepp, Ph.D. Director, California Economic Forecast Dr. Schniepp served as senior economist to Kathleen Connell, the California State Controller from 1999 to He taught as a past faculty member of the Department of Economics at the University of California, Santa Barbara, teaching intermediate micro economic and macroeconomic theory. He was the keynote speaker at the Association of California Community College Administrators Governor s Proposed Budget Workshop in January 2015. No longer a recovery; nearing the top Nearly all cylinders are firing Jobs Spending Business investments on equipment, software Exports Even the government sector has stabilized The recovery is over. We are now experiencing the expansion phase of the business cycle. Unemployment rates are falling, and moving toward full employment by the end of Most economic indicators are rising at rates consistent with a healthy economy. The only laggard sector is housing. Keep in mind that we are 5+ years on the plus side of the economic cycle. Well It s too far away to predict with any confidence. But statistically, it would occur in 2018. GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. A strengthening state economy is continuing to push revenues higher. Under Prop 98, most of those revenues are dedicated to K 12 schools and community colleges. The year is the last full year for Prop 30 revenues. The sales tax rate of ¼% expires at end of Prop 30 sunsets at the end of 2018 (approx. $1.3M). $120 $100 $80 Billions $60 $40 $20 $ Source: California Municipal Statistics, Inc. and Santa Clara County; Data from 1989 to 2014 12.0% 10.0% 8.0% 6.0% 10.4% 6.2% 8.4% 9.3% 9.3% 7.2% 8.5% 8.8% 4.0% 2.0% 1.9% 2.9% 2.6% 3.2% 0.0% 2.0% 4.0% 4.0% 6.0% 6.0% 8.0% 10.00% 8.47% 8.82% 8.00% 7.31% 7.83% 6.77% 7.69% 6.00% 5.28% 5.36% 4.00% 2.46% 2.95% 3.21% 2.00% 0.00% 2.00% % % August November February April June $373M: Growth and apportionment (not SJECCD) $200M: Student success & student equity Split between student success & student equity Based on MIS reporting & number of students served Subsequent year funding & match requirements may change annually $77M: Career technical education & apprenticeship $40M: Prop 39 (Clean energy) $95M: Deferrals (not SJECCD) $353M: Prior mandated costs One time dollars in Plus $50M one time dollars in $500M: Adult education (AB86) Assumes Governor s Proposed Budget at January 2015 is adopted. Anticipate property taxes will again be 3%. Use added resources for Compensation Board Initiatives (staffing) Global Ends Policy Initiatives Allocate State One Time Dollars $500K San Jose City College $500K Evergreen Valley College $200K Workforce Institute $3M District Financial Stabilization Fund $25,000, % Actual Projected 24.66% 23.23% $20,000, % 25.00% $15,000, % 15.83% 20.00% $10,000, % 10.50% 9.10% 9.70% 14.65% 14.80% 8.39% 7.81% 10.99% 11.59% 14.39% 15.00% 10.00% $5,000, % 5.00% $0 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Est. 15/16 Est. 16/17 Est. 17/18 Est. 0.00% General Fund $ (Fund 10) $16,000, % $14,000,000 Actual 16.14% Projected 15.15% 16.00% $12,000,000 $10,000,000 $8,000,000 $6,000, % 11.80% 10.50% 9.70% 9.10% 14.80% 8.39% 7.81% 14.39% 11.59% 10.99% 6.22% 12.69% 13.11% 11.30% 14.00% 12.00% 10.00% 8.00% 6.00% $4,000, % $2,000, % $0 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Est. General Fund $ (Fund 10) 15/16 Est. 16/17 Est. 17/18 Est. 0.00% $16,000, % $14,000,000 Actual 16.14% Projected 16.00% $12,000,000 $10,000,000 $8,000,000 $6,000, % 10.50% 9.70% 9.10% 14.65% 14.80% 8.39% 7.81% 6.22% 11.59% 10.99% 14.39% 12.69% 10.16% 8.68% 6.95% 14.00% 12.00% 10.00% 8.00% 6.00% $4,000, % $2,000, % $0 01/02 02/03 03/04 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 14/15 Est. General Fund $ (Fund 10) 15/16 Est. 16/17 Est. 17/18 Est. 0.00% Characteristics Requires annual transfer of 1.5% of General Fund revenues to State Budget Stabilization account. Caps Budget Stabilization account at 10% of General Fund revenues. Allows limited use of funds in case of emergency or if there is a State budget deficit. Governments use budget reserves to save money when the economy is doing well. This means that money is saved instead of being spent on public programs during these periods of time. When the economy gets worse and their revenues decline, governments use money that they saved to reduce the amount of spending cuts, tax increases, and other actions needed to balance their budgets. In other words, if a government saves more in reserves when the economy is doing well, it spends less during that time and has more money to spend when the economy is doing poorly. Characteristics Seeded in with $3M from pay down of outstanding mandated claims. (Assumes January 2015 Governor s proposal is funded in Budget Act.) Establishes as a priority $1M of future Property Tax revenue above 3% in and Caps District Financial Stabilization Fund at $5M. MSC Classified Faculty There shall be expended each fiscal year for payment of salaries of classroom instructors, 50% of the District s current expense of education. Included (Numerator) Classroom