SONOMA COUNTY JUNIOR COLLEGE DISTRICT · Understanding the State Budgeting Process State Budgeting Timeline: Late May - June 15 The budget committee of each house considers the subcommittees’

SONOMA COUNTY

JUNIOR COLLEGE DISTRICT

2017-18 BUDGETING

PRESENTATION

Presented by Doug RobertsSr. Vice President, Finance and Administrative Services

Understanding the State Budgeting Process

State Budgeting Timeline:

July 1Fiscal year begins.

July 9 - September 15Department directors and agency heads initiate detailed reviews and develop budget proposals for their programs for the next fiscal year. These requests for program changes are then sent to the Department of Finance for review.



October - January 10 The Governor evaluates the requests as reviewed

by the Department of Finance and sends his or her proposed budget to the Legislature.

On or before January 10 The Governor delivers a state-of-the-state speech

and presents his/her budget.



January – February

The budget committee chairs in each house introduce the Governor’s budget proposal in bill form. The Legislative Analyst’s Office prepares a detailed review of the budget bill.



March – May

Each house refers its budget bill to their respective budget committees. The bills are then broken down by subject and assigned to the appropriate subcommittees by subject areas. After completion of the hearings, each subcommittee votes and then sends its report to the full budget committee.



Late May - June 15

The budget committee of each house considers the subcommittees’ reports and sends a revised budget bill to the floor for evaluation by the full body.

Each house discusses and then votes on its version of the budget bill.

The differences between the Assembly and Senate versions of the budget bill are worked out in a conference committee made up of three members from each house.



Late May - June 15 (continued)

Upon completion of its review, the conference committee submits a single version of the budget bill to both houses.

The Senate and Assembly each vote on this final version before it is sent to the Governor.

The houses also vote on trailer bills if statutory changes are necessary to implement provisions of the budget bill.



June 15 - July 1

The bill becomes law as soon as it is signed by the Governor due to its status as an urgency measure.

Understanding the State Budgeting Process(State General Fund Revenue Sources)

State General Fund Revenue Sources :(in Millions)

Personal Income Tax $ 85,866 68.3%

Sales & Use tax $ 25,179 20.0%

Corporation Tax $ 10,878 8.7%

Insurance Tax $ 2,368 1.8%

Alcoholic Beverages $ 372 0.3%

Cigarette $ 65 0.1%

Pooled Money Interest $ 97 0.1%

Other Revenues $ 913 0.7%

Total $125,738

Understanding the State Budgeting Process(State General Fund Revenue Sources)

From the previous slide, it is clear that 97% of the

state’s general fund revenues are (to some extent)

affected by the U.S./State economy.

During the recession, a full third of the state’s

general fund revenue losses were from reduced

capital gains taxes.

For 2017-18, capital gains tax accounts for 9% of

the state’s general fund revenues.


Proposition 98

A constitutional spending guarantee for schools and community colleges

Approved by the voters in 1988.

Proposition 98 ensures that, over the long run, education spending at a minimum keeps pace with growth in the California economy and increases in

student enrollment (Test 2 level.)


Proposition 98 (Cont.)

Proposition 98 requires that the state keeps track of the difference between the amount funded and the Test 2 level (Maintenance factor).

In subsequent years, the maintenance factor is restored when the Proposition 98 funding guarantee is adjusted upward to raise it to the level it would have been had it always been funded at the Test 2 level. The state does not have to repay amounts from prior years.


Proposition 98 (Cont.)

Proposition 98 allows the state flexibility in times of fiscal hardship. In years that state General Fund revenues grow at a slower rate than the economy, the minimum funding level grows at the rate of state General Fund revenues (Test 3 level).

In any year the Legislature may pass a bill, with a two-thirds majority, that suspends the Proposition 98 funding requirement (Suspension).


Understanding the State Budgeting Process(The Proposition 98 Statutory Split)

2004-05 CCC 10.04% K-12 89.96%

2005-06 CCC 10.6% K-12 89.5%

2006-07 CCC 10.73% K-12 89.27%

2007-08 CCC 10.83% K-12 89.27%

2008-09 CCC 12.14% K-12 87.86%

2009-10 CCC 11.41% K-12 88.59%

2010-11 CCC 11.82% K-12 88.18%

2011-12 CCC 11.17% K-12 88.83%

2012-13 CCC 10.55% K-12 89.45%

2013-14 CCC 10.99% K-12 89.01%

2014-15 CCC 10.93% K-12 89.07%

2015-16 CCC 10.93% K-12 89.07%

2016-17 CCC 10.93% K-12 89.7%

2017-18 CCC 10.87% K-12 89.13%

The community college statutory split of Proposition 98 funding is

10.93%.

