THE MMCC BUDGET January 15, 2015

Where does our money come from? And Where does it go?

REVENUE SOURCES Michigan Community Colleges – primary revenue streams Tuition & Fees – 43% State Appropriations – 25% Local Property Taxes – 31% MMCC – same sources, but… Revenue stream looks much different Low local support from property tax levy Heavy dependency on tuition & fees

MMCC REVENUE COMPARED TO OTHER MICHIGAN COMMUNITY COLLEGES 2014 Per the 2013 ACS Report, the average of operating fund revenue sources for Community Colleges in our group* was: 43% Tuition and Fees 31% Property Taxes 25% State Appropriations 1% All Other *Our ACS group includes Alpena, Bay De Noc, Glen Oaks, Gogebic, Kirtland, Montcalm, North Central, Southwestern, West Shore.

MMCC REVENUE BREAKDOWN

ENROLLMENT FACTS Only 31% of Mid’s students are In-District (State average = 68%) >80% of Mid’s tuition revenue is generated by Out-of-District students Recent focus on International Student enrollment has pushed revenue derived from international students to 6% of Mid’s total tuition and fees Financial effects of recent enrollment declines have been partially offset by annual tuition rate increases

MMCC HISTORICAL DATA

STATE APPROPRIATIONS 20% of Mid’s general fund revenue (average = 25%) Very little change in recent years State appropriations peaked in 2002 at $4.7 million 2014 appropriations were $4.5 million State appropriations per student declined due to enrollment growth Little, if any, ability to impact

MMCC Historical Data Fiscal Year Equated Students

LOCAL PROPERTY TAXES 9% of Mid’s general fund revenue (average = 31%) Remained relatively constant when many schools were experiencing double digit declines Headlee amendment has eroded the college’s original operating millage of 1.5 mills to 1.2232 mills Second lowest operating millage among Michigan Community Colleges

The Annual Budgeting Process

MMCC Board of Trustees’ Guiding Principles MMCC WILL USE AN INCLUSIVE PROCESS INTERNALLY TO DEVELOP A BUDGET AND WILL PROPOSE AN ANNUAL BUDGET BASED ON THEIR PORJECTIONS OF REVENUES AND EXPENSES FOR THE NEXT YEAR. The budget will be developed using the following formula: Program Development funds – equal to 2% of projected general fund revenues Planned Savings – equal to 5% of projected general funds revenues Tuition & Fees – set to provide GF reserve (contingency) equal to 2.5% of budget

BUDGET BUILDING BASICS Current year data is the baseline for future year’s budget Project and evaluate current year data to June 30th

ENROLLMENT & TUITION RATES BUDGET PROJECTIONS ENROLLMENT & TUITION RATES The enrollment projection team meets to forecast the enrollment for the upcoming academic year Current tuition rates are applied to the enrollment projections to evaluate the projected revenue stream without adjusting the tuition rates Tuition rate adjustment proposal goes to the Board of Trustees Board of Trustees acts on tuition rate proposal, revenue is set

MID’S EXPENDITURES General Fund Expenditures were $21.2, $20.7, and $21.0 million for 2012, 2013, and 2014, respectively.

EXPENDITURE COMPARISON MMCC 2014 Per the 2013 ACS Report, the average of operating fund expenditures for Community Colleges in your group* was: 45% Instruction 1% Public Services 11% Instructional Support 14% Student Services 18% Institutional Administration 11% Plant Operations *Your ACS group includes Alpena, Bay De Noc, Glen Oaks, Gogebic, Kirtland, Montcalm, North Central, Southwestern, West Shore.

MAJOR EXPENDITURES Salaries and fringes account for over 82% of total college expenditures Employee health Insurance cost is almost $2 million Employee retirement costs - exceeds 25% of every payroll dollar. Total cost for 2014 was $2.9 million Energy costs for all Mid operations exceeded $1.1 million in 2014

SALARIES & FRINGES

PROJECTING MAJOR EXPENSES BUDGET PROJECTIONS PROJECTING MAJOR EXPENSES Salaries and salary increases are driven by labor contracts Employee health Insurance increases are limited by state imposed caps Health insurance hard caps are indexed to medical inflation rates, averaging 3.2% MPSERS – contribution rates are set by the state of Michigan Current rate exceeds 25% Increased from 16.94% in 2010 to 25.78% in 2014 (60% increase) Recent year increases of 1-2% are necessary to offset the UAAL Energy – increases are estimated based upon market info and projected building utilization

BUDGET ALLOCATION DEPARTMENTAL INPUT Department Managers solicit input from their departments Additional staffing needs Operating expense changes New training or operational initiatives Deferred maintenance issues THIS IS YOUR OPPORTUNITY FOR INPUT!

BUDGET ALLOCATION Budget Managers present requests for additional/modified funding Compare projected revenue to projected expenses Surplus – good, maintain contingency funding Deficit - determine what areas to consider reducing to balance the budget Contingency funds – set aside to fund unanticipated expenditures, new initiatives and salary adjustment that arise after the budget is completed Budget committee (Strategic Council) evaluates budget requests in relation to funds available Consider past year requirements/demands and compare to projected levels of activity Determine extent of budget cuts required and the strategic approach to balance the budget

Eliminating the deficit BALANCING THE BUDGET Eliminating the deficit Budget committee (Strategic Council) evaluates budget requests in relation to funds available Determine extent of budget cuts required and the strategic approach to balance the budget Contingency fund consideration Historical trends vs. future projections

BUDGET APPROVAL Preliminary budget to the Board of Trustees in April Intent to levy millage is published in early June along with notice of a “Truth in Taxation” notice Board authorizes tax levy at the second June board meeting Balanced budget presented to Board of Trustees at the second June board meeting

QUESTIONS?