California Community Colleges Chancellor's Office: Fiscal Review Of City College of San Francisco (2012)

7/28/2019 California Community Colleges Chancellor's Office: Fiscal Review Of City College of San Francisco (2012)

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Joel D. Montero

Chie Executive Ofcer

Fiscal Review

September 14, 201

California Community Colleges

Chancellors Ofce

City College of San Francisco


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Fiscal crisis & ManageMent assistance teaM


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FCMAT

Joel D. Montero, Chief Executive Ocer

1300 17th Street - CITY CENTRE, Bakerseld, CA 93301-4533 . Telephone 661-636-4611 . Fax 661-636-4647422 Petaluma Blvd North, Suite. C, Petaluma, CA 94952 .Telephone: 707-775-2850 . Fax: 707-775-2854 . www.fcmat.org

Administrative Agent: Christine L. Frazier - Oce of Kern County Superintendent of Schools

September 14, 2012

Erik SkinnerExecutive Vice Chancellor o Programs

Caliornia Community Colleges Chancellors Oce

1102 Q Street, Suite 4554

Sacramento, CA 95811

Dear Vice Chancellor Skinner:

In July 2012, the Caliornia Community Colleges Chancellors Oce (CCCCO) and the Fiscal Crisisand Management Assistance Team (FCMAT) entered into an agreement or FCMAT to provide ascal review o the San Francisco Community College District (commonly known as City College oSan Francisco) on behal o the CCCCO. Specically, the agreement states that FCMAT will perormthe ollowing:

1. In accordance with Education Code Section 84041 (a) and (c), the City Collegeo San Francisco may request the Team, pursuant to Education Code Section42127.8, to assist the district to establish and maintain sound nancial andbudgetary conditions that comply with principles o sound scal management and

include the ollowing:

a. Complete a scal health analysis o the district using the Caliornia

Community Colleges Sound Fiscal Management Sel-Assessment Checklist todetermine the districts current level ofnancial risk.

b. Work with the College to develop amulti-year fnancial projection or thecurrent and two subsequent years without any demonstrated adjustmentsbased on todays economic orecast to determine the level ocommitmentneeded to sustain the Colleges fnancial solvency, recognizing that this will

be a snapshot in time regarding the current nancial situation and used as the

baseline or determining the level o reductions.

c. Determine up to our Caliornia community colleges to be used or bench-mark comparisons.


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d. Provide ndings and recommendations or meeting the districts goals. Workwith the College to incorporate into amulti-year projection.

e. Based on benchmark colleges and CCSFs programpriorities, review criticalcost variances, including:

1. Review revenue per FTES/cost per FTE, separated by credit and non-credit.

2. Review the aculty obligation and the amount o reassigned time appro-priate or the enrollment, structure, and budget o the College.

3. Compare managerial positions as reported to IPEDS, and determinewhether administration is organized eectively and i the stang levelsare appropriate.

4. Determine the costs and program impacts o o-site centers and sites.

5. Review the costs o benets or active employees compared to those oother colleges.

6. Evaluate the college or comparative analysis in terms o 50% lawmargins.

7. Review the unrestricted general und match or categorical programs andlevels o encroachment, i any.

8. Review FTES and determine i the college is maximizing its opportuni-ties to generate additional unding.

2. The second component o the scal review will be to identiy recommendationsthat enable the College to sustain nancial solvency and maintain recommendedreserve levels. The objective o this component will be to prepare and present acomprehensive report and recommendations covering the ollowing issues:

a. Financial modeling that illustrates options that CCSF can implement toreduce various expenses and/or increase revenue to balance the budget andsustain nancial solvency.

b. Identify institutional restrictions such as past practices or services that havebeen identied as the CCSF culture o the College including but not

limited to collective bargaining contracts, legal constraints including the50% law and the Full Time Faculty Obligation (FON).

c. Develop implementation steps, including a proposed timeline or improve-ments.

This nal report contains the study teams ndings and recommendations.


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FCMAT appreciates the opportunity to serve you and extends thanks to all the sta o theCaliornia Community Colleges Chancellors Oce and the San Francisco Community CollegeDistrict or their cooperation and assistance during eldwork.

Sincerely,

Michelle Plumbtree Joel. D. Montero

Chie Management Analyst Chie Executive Ocer

C: Frederick E. Harris, Assistant Vice Chancellor, College Finance and Facilities PlanningDivision, Caliornia Community Colleges Chancellors Oce.

Pamila J. Fisher, Interim Chancellor, City College o San Francisco


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California Community Colleges ChanCellors offiCe City Collegeof san franCisCo

iT a b l e o f c o n T e n T s

Table of Contents

About FCMAT ......................................................................................... iii

Introduction ............................................................................................ 1Background ...................................................................................................... 1

Study Team....................................................................................................... 3

Executive Summary .............................................................................. 5

Findings and Recommendations...................................................11

Fiscal Health Analysis .................................................................................. 11Multiyear Financial Projection ................................................................. 19

Stafng and Operational Costs ............................................................... 23

Comparison with Similar Districts .......................................................... 39

Enrollment Management .......................................................................... 43

Administrative Structure ............................................................................ 47

Barriers to Fiscal Solvency ......................................................................... 51

Options to Meet Goals and Sustain Fiscal Solvency ......................... 55

Appendices ............................................................................................57


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ii T a b l e o f c o n T e n T s


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iiia b o u t F C M a t

About FCMATFCMATs primary mission is to assist Caliornias local K-14 educational agencies to identiy,prevent, and resolve nancial and data management challenges. FCMAT provides scal anddata management assistance, proessional development training, product development and otherrelated school business and data services. FCMATs scal and management assistance services

are used not just to help avert scal crisis, but to promote sound nancial practices and ecientoperations. FCMATs data management services are used to help local educational agencies(LEAs) meet state reporting responsibilities, improve data quality, and share inormation.

FCMAT may be requested to provide scal crisis or management assistance by a school district,charter school, community college, county oce o education, the state Superintendent o PublicInstruction, or the Legislature.

When a request or assignment is received, FCMAT assembles a study team that works closelywith the local education agency to dene the scope o work, conduct on-site eldwork andprovide a written report with ndings and recommendations to help resolve issues, overcomechallenges and plan or the uture.

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*Projected

**Actual

90

80

70

60

50

40

30

20

10

0

Studies by Fiscal Year

NumberofStudies

FCMAT also develops and provides numerous publications, sotware tools, workshops andproessional development opportunities to help local educational agencies operate more eec-tively and ulll their scal oversight and data management responsibilities. The CaliorniaSchool Inormation Services (CSIS) arm o FCMAT assists the Caliornia Department oEducation with the implementation o the Caliornia Longitudinal Pupil Achievement Data

System (CALPADS) and also maintains DataGate, the FCMAT/CSIS sotware LEAs use orCSIS services. FCMAT was created by Assembly Bill 1200 in 1992 to assist LEAs to meet andsustain their nancial obligations. Assembly Bill 107 in 1997 charged FCMAT with responsi-bility or CSIS and its statewide data management work. Assembly Bill 1115 in 1999 codiedCSIS mission.

AB 1200 is also a statewide plan or county oce o education and school districts to worktogether locally to improve scal procedures and accountability standards. Assembly Bill 2756(2004) provides specic responsibilities to FCMAT with regard to districts that have receivedemergency state loans.


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iv a b o u t f c m a t

In January 2006, SB 430 (charter schools) and AB 1366 (community colleges) became law andexpanded FCMATs services to those types o LEAs.

Since 1992, FCMAT has been engaged to perorm nearly 850 reviews or LEAs, including schooldistricts, county ofces o education, charter schools and community colleges. The Kern CountySuperintendent o Schools is the administrative agent or FCMAT. The team is led by Joel D.

Montero, Chie Executive Ofcer, with unding derived through appropriations in the statebudget and a modest ee schedule or charges to requesting agencies.


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1i n t roduc t i on

Introduction

Background and Study ScopeThe San Francisco Community College District serves approximately 100,000 students at nine

campuses and many other sites throughout the city o San Francisco.FCMATs review o CCSF was not an audit; the purpose was to review and evaluate theapproach o the San Francisco Community College District (commonly known as the CityCollege o San Francisco, or CCSF) to projecting and allocating its scal resources and todetermine i CCSFs budget assumptions and methods are reasonable. FCMAT was also askedto evaluate CCSFs scal health and provide recommendations to help CCSF maintain scalsolvency. This report refects these goals and the objectives included in the approved scope owork.