It should be noted that the community college system has received

less than it statutory share 15 out of 24 years.

The following is a summary of the Community College/K-12

Proposition 98 split in recent years:

Understanding Community College Funding

To understand the effect of the state’s budget on community colleges … you need to understand community college funding.

Some of the District’s revenues come with certain obligations … and these are referred to as “Restricted Funds”…

It is the “Unrestricted General Fund” (UGF) under which the primary mission of the District is conducted.

Restricted Funds

As stated, the District receives funds from a number of sources …

However, much of that money is “restricted” and can only be spent for restricted purposes.

To account for the various sources of funding, and their associated expenditures, the District has established specific “Funds”

Restricted Funds

Some of the District’s Restricted Funds are:

Measure H – General Obligation Bond Fund

Capital Projects Fund

1972 Bond Redemption Fund

Parking Fund

College Farm

Student Representation Fee Fund

General Fund

Even within the District’s “General Fund” … there is a subset of revenue (approximately $28 million) that can only be used for the purposes/goals for which it was received ... And each program has its own budgeting process.

Examples of this are: State categorical funds (EOPS, Matriculation, SSSP, etc.)

Grants (Child Development, Workforce Innovation)

Student Health Fees

These funds are held in the … “Restricted General Fund”

Unrestricted General Fund

This is the fund under which the District carries out it’s primary mission.

Revenue-wise approximately 60% of the District’s apportionment revenue comes from “local sources.”

The primary sources are ...

Property Taxes and Student Fees.

The remaining 40% comes from State funding.

Components of Unrestricted Revenue

Total General Apportionment* $ 106,322,564 85.3%

Lottery Funding* 3,773,284 3.0%

STRS (on behalf payments) 2,397,643 1.9%

Non-resident Tuition & Fees 1,985,000 1.6%

Materials & Other Course Fees 1,545,248 1.2%

Other State & Fed Revenues 1,222,900 1.0%

Mandated Cost Claims* 543,608 0.4%

Other Local Revenues & Commissions 4,500,018 3.6%

Transfers-in 2,493,547 2.0%

Total Revenue $ 120,812,574

* Revenue directly tied to reported enrollment (or ... “FTES”)

General Apportionment

Derived from the SB 361 funding formula … which has two basic components

1) “Basic Allocation” … is based on the number and FTES- size of each of the college’s sites.

2) “Workload Measure” …is based on the type and number of reported FTES*

* (FTES = Full Time Equivalent Student = 525 Student Contact Hours)

SB 361 Funding Model

Single College

College Allocation

$6.1M ≥ 20,000 FTES

$4.9M ≥ 10,000 FTES

$3.6M < 10,000 FTES

Per Center Allocation

$1.21M ≥ 1,000 FTES

$0.91M ≥ 750 FTES*

$0.61M ≥ 500 FTES*

$0.30M ≥ 250 FTES*

$0.15M < 250 FTES*

* Only for “Grandfathered Centers”

FTES Funding Rate

$5,072 / Credit FTES

$5,072 / CDCP FTES

$3,050 / Non-Cr FTES

Rural District Allocation

$1.16M

SB 361 Funding Model

Multi College

Per College Allocation

$4.9M ≥ 20,000 FTES

$4.3M ≥ 10,000 FTES

$3.6M < 10,000 FTES

Per Center Allocation

$1.21M ≥ 1,000 FTES

$0.91M ≥ 750 FTES*

$0.61M ≥ 500 FTES*

$0.30M ≥ 250 FTES*

$0.15M < 250 FTES*

* Only for “Grandfathered Centers”

FTES Funding Rate

$5,072 / Credit FTES

$5,072 / CDCP FTES

$3,050 / Non-Cr FTES

Rural District Allocation

$1.16M


The Total General Apportionment to be received in any one year is normally calculated as follows:

Base Revenue (which should be the prior year’s total revenue)

+ COLA

+/- Growth/Decline

+ Stability Funding (offsets 1st year of decline)

- Deficit Funding

= Total General Apportionment


And ... the way that the state calculates the

amount of state-funding needed by the

Community College System is as follows:

Total Calculated Apportionment

- Estimated Property Tax Collections (state-wide)

- Estimated Enrollment Fees (state-wide)

= Required State Funding (a fixed amount)

So, what happens if the fixed state amount isn’t enough? ...

