San Diego Community College District Preliminary Budget General Fund Unrestricted Only Information Item March 25, 2010

So why a Preliminary Budget if it is not a legal requirement? It provides a status report on budget reduction efforts since , which have been implemented in response to revenue reductions over a three (3) year period. It provides a status report on the relationship between continuous revenue and continuous expenses as of ( SDCCD Structural Budget issue). As the Tentative Budget, which is approved in June of each year, is too late to make decisions that impact the first half of the upcoming year, a Preliminary Budget provides time to review, plan, and implement budget revisions as necessary for It identifies the remaining budget challenges that exist as of

Preliminary Budget is based on the following assumptions:  No COLA in  A net revenue increase from either Growth or other sources of $1.42 million  No additional revenue reductions to General Apportionment or Categoricals  Any funded growth FTES can be achieved through funding campuses at the same FTEF levels in as was funded in (Requires a continuation of FTES productivity levels)  Total Categorical backfill from GFU will be limited to $1.5 million. In $2.6 million was required to cover Categorical costs  The current $30.28 million reduction goal is attained by July 1, 2010  A roll forward of adjusted budgets (after budget reduction decisions) plus inflationary costs to selected operating expense accounts (utilities, insurance, maintenance contracts, etc)  Increase funding to cover employee class and step advances, STRS & PERS and other mandated benefit cost increases In addition, the Preliminary Budget includes the following:

Preliminary Budget General Fund Unrestricted Only Continuous Expenses over Revenue 10,834,406 10,064,565 (769,841) Budget Gap Change in Beginning Balance: Beginning Balance 16,698, Beginning Balance 15,496, Beginning Balance 14,160, Beginning Balance TBD * *Expenses Include: $3.5 million inflation costs $1.5 million Categorical backfill

Reserves and Set Asides Total $8,634,155 Projected Projected Projected Projected Budget Expenses Expenses Budget Expenses Expenses Item RAF Health Benefits through 12/21/2011 $2,051,033 $1,290,600 $1,393,848 2.Prop S & N Continuous Costs 3,982,494 1,204,251 2,081,074 3.Staff 2,600,628 2,600,628 - Totals $8,634,155 $5,095,479 $3,474,922 Projected Ending Balance$3,538,676$63754 Set Aside for Employee Health Benefits through 12/31/20112,051,033 Set Aside for future Prop S and Prop N projects3,982,494 Set Aside for Position changes (interim assignments, reclassifications, etc) 100,000 Set Aside to fill 2 Deans at City, 4 at Mesa, 1 at Miramar, & 1 at DO 957,429 Set Aside to fill Classified positions at City (per cabinet ) 428,685 Set Aside to fill behind # (AFT-OT 100% Release) 56,806 Set Aside to fill vacant Classified positions at Mesa (per cabinet ) 226,022 Set Aside to fill vacant Classified positions at Miramar (per cabinet ) 117,757 Set Aside to fill vacant Classified positions at CE (per cabinet ) 149,463 Set Aside to fill vacant positions at District Office (per cabinet ) 564,466

Analysis of Structural Budget Issue Use of Beginning Balance (One-Time Uses) Beginning Balance $14,021,875 Prior Year Encumbrances 300,000 Campus Carryforward One-Time Ending Balance Fund1,057,670 Districtwide Advertising 100,000 Recycle Account Carryforward 17,202 Carry forward Various Bargaining Unit Balances1,033,045 Carry forward unused balance for Election Expense 175,000 Total One-Time $14,021,872 To Balance GFU Continuous Operating Budget (Expenses over Revenue) 10,064,565 Reserve for Economic Uncertainty1,274,390 Unused Balance from Reserves & Set-asides (One-time) (3,538,676) Budget Savings in required to avoid deficit spending $5,251,499 Covering the Structural Budget Gap Expense over Revenue $10,064,565 Less Reserves for Economic Uncertainty (1,274,390)

Summary of District Budget Reduction Plan Budget Reduction Goal ( through ) Original Budget Reduction Goal $36.00 million Eliminate Mid-Year Cut Projection (2.93 million) Reduce STRS & PERS Increase from 2.0% to.85% (1.07 million) Adjusted Budget Reduction Goal $32.00 million Potential New FTES Growth Revenue in (1.72 million) Revised Budget Reduction Goal as of 3/1/10 $30.28 million Budget Reductions as of March 1, 2010 (100%) Budget Reduction Goal $30,276,957 (87%) Reductions to Date from Non-Bargained Items (26,353,757) Hiring freezeHiring freeze Defunding positionsDefunding positions SERPSERP - Gen. Fund Unrestricted ( FTE / $1.50 million) - Gen. Fund Restricted ( FTE / $1.29 million) Cancelled SunGard/SCT contractCancelled SunGard/SCT contract Campus reductionsCampus reductions Districtwide reductionsDistrictwide reductions Class section reductionsClass section reductions Proposition S & N offsetsProposition S & N offsets (13%) Balance of reductions needed to meet current plan $3,923,200

Potential Deficit Spending Budget Savings in required to avoid deficit spending $5,251,499 Fair share goal requested from employee units (3,923,200) Balance required to avoid deficit spending $1,329,299 STRS & PERS increased costs above.85% $1.25 million per 1% Additional Categorical backfill funds $300k - $800k Potential Running Potential Deficit Spending Deficit Total 1. No further budget reductions implemented $1.3 million $1.3 million 2. If “Fair Share” goals are not met $3.9 million $5.2 million 3. If STRS & PERS increases to 1.90% $1.3 million $6.5 million 4. If Categoricals require additional backfill $0.5 million $7.0 million

Summary & Budget Issues  Assuming new net revenue of $1.42 million in , the $30.28 million reduction goal is reached, and no other losses in revenue or increased costs, the structural budget gap will be $6.14 million. Deficit spending will be avoided in through use of the ending balance from the Reserves & Set-asides and budget savings.  In , the structural budget gap will be $6.14 million (carryforward from ) plus increased costs from inflation (approximately $3.3 million). This $9.44 million gap will need to be addressed through a combination of expense reductions and/ or revenue increases.  Once the structural budget gap is eliminated, normal inflationary costs should be covered through attrition savings, growth revenue, and small percentage of COLA.  Balance of unfunded future Prop S & N continuous costs needs to be indentified for years forward (approximately $6 million will be needed in today’s dollars).  A continuing restructuring of instructional and non-instructional expenses needs to take place to be in compliance with 50% law (problem created primarily due to $6.5 million workload adjustment in which forced reductions in class schedules).