Prior to the FCMAT review, the Accrediting Commission or Community and Junior Colleges(ACCJC) visited CCSF in March o 2012 and ocially delivered an order o show cause. Thisis the most severe sanction o the ACCJC short o terminating an institutions accreditation.Both the results o that report and the process or accreditation are separate and distinct rom thereview perormed by the FCMAT team.

As is the case with many Caliornia community colleges, CCSF has had declining state revenueor a number o years. As one o Caliornias largest providers o noncredit education, the collegesscal health has been urther challenged by the states ongoing low level o unding or noncreditinstruction. CCSF is acing nancial diculties, as evidenced by its declining und balance andcontinued large operating decits. This has brought CCSF to a point at which it must eithermake signicant and ongoing budget adjustments or ace the prospect o insolvency and possiblestate intervention.

I the Caliornia community college board o governors determines that CCSF is not able tomaintain its scal solvency under the current budget, the board o governors has the authorityto appoint a special trustee to manage CCSF and restore scal solvency. CCSF can also request aspecial trustee, which has also been considered.

I the board o governors makes the determination to appoint a state trustee, the special trusteecould be authorized to assume control o all acets o operations and management or the periodo time deemed necessary or CCSF to achieve scal stability or to implement sound scalmanagement. The board o governors may reduce or withhold apportionment to pay or the costo the special trustee, management review, or other extraordinary costs resulting rom CCSFsscal diculties and to ensure the stabilization o the districts nancial condition.

To understand CCSFs current scal status, FCMAT explored a number o topics with sta.

In some instances CCSF has already begun to proactively address budget issues that FCMATidentied; however, more action will be needed to avert scal insolvency. Moreover, signicantadditional analysis should be perormed beyond this current scope o work but was not possibledue to the time constraints associated with this engagement.

The topics and issues identied in discussions with CCSF sta include the ollowing:

Evaluation o the revenues versus the costs o o-site instructional operations.

Previous budget savings actions and those anticipated or scal year 2012-13.


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2 i n t roduc t i on

Employee contracts, specically identication o items that committed CCSF to addedcosts and limited its decision-making ability.

CCSFs aculty obligation number (FON) in light o CCSFs actual ull-time equivalentaculty.

The calculation and related components used or compliance with the 50% law (which

requires that hal o each community college districts current expense o education bespent on classroom salaries and benets).

Class sizes, classroom productivity, creation o the class schedule, and number o ull-time equivalent students (FTES) as a component o enrollment management.

Support rom the unrestricted general und or categorical programs and auxiliaryoperations such as the bookstore and ood services.

Grants that anticipated CCSF continuing the program ater the grant expired.

Bond program costs that may be masking uture general und obligations.

The costs and unctions o aculty release time.

Retiree health benets program.

Budget assumptions being considered or scal year 2012-13.

Data tools, processes and procedures used to guide major decisions.

Identication o ve other community college districts against which CCSF would becompared in the areas o expenditures, 50% law, and stang levels across all employmentclassications.

CCSFs nancial and expenditure history over the last seven years.

Recent external nancial statement audits to identiy any major scal issues and audit

ndings. CCSFs recent accreditation report.

Health benet programs.

The administrative structure and the organizational history.

CCSFs response to the state community college chancellors oces scal managementchecklist.

Some o the above topics needed no additional comment beyond the initial discussion. Thebalance o this report includes ndings and recommendations in those areas that require urtherattention.

FCMAT visited CCSF on July 30 through August 3, 2012 to conduct interviews, collect dataand review documents. This report is the result o those activities.

During this eldwork, FCMAT also identied additional issues that required urther researchand analysis. These are noted throughout the report.

The scope o FCMATs review included both a scal review and analysis and a benchmarkcomparison o CCSF against similar community college districts to provide data to help thecollege make decisions to sustain nancial solvency and maintain recommended reserve levels.


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3i n t roduc t i on

FCMAT was also asked to compare CCSFs administrative organizational structure with those othe comparison districts.

Study TeamThe study team was composed o the ollowing members:

Michelle Plumbtree Michael HillFCMAT Chie Management Analyst FCMAT Consultant

Petaluma, CA San Jose, CA

Roy Stutzman Ronald Gerhard*

FCMAT Consultant Vice Chancellor or Finance

Benicia, CA Peralta Community College District

Oakland, CA

John LotzeFCMAT Technical Writer

Bakerseld, CA

*As a member o this study team, this consultant was not representing his employer but wasworking solely as an independent contractor or FCMAT.


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5e x e c u t i v e s u m m a r y

Executive SummaryFCMATs review o CCSF is not intended to be viewed as a comprehensive audit. The scopeo work was conducted to determine how CCSF projects and allocates its scal resources andto determine i CCSFs budget assumptions and methods were reasonable. The review andassessment includes recommendations to help CCSF maintain its scal solvency and avoid stateintervention.

Prior to FCMATs review in July, the Accrediting Commission or Community and JuniorColleges (ACCJC) visited CCSF in March o 2012 and ocially delivered an order o showcause. This is the most severe sanction o the ACCJC short o terminating an institutionsaccreditation. Show cause occurs when the ACCJC nds an institution in substantial noncompli-ance with the commissions eligibility requirements, accreditation standards or policies, or whenthe institution has not responded to the condition previously imposed by ACCJC.

The ACCJC conducted its own independent review to determine accreditation status or CCSF,and results o that report are separate and distinct rom the assessment perormed by the FCMATteam.

Fiscal Health Analysis

City College o San Francisco (CCSF) has not developed a plan to und signicant liabilities andobligations such as retiree health benets, adequate reserves, and workers compensation costs.Further, it has been subsidizing categorical programs with unrestricted general und moniesregardless o the eect on the general und, and has provided salary increases and generous bene-ts with no discernible means to pay or them. The college has also used temporary one-timemeasures to mitigate its operating decits, thus deerring dicult decisions to the uture. Thesedeciencies raise signicant concerns regarding CCSFs ability to maintain solvency because othe unknown outcomes o an upcoming local parcel tax measure and the governors November2012 state tax measure reerred to as Proposition 30.

Multiyear Financial Projection

CCSFs 2012-13 tentative budget is balanced in terms o anticipated revenues and expenditures,but it assumes and depends on passage o the governors November 2012 tax measure. Mosto the expenditure savings in the tentative budget are one-time concessions rom the employeegroups or 2012-13 only, which means that CCSF will again need to make reductions or 2013-14. Even with the passage o the governors tax measure, CCSF projects a $13 million shortall inscal year 2013-14. CCSF cannot aord to wait and see i the local parcel tax is approved beoreimplementing expenditure reductions. To maintain nancial solvency, reductions or 2013-14and beyond must be ongoing rather than temporary.

CCSFs 2012-13 tentative budget does not increase the und balance. Although the budgetrecognizes the possibility o a small state unding decit o 0.7%, in todays economic climateit is likely that the decit could be higher, which will urther reduce the und balance. CCSFsminimal ending und balance leaves no margin or error or unexpected changes to the budget;either could result in scal insolvency.

The below table summarize the our possible scenarios prepared by CCSF sta or scal year2012-13. These scenarios vary based on whether the dierent tax measures pass.


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Fiscal Year 2012-13 Funding Scenarios

I state tax and

parcel tax ail

I state tax passes

but parcel tax ails

I state tax ails but

parcel tax passes

I state tax and parcel

tax pass

Total Revenue $175,093,000 $187,299,000 $189,819,000 $201,064,000

Adopted Tentative Expense Budget $186,572,000 $186,572,000 $186,572,000 $186,572,000

(Defcit)/Surplus ($11,479,000) $727,000 $3,247,000 $14,492,000

Key assumption: CCSF continues spending at the level o the tentative budget under all scenarios.

There is a possibility that the governors tax measure will not pass. Although CCSF has estimatedthat this would reduce unding by another $11.5 million in scal year 2012-13 and beyond, ithas not developed a plan to deal with this reduction should it occur, and its ending und balanceis not sucient to bear the burden.