DEFICIT FUNDING ! (i.e., funding at less than 100 cents on the dollar)


So, how does a District increase its revenues?

Given that apportionment revenue is roughly 90% of all revenue sources, and, given the apportion formula…

Base Revenue

+ COLA

+/- Growth/Decline+ Stability Funding

+ Deficit Funding

= Total General Apportionment

COLA and Growth are the primary ways to significantly increase a district’s revenues ... (... and both of these are controlled by the State)

Historic COLA Increases

Historic COLA Increases

Historic Funded FTES

Stability

A mechanism of community college funding (T-5, 58776)

It allows a district to … RECEIVE … “Full Base Funding” … in a year in which the district did not report sufficient FTES to … EARN such funding.

Prior to SB 361, the stability mechanism allowed a district 3 years to restore to base funding levels (as long as it recovered 1/3 of the original loss each year) without suffering any loss of apportionment funding.

Since SB 361, a district must restore FTES by the following year or risk losing apportionment revenues.

Workload Reduction

Another mechanism of community college funding

Or, rather … Funding Reduction

Under Workload Reduction … the State does not reduce its “Per-FTES-Funding-Rate …

It just reduces the number of FTES that the State will fund!

SRJC received workload reductions in 2009-10 and 2011-12

… and if Proposition 30 had not passed, another $6M in workload reduction would have been received for 2012-13!



Budgeting

As soon as “total resources” are calculated, the District can begin budgeting expenditures

(Total Resources = Beginning Fund Balance + Current Year Revenues)

From the total resources available, the District makes budgetary allocations to fund the following:

Full-time Employee Salaries & Benefits (a “roll-over”)

Part-time Faculty Salaries & Benefits (based on planned course offerings)

Retiree Health Benefits

Operational Expenses * (based on roll-overs & PRPP decisions)

* (includes expenditures for: supplies, equipment, contracted services, leases,

insurance, utilities, classified & student hourly staff, etc.)

Fund Balance / Reserve (State Minimum is 5% of expenditures)

If total District resources do not cover total uses, then expenditure-cuts are required.

Components of Unrestricted Expenditures

Faculty Salaries * $ 54,376,254 43.6%

Classified Salaries * 25,568,288 20.5%

Benefits * 28,771,247 23.1%

Utilities 2,756,602 2.2%

Supplies & Materials 2,475,363 2.0%

Contracts, Leases, Equipment Repair 2,475,335 2.0%

Consultants and Lecturers 2,225,816 1.8%

Insurance, Legal, Audit & Elections 1,237,263 1.0%

Conferences, Dues, Mileage 682,798 0.5%

Other 5/6/7 Expenses & Transfers 4,019,902 3.2%

Total Expenditures $ 122,229,473

* Salaries & Benefits comprise 87.2% of total expenditures

Ending Fund Balance

The Budgeting Challenge

How does the District keep abreast of annual

expenditure increases such as …Healthcare Premium Increases

State Increases to Employer Salary Expense (STRS & PERS)

Contractual Salary Obligations

Utility Rate Increases

Insurance Premium Increases

Increases in the Cost of Goods & Services (due to inflation)

… when revenue increases are not keeping pace …

Looking Forward

Although the District offset the expenditure increases

budgeted for 2017-18 … with $4 million in reductions,

2018-19 will come with it’s own set budget hurdles:

STRS Increase (from 14.43% to 16.28%) ≈ $ 600,000

PERS Increase (from 15.33% to 18.10%) ≈ 560,000

Healthcare Increase ?

Step & Column Increases ≈ 1,040,000

Loss of 2017-18 One-time Funding

Interest & Redemption Transfer ≈ 1,382,746

Bookstore Closure Transfer ≈ 500,000

State Prior Year Revenue Distribution ≈ 694,000

For these reasons, for 2017-18, the District has

proposed a tight budget and continues to carefully ...

Manage enrollment

Maximize revenues

Contain costs

... while at the same time

Meeting the needs of our students

Meeting District initiatives

Ensuring long-term fiscal stability

QUESTIONS?

Documents

SONOMA COUNTY JUNIOR COLLEGE DISTRICT · Understanding the State Budgeting Process State Budgeting Timeline: Late May - June 15 The budget committee of each house considers the subcommittees’