Community College Funding: How it works and why it matters

Community College Funding: How it works and why it matters California Community College Leadership Academy (3CLA) September 21, 2017 Kathy Blackwood, Executive Vice Chancellor, San Mateo County Community College District Student Learning Outcomes (SLOs) Acquire better understanding of: How K-14 education is funded in California How CCC districts are funded Acquire a working knowledge of: The basics of FTES/WSCH The very basics of fund accounting and the BAM Where to look for CCC fiscal information

Understand where were going from here: New initiatives: Strong Workforce, Guided Pathways, Promise Programs New funding formula California Public Education Structure University of California (UC) California State University (CSU) K-14 education in California Proposition 98 passed in Nov. 1988 K-12, the big dog why? Community colleges Political strengths/Political weaknesses Prop 98 share California Community Colleges 2016-2017 How many districts?

72 How many colleges? 114 Newest Compton College How many centers? 76+ Grandfathered - 37 State Approved - 39 Newest Rancho Cordoba Education Center Los Rios CCD March 2016 California Community Colleges 2017-2018 Total system-wide budget Approximately $7 billion Community Supported (Basic Aid) Districts How can you tell theyre community supported? Arent we all? Nine districts as of P2 2016-2017

Mira Costa, South Orange, Marin, San Mateo, San Jose-Evergreen and West Valley-Mission In as of 16/17 (P2) Napa College, San Luis Obispo, Sierra College But they were in at 15/16 P2 and out by 15/16 Recalc Funding Rates 2016-2017 UC - $26,391 270,000 students 10 colleges CSU - $14,723 480,000 students 23 colleges K-12 - $11,601 6,227,000 students 10,453 schools CCC - $7,949* 2,127,000 students 1,186,000 FTES

* - includes state GF, property taxes, student fee revenue and unrestricted lottery funds source CCLC Review of the CCCCO Organization Structure BOG 1102 Q Street Appointments State Agency New Chancellor! Eloy Ortiz Oakley of LBCC Power compared to UC & CSU? Governance Structures How California Funds K-14 Education Proposition 98

Passed by voters in November 1988 K-14 receives a share of state revenues collected Minimum funding guaranteed by formula Three tests Community college system receives approximately 11% share of Prop 98 revenues Minimum guarantee percentage of Prop 98 -10.92% However, not a guarantee Legislature can suspend to fund at a lower level Minimum guarantee has also become maximum guarantee Funding follows state economy When economy is good, increases in funding When economy is poor, decreases in funding Whats wrong with this reality for our colleges and students? How the CCCCO Funds the Districts Unrestricted General Fund

Principal Apportionment process Exhibit C Becomes Exhibit E once final recalculated certification (R1) Eight months after close of fiscal year (Feb P1) SB361 Funding Allocation Model - 2006 Replaced Program Based Funding from AB1725 Differences of SB361 methodology compared to Program Based Funding formula Other CC District source of Funds Categorical program entitlements (SSSP, DSPS, Student Equity, BFAP),competitive grants, regional grants (SBDC), regional collaborative (adult ed), Economic Development, special purpose funds, etc. More often based on FTES counts and students served counts as well as Pell grants, unemployment, etc. SB361 Funding Formula Equalized FTES marginal funding rates

Credit FTES - $5,151.24 (17/18) 6 districts grandfathered base rate is higher Ex.- West Kern = $6,766,65/cr. FTES Non-credit - $3,097,58 (17/18) Career Development/College Prep CDCP $5,151.24 (17/18) Old non-credit enhanced Now equalized with credit rate Base Allocations for colleges and centers based on size Acknowledges economies of scale Minimum level of service to operate a college Acknowledges rural (small) district funding need/support SB361 Funding Formula Challenges Large recent state investment in specialized programs Categorically funded

Thats great for our targeted student needs Declining support for core funding for unrestricted general funds Cost of Living Allowance (COLA) Growth/Access (earned) Base Augmentations Budget challenges for districts unrestricted general funds due to state primarily investing new Prop 98 funds for CCs in new Categorical Programs Small or no COLAs in the foreseeable future Implicit Price Deflator formula New Growth/Access Model Constrains many districts to miniscule growth opportunities regardless of unfunded FTES and actually serving more students What are budgets? Authorization to spend

Approved by Board of Trustees Estimate of revenues and expenditures Salaries & benefits Other expenses Allocation of resources What are Budgets? Maximum amount that can be spent in a major classification Transfers and revisions must be approved by a 2/3 majority of the board This includes transfers from contingency Title V 58307 Budget Calendar On or before the 15th day of September of each year the governing board of each community college district shall prepare and keep on file for public inspection a statement of all receipts and expenditures of the district for the preceding fiscal year and a statement of the estimated total expenses for the district for the

current fiscal year. Title V 58300 Budget Calendar Jan. 10: Governors Budget May 15: Revised Governors Budget June 30: District Tentative Budget June 30: State Budget Sept 15: District Final Budget Common Budget Builders COLA Compensation settlements Deficit factor Productivity

Growth/Decline in FTES (impacts categorical, lottery, and adjunct budget) Benefits Interest Supplies/equipment Lottery Other operating Utilities Reserves for contingency Common Differences

Redevelopment funds Capital construction Bonds/other debt Debt payments Contract education Contract instruction Leased space revenue Leased space costs Farms/other industries Golden Handshakes