CCSF is in a perilous nancial position. It can aord neither errors in its budget assumptions oraccounting treatments nor additional unbudgeted expenses. Even i CCSF is able to maintainits scal solvency in scal year 2012-13 using the temporary measures it has enacted, it willexperience numerous challenging, spending pressures and critical decisions in the uture. The

our multiyear nancial projections (MYFPs) developed by CCSF indicate uture insolvency inall scenarios except or the one in which both the governors tax measure and the local parcel taxpass, and even then CCSF would remain only marginally solvent. The below table summarizesthe eect on und balance under all our unding scenarios. Even under the best alternative,where both the state and local tax pass, by scal year 2014-15 a decit o $2,512,000 occursbased on current revenue and expenditure trends.

Estimated Defcit/Surplus Projection Scenarios


tax ail

I state tax passes but

parcel tax ails

I state tax ails but par-

cel tax passes


tax pass

2012-13 ($11,479,000) $727,000 $3,247,000 $14,492,000

2013-14 ($24,570,000) ($13,254,000) ($10,570,000) $726,658

2014-15 ( $27,809,000 ) ( $16,493,000 ) ( $13,809,000 ) ($ 2,512 ,0 00)

Stafng and Operational Costs

CCSF has employed twice as many ull-time aculty per 1,000 ull-time equivalent students(FTES) and incurred expenses that are $17 to $18 million higher than comparison districts,while at the same time having a level o classroom productivity (class size) that is less than thato most o the comparison districts. CCSF also employs more classied sta at higher averagesalaries than the comparison districts.

CCSFs capital outlay budgets will need to be restored as bond unds dwindle. Retiree health

benets payments will increase rom an estimated $6.9 million in scal year 2011-12 to $13.0million annually by 2020-21. Steps added to the classied salary schedule during negotiationswill also add signicant costs over time. The magnitude o its employee contract obligationsmakes it dicult or CCSF to continue as a going concern (an organization that is scallyhealthy and able to meet its nancial obligations) without change.

CCSF needs to be more aggressive in reducing its expenditures to provide or a structurallybalanced budget by implementing ongoing budget adjustments and reductions. This is chal-lenging but is essential to avoid insolvency.


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CCSFs expenditure per ull-time equivalent student (FTES) exceeded its state unding (alsoknown as state apportionment revenues) or scal year 2011-12 by $637 per noncredit instruc-tion FTES and by $859 per credit instruction FTES. Thus these amounts had to be providedrom other unding sources. Based on a revenue and cost analysis, there is no clear evidence thateither credit or noncredit is signicantly more ecient than the other. The noncredit undingrate is lower, but costs are lower as well. This is largely due to the dierence in teaching load:

15 contact hours per week or credit courses versus 25 contact hours per week in the noncreditprogram. On a proportional revenue and expense basis, the eciency o credit and noncreditinstruction is nearly equal; apportionment revenue pays or 85.34% o the costs associated withcredit courses and 83.99% o the revenue required to support noncredit courses.

CCSFs estimated average rate o pay or a part-time instructor is $113.51 per hour. Based onthis rate, the estimated annual cost o one part-time aculty who works the equivalent o ull time(one FTEF) is $59,595, or approximately $6,000 per course. FCMAT conrmed these pay ratesthrough inormation provided by district sta and a review o nancial records or scal year2010-11 (the most recent year or which there is certied data) that indicate the total hourly payin relation to total part-time aculty FTEF. Statutory benets such as workers compensation,

unemployment insurance and retirement contributions add 6.6 % to this total. In addition, ia part-time aculty members teaching assignment is equal to or greater than 50% (7.5 units orcredit and 12.5 units or noncredit) o a ull-time load, the employee is eligible or health benetspartially paid by CCSF and or ully paid dental benets.

CCSFs part-time aculty salary schedule and health benet provisions in its collective bargainingagreement with the American Federation o Teachers (AFT) Local 2121 have negated any signi-cant short-term cost advantage o using part-time aculty. The lower costs associated with part-time aculty have typically allowed community college districts to maintain their class schedulesand oerings at a lower cost, but this is not the case at CCSF.

Through the Caliornia Community College Chancellors Oces (CCCCOs) management

inormation system (MIS), CCSF reported having 842 tenure-track aculty in 2010-11. Whenall aculty release time is considered, 14% o CCSFs ull-time aculty are being released to ulllnonteaching responsibilities. Thus the equivalent o more than 50 ull-time, highly qualied,tenured aculty are serving as department chairs rather than instructing students.

The prolieration o release time is costly, creates a unique administrative structure that is dicultto manage, reduces accountability, and makes coordination and decision-making more chal-lenging.

Comparison with Similar Districts

To provide additional context to the analysis o CCSFs scal condition, ve similar communitycollege districts were selected against which CCSF would be compared in terms o spending,

stang and productivity. The selected districts are Santa Monica, Long Beach, Foothill-De Anza,Mt. San Antonio and El Camino. The comparison revealed many important distinctions thatCCSF should consider as it makes uture decisions:

CCSF has signicantly more regular ull-time equivalent (FTE) employees than thecomparison districts, both in total and per FTES.

CCSF has almost twice the number o tenured aculty as the two largest comparisondistricts, with 23.52 FTE per 1,000 FTES versus 13.69 and 12.17 or Mt. San Antonioand Santa Monica, respectively.


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CCSF also has signicantly more classied sta support than the two largest comparisondistricts, with 192 more FTE sta than Mt. San Antonio and 243 more FTE sta thanSanta Monica.

CCSF is the third lowest o the comparison districts in productivity or credit classes(FTES per section average). CCSF has both more tenured aculty and lower productivity,

which compounds its scal burden.The results o this data support the ndings o the stang analysis. CCSFs decisions regardingull-time aculty and increases to the salary schedule and benet provisions or part-time acultyresult in higher costs or academic employees, which in turn result in higher total salaries andbenets and higher total costs.

Enrollment Management

CCSF shows little evidence o an eective enrollment management plan. It lacks sucient dataprovided in a timely and consistent reporting ormat to make important enrollment managementdecisions. Serving students when resources are reduced requires maximizing the use and eect oall available resources, but this is not possible without an eective enrollment management plan.

CCSFs enrollment management has ocused on student recruitment and marketing, studentengagement and connection, technology (distance education), counseling and support.Enrollment management must also ocus on enrollment goals or campuses and sites, programsand disciplines; the deployment o resources to achieve those goals; and measurement o progress.Enrollment management will be an important tool as CCSF plans course schedules, seeks tocontrol direct costs, and measures progress toward FTES goals. Because revenue is largely drivenby service level (FTES), it is imperative that CCSF manage this aspect o its operations eec-tively.

Administrative Structure

The use o some release time is normal in the community college system; however, the magnitude

and types o release time assignments at CCSF are cause or concern. CCSF allows an inordinateamount o release time, which is expensive because o CCSFs high salary and benets or thepart-time employees who replace ull-time employees when they are on release time. A signicantpart o this release time is or department chairs; other instructional and noninstructional releasetime makes up the balance. The structure and responsibilities o department chairs at CCSFdier signicantly rom what is typical at most Caliornia community colleges. Specically, thedepartment chairs at CCSF operate under a separate collective bargaining agreement and haveresponsibility or decisions about program and course oerings as well as control over releasetime assignments.

Barriers to Fiscal Solvency

Administrative stability is needed at CCSF. Four o its ve vice chancellor positions are interim;the vice chancellor or nance and administration is the only administrative position with historyin the district. The chancellor is also an interim assignment.

Interviews revealed that decisions that have serious nancial implications are oten made but thatno one position is accountable or those decisions. Ultimately the governing board and the chan-cellor must provide leadership and serve as the nal authority or important decisions. Fixing theimmediate budget problem is imperative, but both the immediate remedy and sustained changedepend on recognizing and addressing actors that contribute to poor decisions and a lack oaccountability.


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The costs o employee contracts have increased through a succession o chancellors. A number othe contract provisions have been added without any consideration o CCSFs ability to pay inthe uture. As a result, CCSF is acing potential insolvency, which could signicantly aect theorganization or require state intervention

The civil service structure under which CCSF operates is the same as that o the City o San

Francisco and is established and maintained in accord with Education Code section 88137.This has both benets and drawbacks. CCSF is the only community college in Caliornia thatoperates under this structure, which can make creating and managing the classied workorcedicult, especially in times o scal crisis, because CCSF oten does not have control over who isplaced in positions.

