1. Community College Budgets: Process and Prospects
Jennifer Haygood,
EVP and Chief Financial Officer
North Carolina Community College System

2. Overview Overview of State and NCCCS Budget Budgeting Process
College Budget Allocation Process
On the Horizon: Prospects for the Future
Please feel free to ask questions at any point! FY

3. State General Fund Budget by Revenue Source: FY 2011-12 (in millions)
Source: Fiscal Research Division, August 8, 2011 FY

4. FY 2013-14 State General Fund Budget
Area
Net
Appropriation
% of Total
Education
Public Schools
Higher Education (UNC & CCs)
$11.5 billion
$7.9 billion
$3.6 billion
56%
38%
18%
Health and Human Services
$5.0 billion
24%
Justice and Public Safety
$2.4 billion
12%
All Other
$1.7 billion 8%
Total
$20.6 billion
100%
Of the State funds allocated to community colleges for current operating:
83% supports direct classroom instruction (66%) and academic and student support (17%).
90% supports salaries and benefits of community college employees. FY

5. State General Fund Appropriations for Education: FY 2013-14 (in millions)

6. Financial Support of Institutions
State
G.S. 115D-31
Operating costs for instruction, administration, and support services
Local
G.S. 115D-32
Operation and maintenance of plant
Capital construction is the legal responsibility of the county. However, G.S. 115D-31 authorizes the State to provide capital funds to local institutions, provided that it is matched on a dollar-to-dollar basis. FY

7. Sources of NCCCS Funding: FY 2013-14 (in millions)
Total: $1.8 billion
Over the past few years, tuition and fees have become a more important fund source. In 08-09, tuition receipts only constituted 13% of our budget. Our tuition and fees budget has increase by 71% over the past two years.
Local funding has remained flat and therefore has declined as a percentage by 1-2 percentage points.
Source: August 2012 BD-701, DCC 2-1 Summary. Includes college current expense (Purposes 1XX-6XX) and equipment; chart does not include proprietary activities, student aid, and capital improvement projects. FY

8. NCCCS State Budget: FY 2002-2014
Budget Drivers: Enrollment Growth and Salary Increases
Authorized State Budget (requirements) increased 57% between and
Source: BD 701: FY June 30 Authorized Budgets, FY Aug 31 Authorized Budget FY

9. NCCCS State Budget: FY 2002-2014
Authorized State Budget (requirements) increased 57% between and
Source: BD 701: FY June 30 Authorized Budgets, FY Aug 31 Authorized Budget FY

10. Biennial Budget Cycle: FY 2013-15
Summer and Fall 2012:
Develop continuation budget
Develop expansion budget request
Identify reduction options
2013 Long Session (begins in January):
Adopt a two-year budget
2014 Short Session (begins in May):
Adjust second year of the budget FY

11. The Gubernatorial Process
Per the NC Constitution, the Governor shall:
Serve as “Director of the Budget”
Prepare and recommend a budget to the General Assembly
Administer the budget as enacted by the General Assembly FY

12. Legislative Budget Process
Governor’s Recommended Budget Full Appropriations Appropriations Subcommittees House/Senate Floor Sent to Other Chamber House and Senate Appoint Conferees House and Senate Vote on Conference Report Conference Report Adopted Budget Bill Enrolled, Ratified, and Sent to the Governor to be Signed into Law
The House and Senate alternate preparation of the initial budget bill.
Originating Chamber Fails to Concur
The Conference Report must be voted up or down as submitted by the conference committee; it cannot be amended on the House or Senate floors.
Gov. veto can be overridden by 3/5 vote of each chamber. FY

13. State Board Approval State Aid Allocations and Budget Policies
Guidelines Related to Salaries and Benefits of Community College Employees
Formula and Categorical Allotments
Use of State Funds and Budget Flexibility
Tuition and Fees
Other Budget Policy Issues FY

14. College Allotments: FY 2013-14
59%
Total Allotments: $1.41 billion
Less Management Flex Cut: $0.07 billion
Net Allotments: $1.34 billion
34%
The chart on page 34 shows how these funds are allocated among expenditure categories.
Note that 96% of the funds are allocated to and expended by the local institutions. The largest amount, 57%, goes to instruction, which includes faculty and educational supplies; 27% goes to college administration and student support services, such as counseling, financial aid officers, and library services.
An additional 9% is allocated to categorical aid. Examples of programs in this category include workforce development programs, such as the Small Business Centers and the community college’s Bionetwork initiative. This category also includes specialized technology centers such as the Textile Center and the Hosiery Center.
As you can see, a relatively small amount is spent on Equipment and Books.
Finally, I would note that $57 million dollars, or 4% of the system’s total budget, is allocated to the System Office budget. About half of the funding in this category consists of a $15 million appropriation for the system-wide computer information system project, and $14 million for financial aid. The remaining amount goes towards other System Office operations. 4% 2%
.3%
Source: FY Summary of Budget Allocations. Note that this graph only captures funds distributed to colleges through the routine budget allocation process. This graph does NOT account for any subsequent reversions required by the Governor or allocations. FY

15. Full-Time Equivalent (FTE) Student
Curriculum FTE
= 16 hours x 16 weeks x 2 semesters
= 512 Membership Hours
Non-Curriculum FTE
+ 16 hours x 11 Weeks
= 688 Membership Hours FY

16. Budgeted FTE
Budgeted FTE means the number of FTE which determines a college’s operating budget
Curriculum budgeted FTE counting period = Fall, Spring (academic year)
Non-curriculum budgeted FTE counting period = Spring, Summer, Fall (calendar year) FY