Instructors Instructional Aides Salary & Benefits Salary & Benefits Denominator Costs from above General Administration Counseling & Library Transfer Center Utilities Exclusions (Not in Equation) Contract Education Bookstores Constructions Student Activities Student Grants san josé evergreen Classroom Supplies Conferences Staff Development Reassigned Faculty Time Liability Insurance Capital Outlay Leases Lottery Proceeds Cafeteria 56% 55% 54% 53% 52% 51% 50% 49% 48% Actuals Statewide Average Basic Aid Average Bay 10 Average 51.75% 51.43% 51.41% 51.50% 51.37% 52.15% 51.79% 51.82% 52.01% 50.92% 52.01% 51.77% 52.09% 51.85% 51.52% SJECCD 54.99% 52.90% 54.15% 55.36% 51.13% Statewide Average Basic Aid Average Bay 10 Average 16.2% 18.7% 17.1% 17.6% 17.5% 14.4% 15.8% 15.8% 17.3% 21.0% 12.9% 16.5% 16.8% 17.7% 19.7% SJECCD 6.5% 10.7% 12.3% 15.1% 16.2% What They Are General budget guidelines Overarching values to help frame and guide budget deliberations Overarching values for prioritization and resource allocation Provide a standard against which our fiscal performance will be judged Current Board of Trustees Principles 1. Trustees to provide the Chancellor & staff with policy framework for managing and appropriate fund balance & structural balance 2. Validate student centered approach 3. Compliance with accreditation standards 4. Distinguish between on going vs. one time savings & needs 5. Add back slowly and strategically to maximize program initiatives 6. Seek efficiencies and revenue opportunities san josé evergreen 7. Maintain a minimum 7% Unrestricted General Fund reserve New Board of Trustees Principles for Consideration 8. Establish and maintain an employee salary and compensation structure that is competitive among the Bay 10 Community College Districts 9. Establish a $5M one time District Financial Stabilization Fund Board authority required to access Access during economic downturn Replenish in healthy fiscal times san josé evergreen New Board of Trustees Principles for Consideration 10. Establish and maintain a balanced funding model: Compensation Board Initiatives (staffing) Global Ends Policy Initiatives san josé evergreen 11. Property Tax projections will be based on 3% growth and will be adjusted each period based on County Tax Collector updates. New Board of Trustees Principles for Consideration san josé evergreen 12. Adopted Budgets and Quarterly Reports will include long term revenue and expenditure forecasts, enrollment experience, and financial risk analysis. (BP6200) Review Board Discussion Recommendations Take Action GDP is commonly used as an indicator of the economic health of a country, as well as to gauge a country's standard of living. The monetary value of all the finished goods and services produced within a country's borders in a specific time period, though GDP is usually calculated on an annual basis. It includes all of private and public consumption, government outlays, investments and exports less imports that occur within a defined territory. Currently Director of the California Economic Forecast in Santa Barbara. Prepares economic analysis and county level forecasts for Cal Trans, Kaiser Permanente, the California Association of Realtors, and the Southern California Association of Governments. Developed residential and office sector forecasting models for strategic decision making. Served as senior economist to Kathleen Connell, the California State Controller from 1999 to Served as Director of the Economic Forecast Project at the University of California, Santa Barbara. Taught as a past faculty member of the Department of Economics at the University of California, Santa Barbara teaching intermediate microeconomic and macroeconomic theory. Received a Ph.D. from the University of California, Santa Barbara. Source: OPEB Trust Agreement Covenants Section 10.02(c) of the Trust Agreement between the District and the bondholder states, The District shall maintain an unrestricted general fund ending balance at June 30 of each year that is equal to or greater than 5% of its total unrestricted general fund expenditures as reported in its annual Financial and Budget report on form CCFS 311 for such Fiscal Year. The OPEB Trust pays the annual retiree benefits of approximately $3.5M. Fund 10 contributes $2M annually towards the debt service associated with the bonds that funded the OPEB Trust. Currently, Fund 10 realizes at $1.5M savings. (Cost of benefits less the cost of debt service.) At some point in the future, the District will cross the break even point (e.g., retiree benefits cost less than $2M because of reduced population) and Fund 10 will still have to pay the $2M in debt service. Source: School Services of California, Community Colleges Update, January 23, 2015 In a report released on January 13, 2015, four days after the release of Governor Jerry Brown s State Budget proposal, the Legislative Analyst s Office (LAO) concludes that the Governor s State Budget proposal for is generally prudent and, if enacted by the Legislature, could help avoid the boom and bust budgeting of the