Interviewees consistently indicated that CCSF has or many years operated based on power,infuence and political whim rather than reason, logic and airness. Interviewees indicatedthat CCSFs ocus and purpose, which should be serving students, has been lost and is not thebasis or decision making. Rather, the emphasis has been on keeping individuals employed andensuring that they receive benets, which is a positive goal but should not usurp any collegedistricts primary goal o serving students. CCSFs decisions have diminished the resources avail-

able to achieve its primary purpose.

Past decisions have reduced the management team to spectators rather than organizationalleaders. For example, determining how many classied employees are needed and what servicesare required should be a management unction, but at CCSF these decisions are made by acommittee. This has been costly to CCSF.

Under this organizational and cultural model there is no responsibility or accountability becauseit is oten unclear how or by whom decisions have been made. This has resulted in operationaldysunction, which in turn has contributed to scal deciencies.


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11F i s c a l H e a l t H a n a l y s i s

Findings and Recommendations

Fiscal Health AnalysisOverview

Prior to and separate rom FCMATs review, the Accrediting Commission or Communityand Junior Colleges (ACCJC) ocially issued the San Francisco Community College District(commonly known as City College o San Francisco, or CCSF) an order o show cause, partlybecause o its scal status. The Commission is concerned that CCSF is on the brink o insol-vency.

Show cause occurs when the ACCJC nds an institution in substantial noncompliance with thecommissions eligibility requirements, accreditation standards or policies, or when the institutionhas not responded to the condition previously imposed by ACCJC. In CCSFs case, CCSF mustshow cause regarding why the commission should not withdraw accreditation at its June 2013meeting by demonstrating that it has corrected the deciencies noted by the commission and is

in compliance with the eligibility requirements, accreditation standards and commission policies.Show cause places the burden o proo on CCSF to demonstrate why its accreditation should becontinued.

The ACCJC conducted its own independent review to determine CCSFS accreditation status.Both the results o that review and the process or accreditation are separate and distinct rom thereview perormed by the FCMAT team.

CCSF has unrestricted revenues o approximately $190 million per year. This includes approxi-mately $15 million in revenues rom a local sales tax, a source that most similar college districtsdo not have. Even with this signicant scal advantage, CCSF is experiencing severe nancialdiculty.

Reserve Requirements

For at least the last ve years CCSF has operated with a reserve o slightly more than 1%, or$1.9M, o its unrestricted general und expenditures. As a general rule, the CCCCO recom-mends a 5% reserve level. In addition, there has been a xed $6.6 million board reserve orseveral years. In scal year 2011-12 CCSF overspent its budgeted expenditures because o aultybudget assumptions made when the budget was adopted. To balance the budget, anticipatedsavings were included in the expense budget as negative line items without identiying anyspecic reductions. These reductions did not materialize, so the unrestricted und balance o 1%and $3.5 million o the $6.6 million board reserve were needed to balance the budget or scalyear 2011-12, leaving CCSF with only $3 million available in the board reserve at the close o

the scal year.According to CCSF, $1.5 million in one-time internal departmental unds has been carried overrom previous years and could be used to augment the $3 million remaining board reserve i theboard so decides. Even i that occurs, the combined unds would comprise a 2.25% total reserve,which is insucient in todays economic climate, especially based on the CCCCOs 5% recom-mendation. Based on district inormation, these are the only remaining sources o emergencyunds.


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Salaries and Benets

It has been noted publicly in various venues that CCSFs employee salaries and benets compriseapproximately 92% o its unrestricted budget. Operating expenses such as utilities, supplies,property and liability insurance, maintenance agreements and capital outlay are paid out o theremaining 8%. This leaves very little in discretionary unds. Although the 92% gure is trueor the 2012-13 budget, CCSFs employee costs have historically been closer to 90%, comparedto approximately 86% or most community college districts. Because so much o its budget iscommitted to employee costs, resulting in insucient reserves, CCSF has diculty respondingto unexpected scal obligations. I CCSF continues to maintain a high ratio o employee costs, itwill need a larger unrestricted und balance to provide or unanticipated scal emergencies.

Capital Outlay

Capital outlay spending has only been approximately 0.1% o the budget during the last veyears because local general obligation bonds have provided unds or capital needs during thattime. However, the bond unds will soon be completely depleted, so CCSF will need to startplanning to meet ongoing capital needs and restore capital outlay budgets using its operatingbudget.

Unfunded Liabilities

Until recently, CCSF has not set aside unds to address its ununded liability or retiree healthbenets. The amount CCSF has currently identied to meet this ongoing obligation is $500,000per year, which is well below the actuarial recommendation. The July 2011 actuarial analysis oCCSFs retiree health benet obligation indicates a present value debt o $235,000,000. CCSFis meeting its annual payment obligation on a pay-as-you-go basis. For the 2011-12 budget year,the annual cost is estimated to be $6.9 million, but this will increase to $13.0 million annuallyby 2020-21. This cost will continue to increase regardless o CCSFs revenues or scal solvency.This means that as available revenue decreases, the burden that these retiree costs place on theexpenditure budget will be amplied. Regardless o the economic growth scenario chosen, the

expenditures or pay-as-you-go will increase on a percentage basis aster than increases in revenue.

Encroachment

The amount CCSF has taken rom its unrestricted general und to subsidize categorical andauxiliary operations has increased rom $1.98 million in scal year 2008-09 to $6.2 million inscal year 2011-12. CCSF has planned to decrease this amount to $2.95 million in 2012-2013;however, part o the planned decrease is created by moving the basic skills program rom therestricted general und to the unrestricted general und, which changes how the expenditures arerecorded but does not decrease the nancial burden.

Workers Compensation

Prior to 2009, CCSF paid workers compensation expenses on a cash basis. This meant therewas no recognition o accrued or expected liability related to outstanding claims. Because claimstake time to mature and the costs oten occur over more than one scal year, community collegedistricts typically use actuarial studies to determine the expected cost o open claims and establishreserves to pay claims. CCSF has conducted actuarial studies but has not set aside unds to ullyund uture claims obligations. Since 2009, CCSF has assessed an internal premium to programsand has chosen to address the ununded claims expense through a 25-year amortization plan.


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This structure may be sucient as long as the claims experience and payouts do not exceed thelevel o premium assessment.

Stafng

CCSF has not implemented layos, closed any sites or eliminated any programs in the past veyears, even with signicant decreases in unding. It has replaced some ull-time aculty who have

let CCSF rather than always recognizing the opportunity to reduce stang through attrition.One-time actions have been the primary method used to address operating decits, which meansthat CCSF must begin anew in its search or scal solutions each year to address the ongoingdecits. Based on CCSFs multiyear nancial projections, it is clear that ongoing budget reduc-tions are needed rather than temporary or one-time measures to eliminate decits and restoreund balances.

CCSF has completed the Caliornia Community Colleges Chancellors Oces (CCCCOs)Fiscal Health Checklist, which is included below. Based on the sel-assessment, CCSF hasrecognized a number o areas in which it is decient. FCMAT has reviewed the document andagrees with most o CCSFs statements but diers on some. FCMATs comments and opinions

regarding the document are provided in italicized text; all other comments and assessments arethose o CCSF.

CCCCO Sound Fiscal Management Checklist Completed by CCSF

FCMATs comments are included in italics.

1. Decit Spending or scal year 2011-12 Not Acceptable

Revenue estimates are based on past history.Estimate or scal year 2011-12 revenues were conservative and withinreason. The February surprise created substantial challenges.

Fiscal year 2010-11 was not a decit spending year; closeout rom the UGF[unrestricted general und] was more than $3 million. However scal year2011-12 had an unacceptably high level o decit spending. It was addressedby using und balance and one-time spending reductions including wageconcessions.

The district does not automatically build in growth revenue; in act the2010-11 closeout was primarily due to the conservative strategy o notincluding such revenue in the nal budget. Growth is only built in when a

unding strategy to add sections is also incorporated.

2. Fund Balance or scal year 2011-12 Not Acceptable

Fund balance declined dramatically during scal year 2011-12 as a result ousing the undesignated unreserved balance and a substantial portion o thedesignated reserve to support operations.

3. Enrollment Not AcceptableDistrict has had to make use o stabilization unding due to lack o unds orsummer sessions.


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Demand in Credit remains strong, declining in Non Credit. Data is trackedand analyzed and strategies are developed to meet enrollment targets.However, the college was in stability in both 2011-12 and 2009-10 due to

lack o ability to und summer session.