Budget Cuts Personnel: Hiring freeze Managed hiring No OT/Comp time Productivity/Growth Increase class size Grow where? Eliminate low performing programs Operations Utilities Conference/travel Renegotiate contracts Increase revenue What are you no longer going to

do? Building Blocks: Adjunct Budget Definition of FTES One Full Time Equivalent Student is defined as 525 contact hours over an academic year An academic year is defined as 35 weeks 525 hours per year / 35 weeks per year means that a FT student is in class 15 hours a week One Weekly Student Contact Hour (WSCH) is one student in class one hour per week for 35 weeks Building Blocks: Adjunct Budget Definition of Productivity or Load Weekly Student Contact Hours per Full Time Equivalent Faculty (some use FTES/FTEF) One full time faculty teaching 15 hours per week with 35 students in each class is generating 525 WSCH/FTEF Projecting Costs

16/17 Hourly teaching budget development model FTES WSCH 6,867 103,005 Prod Target 500 Hourly FTEF FT FTE FTE Needed Available Needed Average Cost per

FTE 206.01 $62,885 $5,492,747 118.67 87.35 Budget Needed Communicating FTES WSCH Prod

Target Hourly FTEF FT FTE FTE Needed Available Needed Average Cost per FTE Budget Needed 6,867 103,005 500 206.01

118.67 87.35 $62,885 $5,492,747 6,867 103,005 510 201.97 118.67 83.31 $62,885 $5,238,727

6,867 103,005 525 196.20 118.67 77.54 $62,885 $4,875,842 6,867 103,005 490 210.22 118.67 91.55

$62,885 $5,757,134 6,867 103,005 480 214.59 118.67 95.93 $62,885 $6,032,538 Communicating = Changing What is the difference between 525 and

535? 525 WSCH per FTEF is a class size of 35. 535 WSCH per FTEF is a class size of 35 . Take 1 more student -- NO!! Communicating = Changing SIMPLY KEEP EVERY STUDENT THAT SHOWS UP ON THE FIRST DAY OF CLASSES! Budget and Accounting Manual (BAM) Basics You need to know the basics of Fund Accounting (the BAM) to Read and understand the CCFS 311 Understand district account codes Chart of accounts The Basics

Fund Program source of funds Activity where spent Object for what? BAM Fund Accounting General Fund Unrestricted Restricted Special Revenue Fund Child Care Centers Parcel Tax Capital Projects Fund General Obligation Bonds Scheduled Maintenance Debt Service

Payment for General Obligation Bonds Enterprise Fund Bookstore, Cafeteria, Fitness Center, Copy Shop, Farm, etc. Internal Service Fund Self-Insurance Trust Funds Financial Aid Student Body 2017-18 % of Fund Budget Total

Unrestricted General Fund $177,330,818 42.58% Restricted General Fund 48,185,039 11.57% Child Development Fund 1,269,697 0.30% Capital Projects Fund 98,296,552 23.60% Debt Service Fund 54,369,200 13.05% Bookstore Fund 7,693,000 1.85% Cafeteria Fund 289,000 0.07% San Mateo Athletic Club (SMAC) 3,940,000

0.95% Community, Continuing, and Corp Ed 1,391,000 0.33% Self-Insurance Fund 1,566,330 0.38% Trust Funds (Financial Aid) 17,942,178 4.31% Reserve for Post-Retirement Benefits 4,200,000 1.01% TOTAL $416,472,814 100.00% Unrestricted

General Fund Revenue 1 Federal Revenue 0 2 State Revenue 9,927,904 3 Local Revenue 167,402,914 4 Total Revenue 177,330,818 Expenses

5 Cost of Sales 0 6 Certificated Salaries 71,177,060 7 Classified Salaries 38,719,695 8 Employee Benefits 41,477,136 9 Materials & Supplies 7,777,026

10 Operating Expenses 23,857,604 11 Capital Outlay 385,042 12 Total Expenses 183,393,563 13 14 15 16 17 18

19 20 21 22 Transfers & Other Transfers In Other Sources Transfers out Contingency/Deficit Other Out Go Total Transfers/Other Fund Balance Net Change in Fund Balance Beginning Balance, July 1 Adjustments to Beginning Balance Net Fund Balance, 6/30

0 0 (4,683,407) (83,627) 0 (4,767,034) (10,829,780) 33,882,785 0 23,053,006 Where to Find Additional Budget and Fiscal Information Chancellors Office Website cccco.edu Community College League of California Association

accca.org of California Community Association of Chief Business Officials ccleague.org College Administrators acbo.org Academic Senate for California Community Colleges (glossary) asccc.org/glossary

Calif. Dept. of Finance (state budget) ebudget.ca.gov New Inititatives Guided Pathways: $150M - $15M goes to the CO off the top Remainder takes each college from where they are to the next step in implementing the pathways Strong Workforce: CTE funding Based regionally Integrated Planning: Basic Skills, Equity and SSSP funding to be integrated New Funding Formula Chancellors Task Force on Fiscal Affairs Same group (more or less) developed SB361 10 years ago Looking at outcomes based funding

Reviewing other state models successes and failures Proposal will be vetted through state governance processes Questions? Kathy Blackwood [email protected]

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