past. Source: School Services of California, Community Colleges Update, January 23, 2015 LAO, Through Proposition 2 and the Rainy Day Fund, the Governor recognizes that California s economy remains cyclical and will at some point reverse course. The LAO notes that there is upside potential in the Administrator s revenue estimate for the current year. Citing the strength of the revenues collected in December, the LAO concludes that a revenue gain of $1 billion to $2 billion in the current year seems likely and an even larger gain is possible. Source: School Services of California, Community Colleges Update, September 5, 2014 A Basic Aid district needs a larger reserve, since its dependence on property tax revenues leaves it more vulnerable to budget fluctuations than state apportionment districts. Source: National Advisory Council on State and Local Budgeting Practice Governments should maintain a prudent level of financial reserves to protect against reducing service levels The policies should establish how and when a government builds up reserve funds and should identify the purposes for which they may be used. Source: California Community Colleges Chancellor s Office Update, January 16, 2015 Impact of Forced Rationing of Education During the Recession Categoricals cut $313M Apportionment cut $190M Apportionment cut $385M Received no cost of living increases between and , creating a cumulative loss of purchasing power total 16.3%. Source: California Community Colleges Chancellor s Office Update, January 16, 2015 Impact of Forced Rationing of Education During the Recession California Community College enrollment decreased by 585,000 students to 2.3M from to due to severe budget cuts. Course sections were reduced by approximately 25% due to State funding reductions. From to , the Community College system reduced summer and winter sections by nearly 50%. Presentation: Dr. Rita Cepeda, March 26, 2013 Budget cuts over the past four years have resulted in reductions in the numbers of SJECCD s student enrollment, full time equivalent students, seat count, and course sections; and an increase in wait lists for course enrollments. Presentation: Dr. Rita Cepeda, March 26, 2013 Colleges have been forced to: Reduce course offerings by roughly 15% resulting in hundreds of thousands of students being turned away. Increase class sizes Lay off adjunct faculty and other staff Institute furloughs Spend down reserves and borrow money to manage cash flow Historical FTES District wide 12.0% 10.0% 8.0% 8.4% 9.3% 9.3% 8.7% 9.0% 7.2% 8.2% 8.5% 8.8% 8.1% 6.0% 5.1% 4.0% 2.0% 3.6% 3.3% 2.9% 2.6% 3.2% 2.5% 0.0% 2.0% % 4.0% 6.0% 8.0% District Assessed Valuation 3.3% 3.0% 4.0% 6.0% District Property Taxes Total $15.7M Excess Excess above FTES cap Excess as a result of FTES below cap $12.5M $3.2M Talking Points FTES cap 13,052 Actual FTES 12,366 Below cap 686 Each FTES worth $4,636 SJECCD from the bottom Districts with larger ending fund balances 5 th 9 th 24 th 33 rd 35 th Ensure all students, especially those with educational and/or socioeconomic challenges, have the skills and capabilities to be successful in the next stage of life. Career Development Transferability College Readiness Institutional Excellence Student Success College Experience 1. Basic skills completion 2. Degree completion and/or transfer ready status 3. Alignment between degree offerings and workforce needs 4. Enrollment in targeted workforce programs 5. Increased corporate partnerships 6. Increased revenue from contract training 7. Increased community awareness of District programs 8. Increased student goal attainment 1. Degree completion and/or transfer ready status 2. Number of ATD programs approved by the state 3. Number of students completing ATD degree programs 4. Student transfer rate 5. Number of online courses offered 6. Enrollment in online courses 7. Proportion of student demographics to the surrounding community 1. Degree completion and/or transfer ready status 2. Number of ATD programs approved by the state 3. Number of students completing ATD degree programs 4. Student transfer rate 5. Number of online courses offered 6. Enrollment in online courses 7. Proportion of student demographics to the surrounding community 1. Employee productivity 2. Employee retention 3. Number of safety incidents on campuses 4. Employee satisfaction with work environment 5. Employee satisfaction with District services 6. Number of employee performance reviews completed 7. Institutional Learning Outcomes 8. Course productivity rates 1. Persistence 2. Course completion 3. Basic skills completion 4. Student enrollment 5. Student term to term retention 6. Student persistence rate unit completion 8. Implementation of SSSP resources Student Ed Plans and Degree Audit, orientations, assessments, etc., and reporting of related MIS data 1. Employee and student satisfaction with campus safety 2. Student satisfaction with campus environment 3. Student engagement 4. Faculty and staff satisfaction with engagement 5. Student academic engagement
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