4. Unrestricted General Fund (UGF) Balance Not acceptableFund balance includes a long-term prepaid lease or the Mission Campus,currently valued at about $10 million. The portion o und balance that isavailable to be used or emergencies is less than 5% o annual unrestrictedgeneral und expenditures.

5. Cash Flow Borrowing Not Acceptable

Tax revenue anticipation notes (TRANs) are repaid on time. The college alsoborrows rom the City/County o San Francisco. The college has a negativecash position too oten.

6. Bargaining Agreements Acceptable

Per the criteria this is acceptable as there have been no across-the-boardsalary increases or any employee group since July 2007. In the past veyears the only negotiated changes have been in the areas o health insurancecontributions made by certicated employees and a seniority step increaseor some classied employees. Several years ago the colleges contract with the

American Federation o Teachers (AFT) allocated a portion o new revenueto aculty based on a ormula. Service Employees International Union (SEIU)

contracts were based on traditional bargaining. Cost analyses were alwaysconducted; wage increases were budgeted.

Although CCSFs statements are correct, FCMAT believes that CCSFs

contracts are not sustainable given the districts nancial condition.

Evidence of this is that salaries and benets consume 92% of the budget.

Thus FCMAT would rate this item as Not Acceptable.

7. Unrestricted General Fund Stang Not Acceptable

Decit spending was incurred in 2011-12; one-time unds were used to

support ongoing expenses. The percentage o the unrestricted general undspent or personnel expenses is greater than 85%. The college is not providingadequate unds or scheduled maintenance or or upgrading technology.

8. Internal Controls Acceptable

Internal controls are adequate and are evaluated by both independent audi-tors and an internal auditor. Loss o assets over the years has been negligible.


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9. Management Inormation Systems (MIS) Acceptable,but some reports are late

The college has a task orce that makes an ongoing eort to ensure that

data is accurate or the state MIS report. In addition, the program reviewcommittee works to ensure that data used or such purposes is accurate. The

business oce completes all required reports but the college has led itsannual audit and 311 reports ater the state deadline in several years. Thisissue can only be addressed by improving available resources

10. Position Control Acceptableas o all 2012

Position control or classied employees is ne. For certicated employeesthe college has had an ongoing problem with assignment orms not reachingpayroll in a timely manner. This is currently being addressed by the oce oinstruction. Position control is integrated with payroll but not budget.

As noted later in this report, there are concerns regarding CCSFs inability

to link position control to budget, which is a critical function to recon-

cile salary and benet costs. Thus FCMAT would rate this item as Not

Acceptable.

11. Budget Monitoring Acceptable,but budget development needs improvement

Historically bargaining agreements have been evaluated in advance orbudgetary impact. Revenue revisions are timely; expenditures are updated

every pay period. The board is kept inormed about changes in budget esti-mates throughout the year. The districts only long-term nancial obligations

are or other post-employment benets (OPEB) and workers compensation.There are no other long-term debts. Annual budget development needsimprovement particularly with respect to costs associated with part-timeaculty and health benets or active employees.

12. Other Post-Employment Benets (OPEB) Not Acceptable

Actuarial studies have been completed; the results have been widely shared.The college was strictly pay-as-you-go or this liability until 2011-12 when

or the rst time it made a $500,000 transer into a trust und established bythe city. This transer will be repeated in 2012-13. There is no specic plan toincrease these payments.

13. Leadership/Stability Acceptable

The chie executive ocer retired in April 2012. The chie business ocial(CBO) has been at the college or 20 years. Several board members haveserved multiple terms.


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FCMAT believes that although there is stability in one key position, the

CBO, there is instability in other aspects of the senior administrative

structure. Thus FCMAT would rate this item as Not Acceptable.

14. District Liability Acceptable

There are no active lawsuits that require increased reserves. The college was aounding member o the Statewide Association o Community Colleges or

property and liability coverage, but switched to the Alliance o Schools orCooperative Insurance Programs eective 7/1/12. There are no anticipatedsettlements at this time.

15. Reporting Not Acceptablewith respect to timeliness

The colleges annual audit reports have been delivered ater January 1 onseveral occasions. The quarterly and annual 311 reports have also been late onmultiple occasions. The district has always met the 50% law. The 320 reportshave been timely.

Several external audit recommendations have been repeated in multiple

audits and remain outstanding. CCSF has stated that it is taking steps to

address these recommendations, but it needs to do so more aggressively.

FCMAT rates this as Not Acceptable not only with regard to timeliness,

but also because of these repeated audit ndings. FCMATs analysis of the

audit ndings follows.

Audit Findings

CCSF has made some progress toward resolving outstanding audit ndings in annual auditednancial reports or scal years 2007-08, 2008-09, 2009-10 and 2010-11. These ndings areitems that the external independent auditors determined indicate deciencies in internal controlsthat could result in material misstatements in CCSFs nancial statements. These audit ndingsare categorized in terms o severity as either material weaknesses (most severe), signicant de-ciencies (moderately severe), or deciencies (least severe).

The tables below provide an overview o the number and type o ndings reported in the lastthree annual nancial audits.

Quantity and Types o Audit Findings2010-11 2009-10 2008-09

Material Weaknesses 3 4 0

Signifcant Defciencies 3 14 17

Defciencies 7 0 0

Total 13 18 17

As the table above shows, since scal year 2008-09 CCSF has reduced the total number o audit


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ndings rom 17 to 13, but the number o audit ndings classied as material weaknesses hasincreased.

This may indicate that there are signicant obstacles to timely and accurate reporting o nancialstatements going orward. Indeed, the nature o the three material weaknesses in the most recent2010-11 audit report indicates that this is the case. These three audit ndings concern the

ollowing: The signicant number o nancial restatements required by the auditors to ensure that

the nancial statements were materially accurate.

The signicant number o errors in CCSFs nancial records that inhibited its ability toclose its books accurately and in a timely manner.

CCSFs lack o a long-term nancing plan that will lower its OPEB liability and relievethe negative unrestricted net asset balance o $25,056,628 as o June 30, 2011.

Analysis o Findings

2010 -11 2009-10 2008- 09

Number o continuing fndings 6 8 4

Number o new fndings 7 10 13

Total Findings 13 18 17

RecommendationsCCSF should:

1. Increase unding or the uture cost o retiree health benets using a struc-tured plan rather than on an ad hoc basis.

2. I unds become available, consider unding its outstanding workers compen-

sation claims in advance o the current 25-year amortization plan.


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18


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19m u l t i y e a r f i n a n c i a l p r o j e c t i o n

Multiyear Financial ProjectionPotential Funding Scenarios

CCSF aces our possible unding scenarios or 2012-13, which are predicated on two dierenttax proposals included in the November 2012 election: the governors tax measure and a localparcel tax or CCSF. The scal implications and projections or CCSF vary greatly dependingon the election outcome scenario on which they are based. Appendix A includes more detailregarding each scenario, assumptions or each scal year, and inormation or 2014-15.

The two tables below summarize the our possible scenarios prepared by CCSF sta or scalyears 2012-13 and 2013-14.


I state tax and

parcel tax ail

I state tax passes

but parcel tax ails


parcel tax passes

I state tax and

parcel tax pass

Total Revenue $175,093,000 $187,299,000 $189,819,000 $201,064,000

Adopted Tentative Expense Budget $186,572,000 $186,572,000 $186,572,000 $186,572,000

(Defcit)/Surplus ($11,479,000) $727,000 $3,247,000 $14,492,000

Key assumption: CCSF continues spending at the level o the tentative budget under all scenarios.


I state tax and

parcel tax ail

I state tax passes

but parcel tax ails


parcel tax passes

I state tax and

parcel tax pass

Total Revenue $176,880,000 $188,196,000 $190,880,000 $202,176,000

Expected Level o Spending $201,450,000 $201,450,000 $201,450,000 $201,450,000

(Defcit)/Surplus ($24,570,000) ($13,254,000) ($10,570,000) $726,000

Even in the best case scenario in which both taxes pass in November 2012, CCSFs scal condi-tion remains a concern. CCSF must conront its serious and ongoing decit spending, which isincreased partly because o the anticipated increases to support its retiree health benet obliga-tion, capital outlay, maintenance, and additions to the board reserve. These are all necessaryincreases or a variety o reasons.

Because CCSFs 2012-13 budget reductions were one-time in nature, the absence o thesereductions in scal years 2013-14 and 2014-15 results in increased operating costs and relatedincreased decit spending year to year. In every scenario other than the best case in which bothtaxes pass in November, CCSF aces substantial solvency issues over the next several years.

Appendix A o this report contains a multiyear nancial projection (MYFP) or CCSF thatincludes an explanation o the revenue and expenditure assumptions used in determining theamounts or each year. The projection includes no permanent, ongoing expenditure reductionsbeyond those identied in the scal year 2012-2013 tentative budget.

I voters approve the local parcel tax in November 2012, CCSF will not receive any resultingrevenues until scal year 2013-14. The administration has held discussions with, and receivedauthorization rom, the board to issue debt instruments in order to receive the tax revenue in2012-13. Although the exact amount o the debt has not yet been established, it is estimated to


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20 m u l t i y e a r f i n a n c i a l p r o j e c t i o n

be up to approximately $14 million. I CCSF issues the debt, the unding would be accelerated.There is a cost to borrow but it will not be known until the size and timing o the transaction areestablished. At that time CCSF will need to decide i the earlier receipt o revenue is worth thecost o issuing debt.

Multiyear Financial Projection

Multiyear nancial projections (MYFPs) are an important part o the budget process. Theyshould be produced accurately and contain the most current scal inormation available. MYFPsallow CCSF to project revenues and expenditures and help ensure that it will be able to meet itsnancial obligations in the current and two subsequent scal years.

FCMAT reviewed the MYFP prepared by CCSF to ensure its validity. FCMAT reviewed theperormance o CCSFs unds over the last several years to identiy trends and ormulate ques-tions about the status o accounts. This review allowed FCMAT to validate CCSFs general undbudget projections or the current and two subsequent scal years and indicate any eects thatother unds may have on the general und.

Any nancial orecast has inherent limitations because it is based on certain criteria and assump-

tions rather than on exact calculations. Limitations include issues such as the accuracy o baselinedata, unpredictable timing o negotiations, unanticipated changes in enrollment trends, andchanging state, ederal and local economic conditions. Thereore, the budget orecasting modelshould be viewed as a trend based on certain criteria and assumptions rather than as a predictiono exact numbers. To maintain the most accurate and meaningul data, the projection should beupdated at requent intervals as well as when there are signicant nancial changes to CCSFsbudget in current or uture years. The projection should also be updated during collectivebargaining negotiations to determine the scal eect o any potential contractual changes.

In evaluating the MYFP, much attention is ocused on the bottom line, which indicates CCSFsundesignated, unappropriated und balance. I the bottom line shows a positive unappropriatedund balance, this amount may be used by the governing board and/or the chancellor to improveeducational programs, increase employee compensation, improve the und balance, und liabili-ties such as retiree benets or workers compensation, or spend in other categories. However, ithe unappropriated und balance is negative, the decit is the amount by which the budget mustbe reduced to sustain the recommended reserve levels and board-designated reserves. The MYFPmust be viewed comprehensively, and CCSF must determine the compounding eects that usingany or all o the unappropriated und balance will have on the MYFP in the current and utureyears. The unappropriated balance and the corresponding compound eects can be determinedclearly as the years proceed.

FCMAT reviewed CCSFs records, interviewed sta members and examined nancial reportsto gather the inormation needed to validate CCSFs MYFP, which uses its scal year 2012-13

tentative budget as the base year. Based on FCMATs review o the data, the projection is reason-able. Because there are multiple possible outcomes based on the upcoming election, the projec-tions vary greatly rom one scenario to another, and the variance increases urther in the secondand third projection years.

CCSFs 2012-13 tentative budget is balanced in terms o anticipated revenues and expendi-tures, but it both assumes and depends on passage o the governors tax measure. Most o theexpenditure savings in the tentative budget are one-time concessions rom the employee groupsor 2012-13 only, which means that CCSF will again need to make reductions or 2013-14.Even with the passage o the governors tax measure, CCSF will have a projected shortall o


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21m u l t i y e a r f i n a n c i a l p r o j e c t i o n

$13 million in scal year 2013-14. CCSF cannot aord to wait and see i the local parcel tax isapproved beore implementing expenditure reductions. To maintain scal solvency, it would bebest to identiy reductions or 2013-14 as soon as possible and to ensure that they are ongoingrather than temporary.

CCSFs 2012-13 budget does not refect increases to the und balance. Although the budget

recognizes the possibility o a small state unding decit o 0.7%, in todays economic climate itis likely that the decit could be higher, which will reduce the und balance. CCSFs projectedsurplus (revenues minus expenditures) i the state tax passes but the local parcel tax ails is$727,000, which is minimal and leaves no margin or error or unexpected changes to the budget;either could result in scal insolvency.

There is a possibility that the governors tax measure will not pass. Although CCSF has estimatedthat this would reduce unding by another $11.5 million in 2012-13 i both the state tax andparcel tax measures ail, it has not developed a plan to deal with this reduction should it occur,and its ending und balance is not sucient to bear the burden.

CCSF is in a perilous nancial position. It can neither aord to err in its budget assumptions

or accounting treatments, nor incur additional unbudgeted expenses. Even i CCSF is able tomaintain solvency in scal year 2012-13 using the measures it has enacted, it will experiencenumerous challenging spending pressures and decisions in the uture.

CCSF Response to the Possible ScenariosAt the time o this report, CCSF had planned only or the second scenario, in which thegovernors tax measure passes and the local parcel tax does not pass in November 2012. As inthe past, CCSF plans to address the budget shortall with one-time budget adjustments ratherthan ongoing solutions, which is problematic. The identied one-time reductions total $6 to$10 million. The variance exists because the reductions include goals to increase classroomproductivity as well as the annual calculation o unded ull-time equivalent students (FTES),

which remains unknown. The interim chancellor and vice chancellor have indicated that theywill provide recommendations to the board in September 2012 regarding planning or the worst-case scenario, in which both the state and local tax measures ail. Under this timeline, it will bedicult to complete a plan by the rst o November and unlikely that it will be implementeduntil sometime ater that.

RecommendationsCCSF should:

1. Ensure that any additional revenue or savings that materialize are used rst to

improve its und balance.

2. Develop a plan now or the scenario in which both November 2012 taxmeasures ail.

3. Become more aggressive in reducing expenditures by implementing ongoingbudget adjustments to avoid insolvency.

4. Plan or and make permanent reductions to balance its scal year 2013-14budget.


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22 m u l t i y e a r f i n a n c i a l p r o j e c t i o n

5. Take a very conservative position with its tentative and adoption budgets, andlimit spending to an absolute minimum until the November election resultsare known. Any savings can be used to help address a worst-case scenario in

the current year.

I the election results are positive, CCSF should assess the situation and then

develop a plan to restore the ending und balance and to und ongoing obli-gations such as retiree health benets and workers compensation.

6. Beore adding any new discretionary costs to the budget, identiy a reasonablelevel o resources to commit to capital outlay rom the operating budget,beginning in scal year 2013-14.

7. Evaluate all requests or categorical program subsidies against all other useso unrestricted general und monies and along with CCSFs other priorities.Subsidies should not be provided without analysis and discussion.

8. Ensure that multiyear projections include all cost increases such as those

or retiree health benets, utilities, normal step-and-column movement,employee benets, and payroll. I a shortage occurs ater including these

items, either identiy an ongoing revenue source and/or implement perma-nent cost reductions.


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24 s t a f f i n g a n d o p e r a t i o n a l c o s t s

Although the agreement contains the provisions ound in most agreements o this type, it alsoprovides benets and compensation that may not be sustainable in the current economic envi-ronment, including the ollowing:

Release time or contract administration, including grievance processing (3.75 FTE).

Compensation or tenure review committee members and mentors

CCSF provides nine hours o non-instructional pay or committee members, 17 hoursor committee chairs, and 18 hours or mentors.

Voluntary sick leave bankThis pays up to 100 days at hal pay to supplement partially paid sick leave or ull-timeemployees, up to 100 days or part-time employees at level o the employees currentworkload, and up to 25 ull days o extraordinary benets i other voluntary sick leavebank benets have been exhausted.

Pregnancy disability leaveEmployees receive up to six weeks o this leave, which is paid by CCSF and is notdeducted rom an employees accrued sick leave.

Sabbatical leaveFour percent o the total aculty are on leave each semester; at least three-quarters o thismust be or one-year sabbaticals.

Load and class sizeThe minimum class size is 20, with some exceptions. Teaching load in the credit programis 15 units per semester or 30 units per year with some adjustment based on varyingmodes o instruction.Noncredit teaching load is 25 contact hours per week.A joint aculty/management committee was ormed many years ago to discuss work loadand class size. The current contract contains the ollowing statement acknowledging the

work o the joint committee: . . . [acknowledges] the work o the Joint Committee asdetailed in the Eciency Committee Report o January1991. The District and Union armed their commitmentto urther evaluate the Joint Committees recommendationswith particular emphasis on administrative eciency, acultyloads and class size in light o median loads and class sizes oother Bay Ten community college districts

Compensation/SalariesThe salary ormula may not adequately address CCSFs rising costs o benets, including

its retiree benet obligation. Temporary part-time aculty are paid on a prorated basisat 86% o ull time rates, up to step 12 o the salary schedule (ull-time permanentemployees are paid on this basis up to step 16) or the various modes o instruction. Payor temporary part-time oce hours is based on the load assigned, with a range o upto our, eight or 15 hours per semester. Full-time aculty are eligible or annual salarystep movement; step progression or part-time aculty is granted ater completion oour semesters, up to Step 12. Salary schedule column movement provisions provideincentives to pursue urther academic preparation via preapproved undergraduate or


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25s t a f f i n g a n d o p e r a t i o n a l c o s t s

graduate units ater initial salary placement. The annual cost or step-and-columnmovement or ull-time and part-time aculty was $1,528,556 in scal year 2010-11.

BenetsCCSF pays a city charter-mandated contribution or employee medical insurancepremiums or ull-time and eligible part-time aculty. CCSF also pays 100% o the

premium or dental coverage or ull-time and eligible part-time aculty. Part-timeemployees are eligible i they are beginning at least their third semester and are assignedeither 12.5 hours or more per week or a semester in the noncredit program or 7.5 unitsor more per week or a semester in the credit program. The total annual costs to CCSF othis provision are $3,017,274 or health benets and $443,779 or dental benets.

SubstitutesCCSF provides higher pay rates or substitute assignments that exceed 12% o the totalhours o an academic course.

The magnitude o its employee contract obligations makes it dicult or CCSF to continue as agoing concern without negotiating to reduce total stang costs.

CCSF has employed twice as many ull-time aculty as its peers, incurring expenses that are$17 to $18 million higher than comparison districts. CCSF also employs more classied sta athigher average salaries than the comparison districts.

Medical Benet CostsFCMAT evaluated CCSFs medical benet costs compared to those o 10 other Bay Areacommunity college districts. Bay Area districts were used or comparison because o the ease oobtaining data and because the rates, which are usually based on geographic location, were likelyto be comparable. The analysis assessed only the medical premium costs associated with theexisting plans. An exhaustive analysis would require considering many variables, but this was notpossible because o constraints on time and inormation. The data or scal year 2010-11 indi-

cate that CCSFs premium rates are near the median o those or the other 10 Bay Area commu-nity college districts. However, CCSF has approximately two to three times more employees whoare eligible or these benets than the other Bay Area districts used or comparison.

Full-Time Equivalent Students (FTES)The number o ull-time equivalent students (FTES) at CCSF rom 2005-06 through 2011-12has been airly stable. The decline o 1,237 FTES during that time was due largely to stateunding reductions or FTES, which were out o CCSFs control. During the decline, creditFTES increased rom 65.3% o total FTES in 2005-06 to 69.1% in 2011-12. Because creditFTES are unded at a higher rate, this increase mitigated the eect o the decline in total FTESsomewhat. In 2011-12 CCSF received stability unds because it had ewer FTES than its baseamount or FTES unding. This occurred because o the decision to limit the spring and summersessions as a money-saving measure. CCSF ully anticipates restoring these FTES in 2012-13,which would eliminate any negative eect on revenues.

Although there has been a slight decline in FTES during the seven-year period o 2005-06through 2011-12, employee costs have increased in all but three categories. The table belowsummarizes these changes.


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Changes in Employee Costs, 2005-2012

Employee Category Costs, 2005-06 Costs, 2011-12* Change

Instructional Faculty $42.34 million $53.15 million +25.53%

Part-Time Instructors $27.33 million $24.55 million -10%

Librarians $1.73 million $1.95 million +12.71%

Counselors $5.35 million $6.50 million +21.49%

Nonteaching Hourly $6.45 million $5.97 million -7.44%

Academic Administrators $6.01 million $5.03 million -16.31%

Regular Classifed $31.26 million $32.54 million +4.09%

Classifed Hourly $1.44 million $2.05 million +42.36%

Total Salaries and Benefts $121.91 million $131.74 million +

*The 2011-12 amounts are budgeted gures. During this period basic skills was moved out o the unrestricted general und,so the 2005-06 amounts include these costs but the 2011-2012 amounts do not. Most o the basic skills salary costs were oraculty. I they were included, the percentage change would be larger.

Revenues have increased over this same period by approximately 9.6%, excluding use o reserves

and one-time transers.The above table shows that regular aculty salaries have increased 25% during this period, whileFTES have decreased and revenues have increased by less than 10%. The decline in part-timeaculty costs is more representative o a decline in state-unded FTES. Increasing the numbero regular ull-time aculty or increasing the pay structure locks in costs that are hard to reduceduring dicult nancial times. The same is true or counselors and, to a lesser extent, librarians.

Revenue and Cost per FTES for Credit and Noncredit Courses

CCSF operates the largest noncredit program o any community college in Caliornia. In2011-12 CCSF served 37,469 ull-time equivalent resident and nonresident students (FTES). Othese, 10,429 FTES, or 28%, were enrolled in noncredit courses, and 6,439 o the 10,429 FTES

were enrolled in English as a second language courses. Other signicant noncredit programenrollments were in transitional studies, learning assistance, and in business and oce technologyand small business (see Appendix D or enrollment and FTES by discipline).

Noncredit unding is classied as either regular or as career development and college preparation(CDCP). In 2006, the state created a unding category or CDCP courses, sometimes reerredto as enhanced noncredit courses. The Caliornia community college unding ormula undsregular noncredit at $2,745 per FTES and CDCP at $3,232 per FTES. O CCSFs total 10,429noncredit FTES, 7,630 were CDCP and 2,799 were regular noncredit. Thus the majority oCCSFs noncredit FTES are unded at the higher rate.

To perorm a revenue and cost analysis o the noncredit oerings at CCSF, certain assumptions

were used because CCSF does not account or revenues and expenditures in sucient detail toperorm the analysis without them.

For example, FCMAT was provided with 2011-12 general und unrestricted expenditure data orcredit, noncredit and support costs.


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Excerpt o 2011-12 Expenditure Data or Credit, Noncredit and Support Programs

Program Type

Unrestricted General

Fund (UGF)

UGF Internally

Designated Fund Total % o Total

Credit FTES Expenditures 110,086,873 473,064 110,559,937 55%

Non-Credit Expenditures 25,074,789 1,778,108 26,852,897 13%

Support Expenditures 60,367,028 2,133,803 62,500,831 31%

Total 195,528,690 4,384,975 199,913,665

Source: Data provided by Controller. Report title: FICMAT_CR_NC_SUPPORT_NULL_Expenditure_Distributions.

Inormation provided by CCSF indicates that unrestricted general und expenditures totaled$199.9 million or scal year 2011-12, that 55% o this total is attributed to direct costs associ-ated with credit instruction, 13% to direct cost o noncredit instruction, and 31% to indirectsupport activity costs. Support activities are activities that provide support services such as acili-ties, administrative and clerical, counseling, and libraries.

To accurately show the costs o the credit and noncredit programs, a means o allocating thesupport costs between the credit and noncredit instruction had to be developed. FCMAT

used total direct expenditures or credit ($108,944,937= 80%) and total direct expenditures ornoncredit ($28,467,897= 20%) as a basis or allocating the majority o the support costs. Inthe absence o data regarding the distribution o support costs, the assumption is that supportcosts are incurred in the same ratio as direct costs. The exception to this 80%/20% distributiono support costs was in the compensation costs or educational administrators; in this case a70%/30% distribution was used, which approximates the ratio o credit enrollment to noncreditenrollment.

Using this allocation method, total expenditures or credit instruction are $158,420,200($108,944,937 + $49,475,263) and total expenditures or noncredit instruction are $41,493,465($28,467,897 + $13,025,568). The projected costs per FTES are $5,859 or credit and $3,979

or noncredit. Actual 2011-12 FTES, including nonresident FTES, were used in the per-FTEScost calculations (10,429 noncredit and 27,040 credit, including nonresidents).

When calculating revenue per credit and noncredit FTES, FCMAT had to make assumptionssimilar to those made or the cost calculations. FCMAT only actored into the analysis thoserevenue components that are considered by the state as computational revenue or state appor-tionment purposes. These components include local property taxes, student enrollment ees andstate general apportionment.

Per the Caliornia Community College Chancellors Oces (CCCCOs) second principal appor-tionment report or scal year 2011-12, CCSFs total computational revenue was $152,686,227.As previously stated, total expenditures or 2011-12 were $199,913,665. Thus expenditures

compared to the state computational revenue results in a decit o $47,227,438 that must beoset by other local revenues such as local sales tax, interest income, nonresident tuition andother sources.

State unding provides CCSF with $5,000 per credit FTES and $3,341 per noncredit FTES.The noncredit unding rate is approximately 67% o the unding rate or credit courses. Theseunding rates include an appropriate allocation o oundation grant unding to the basic appor-tionment rates. The noncredit rate is a proportional blend o the states regular noncredit andCDCP noncredit rates, and the states basic allocation is 80% to credit and 20% to noncredit,similar to how the support expenditures discussed above are allocated.


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CCSFs expenditure per FTES in excess o apportionment revenues or scal year 2011-12 was$637 or noncredit instruction and $859 or credit instruction. Thus noncredit requires $637per FTES rom other unding sources, and credit requires $859 per FTES rom other undingsources. Based on this analysis, there is little dierence in the proportion o revenue to cost whencomparing credit oerings to noncredit oerings. For credit courses, 85.34% o unding perFTES is provided by apportionment revenue; or noncredit courses, 84% o unding per FTES is

provided by apportionment revenue. The noncredit unding rate is lower, but costs are lower aswell. Based on these revenue-to-expense proportions, the eciency o credit and noncredit oer-ings are nearly equal. The table below summarizes this analysis

Credit and Noncredit Cost and Revenue Analysis

Type

2011-12

General Fund

Expenditures

2011-12 Actual

FTES (includ-

ing nonresi-

dents)

Expenditure

per FTES

Apportionment

Revenue per

FTES, Including

Foundation Grant

Dierence

Between

Revenue and

Expense

Revenue as a

Percentage o

Expense

Credit $158,420,200 27,040 $5,859 $5,000 $859 85.34%

Noncredit $41,493,465 10,429 $3,979 $3,342 $637 84.00%

Total $199,913,665 37,469

This analysis has used the 2011-12 general apportionment revenue in calculating the revenueper FTES. Actual FTES, including nonresident FTES, was used to calculate expenditures perFTES. Total FTES were used to calculate the per-FTES cost because the general und expen-ditures incurred in 2011-12 included costs o serving both resident and nonresident students.It is assumed that the nonresident tuition rate per FTES approximates state apportionmentrevenue since all o the nonresident students appear to be in enrolled in credit courses. Signicantassumptions were made in allocating the support costs, which CCSF does not classiy in itsaccounting system. I CCSF continues to use the revenue and expense model in this report, itwill need to review more closely the 80%/20% distribution o these costs to conrm the appro-priateness o this assumption. The eect o categorical revenue and expenses would also need tobe reviewed as relates to this analysis.

The unding rate per noncredit FTES is approximately 70% o the apportionment per creditFTES. However, costs in the noncredit program are also lower. A signicant amount o thedierence in costs between credit and noncredit is due to dierences in teaching load. In thecredit program, the teaching load is 15 contact hours per week; in the noncredit program,teaching load is 25 contact hours per week. Thus the teaching load in noncredit is 67% greater.The lower unding rate in the noncredit program is compensated or by the overall cost savingsthat result rom aculty members having a higher teaching load, even though the salary scheduleis the same.

Instructional productivity, as measured by FTES per ull-time equivalent aculty (FTEF), issimilar in both programs. According to inormation provided by CCSF, productivity is 35.53FTES per FTEF in the credit program and 36.76 FTES per FTEF in the noncredit program.

Given the assumptions necessary to complete this analysis, the comparison o revenue and costper FTES or credit and noncredit programs yielded no signicant dierence on a proportionalbasis, even though in terms o absolute dollars credit courses required a greater per-FTES contri-bution rom other unding sources ($859) than did noncredit courses ($637).


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Faculty Obligation Number (FON)Assembly Bill (AB) 1725 changed the community college unding ormula in the early 1990sand included goals to both maintain a required number o ull-time aculty teaching in creditprograms and to increase the number o ull-time aculty as growth unding was provided. Thegoal established was that 75% o the hours o credit instruction oered should be taught by ull-

time aculty, and thus the 75-to-25 ratio became part o the community college lexicon. Somelimited additional resources were allocated to colleges via the state budget to support this eortor the rst two or three years ater the passage o AB 1725, but not subsequent to that. Althoughthe goal to maintain and increase ull-time aculty remained, the lack o state unding limitedprogress toward meeting it.

The AB 1725 commitment had two parts: To convert part-time aculty to ull time to increasethe ratio o ull-time to part-time aculty in community colleges statewide; and to increase hourlypart-time pay so that it would be more comparable to the salaries paid to ull-time teachingaculty. Like the unding to hire more ull-time aculty, the supplemental allocation to und part-time aculty pay has been reduced and oset by state general apportionment reductions.

The minimum aculty requirement established by AB 1725 remains in place and is calculatedeach year or each college district based on the prior year number and any growth unding CCSFreceived. This calculation is based on credit enrollment only.

CCSFs aculty obligation number (FON) or all 2011 was 483.80 (the FON requirementapplies only to the credit program). CCSFs most recent reporting (November 2011) indicatedthat it had 661.33 FTEF, which is 177.53, or 36.9%, more FTEF than required.

O the ve similar community college districts chosen or comparison purposes, only SantaMonica similarly exceeds its FON, with 36.8% more FTEF than required. Santa Monicahas a much lower base FTEF in spite o the act that its FTES credit enrollment is similar tothat o CCSF. Statewide, community college districts exceeded the FON by an average o 11FTEF. CCSF exceeds its required FON by the greatest amount o any district in the state whenmeasured numerically. Based on its own reports, ull-time aculty positions comprise 71.35%o the total credit teaching aculty at CCSF. Statewide, ull-time aculty positions comprise anaverage o 58.24% o total credit teaching aculty at community colleges.

To control costs and ensure an appropriate mix o teaching aculty practitioners, most commu-nity college districts seek a aculty stang level that exceeds their FON to some extent butnot signicantly. This is because even with the increases in part-time hourly rates, part-timeaculty are less expensive than ull-time aculty or most districts. However, this is not the casewith CCSF because o its hourly teaching rates and contract provisions that provide ull healthbenets to part-time employees.

Although CCSFs relatively high ratio and number o ull-time aculty may not aect short-term

costs because o the high level o contractual salaries and benets paid to part-time aculty, itwill aect these costs in the long term because o the implications o retiree health benets orull-time employees. Greater use o part-time aculty also provides more fexibility and has thepotential to make CCSF more responsive to local instructional program needs.

Part-Time Faculty Costs

CCSFs estimated average rate o pay or a part-time instructor is $113.51 per hour. Based onthis rate, the estimated annual cost o one part-time aculty who works the equivalent o ull time(one FTEF) is $59,595, or approximately $6,000 per course. FCMAT conrmed these pay rates


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through a review o nancial records or scal year 2010-11 that indicate the total hourly pay inrelation to total part-time aculty. Statutory benets such as workers compensation, unemploy-ment insurance and retirement contributions add 6.6 % to this total. In addition, i a part-timeaculty members teaching assignment is equal to or greater than 50% (7.5 units or cred

Documents

California Community Colleges Chancellor's Office: Fiscal Review Of City College of San Francisco (2012)