17. Budget FTE
For each instructional area (curriculum, con ed, and basic skills), a college’s budget FTE is determined by calculating the higher of :
the prior year; or
the average of the two previous years’ enrollment
Budget FTE are further categorized based on actual FTE proportions :
Curriculum:
Tier 1: FTE in high cost areas of health care, technical education (construction, engineering, industrial systems, and transportation system sciences), lab-based science, and college-level math courses
Tier 2: All other curriculum FTE
Con Ed (OE):
Tier 2: Con ed courses that are a) mapped to a third-party credential, certification, or industry-designed curriculum and b) are 96 hours in length.
Tier 3: All other con ed FTE
Basic Skills FTE: All Basic Skills FTE are designated Tier 2.
Unlike the University system which projects enrollment, community college budgeted FTE is based on actual figures. Projecting community college enrollment is extremely difficult and for many years, projected enrollments were significantly higher than the actual. The General Assembly continued to tweak the enrollment calculation until 2000, when a modified budget stability formula was put into place.
To determine enrollment figures, this formula uses the higher of
a college’s prior year actual FTE enrollment; or
the average of the three previous years’ FTE enrollment.
This formula provides funding when enrollments are up and allows colleges time to adjust when enrollments fall. FY

18. Curriculum Instruction Allotment
Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115
Step 1 Base Allotment: $383,579
Step 2 Multiply Tier 1 BFTE by Tier 1 equivalent value:
= 500 X $3,636.31
= $1,818,155
Step 3 Multiply Tier 2 BFTE by Tier 2 equivalent value:
= 1,000 X $3,160.79
= $3,160,790 FY
Equivalent Values
Tier 1: $3,636.31
Tier 2: $3,160.79
Step 4 Sum steps 1 through 3: $5,362,524
Total Curriculum Allotment: $5,362,524 FY

19. Con Ed Instruction Allotment
Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115
Step 1 Base Allotment: $63,930
Step 2 Multiply Tier 2 BFTE by Tier 2 equivalent value:
= 300 X $3,160.79
= $948,237
Step 3 Multiply Tier 3 BFTE by Tier 3 equivalent value:
= 300 X $2,685.38
= $805,614 FY
Equivalent Values
Tier 2: $3,160.79
Tier 3: $2,685.38
Step 4 Sum steps 1 through 3: $1,817,781
Total Curriculum Allotment: $1,817,781 FY

20. Basic Skills Formula Calculation
Example College: Curriculum FTE – 1,500 Con Ed FTE – 600 Basic Skills FTE - 115
Step 1 FTE Allotment:
State: X $2, = $292,710
Federal: 115 X $ = $ 70,782
115 X $3, = $363,492
Step 2 Performance-Based Allotment:
GEDs/AHS Diplomas Awarded = 100
100 X $ = $87,453
Step 3 Sum steps 1 through 2: $450,945
FY Values
FTE Allotment:
Tier 2: $3,160.79
State: $2,545.30
Federal: $615.49
Performance-Based Allotment:
$ per GED/AHS Diploma
Level of effort = % of target population served: Target population is This year system-wide average was 9.9%.
For every percentage point over system-wide average, get $10,000.
Total Basic Skills Allotment: $450,945 FY

21. Institutional Support Calculation
Example College: Total Budgeted FTE 2,215
Step 1 Base allotment: $2,154,280
Step 2 MCC Allotment (if applicable): $0
Step 3 Enrollment Allotment:
Calculate allowable FTE: 2,215 – 750 = 1,465
Calculate FTE allotment: 1,465 x $1,676 = $2,455,340
Step 4 Determine President’s Salary with Salary Schedule
Total President’s Salary Requirements: $144,477
Step 5 Sum steps 1 through 4: $4,754,097
FY Values
Base Allotment
$2,154,280
MCC Allotment (if applicable)
Level 1: $500,919
Level 2: $839,311
Enrollment Allotment
$1,676 per FTE above 750
President’s Salary
Per Salary Schedule
Total Administrative Allotment: $4,754,097 FY

22. Why Do the Formula Factors Change?
Legislative salary increases (if provided)
Other changes in benefit rates (i.e. hospitalization, retirement)
Legislative or State Board adjustments to the formula FY

23. Performance-Based Allocations
In FY , $9 million was allocated to colleges based on performance on six performance measures:
Success rates of developmental students in subsequent college-level English courses
Success rates of developmental students in subsequent college-level math courses
Progress of first-year curriculum students
Curriculum student retention and graduation
Attainment of licensure and certifications by students
Performance of students who transfer to a four-year institution
In FY , the General Assembly has directed the State Board to allocate $24 million based on performance. In addition to the six measures above, two additional measures will be added:
Progress of basic skills students
Attainment of GED diplomas by students
For each measure, funds are allocated based on two factors:
Quality: Funds allocated based on percentage of students who succeed on each measure
Impact: Funds allocated based on the number of students who succeed on each measure FY

24. Rewarding Quality: In Concept
For each measure, colleges would earn PBF based on how they compared to both a floor and a goal:
If a college did not meet the floor, it would receive $0 in PBF for that measure.
If a college exceeded the floor, but did not meet the goal, it would receive a portion of its potential PBF for that measure.
If a college met the goal, it would receive 100% of potential PBF for that measure.
If a college exceeded the goal, it would receive more than 100% of potential PBF for that measure.
Goal
Floor FY

25. Rewarding Impact: In Concept
Funds not allocated through the Quality component would be allocated among colleges through the Impact component.
Impact = the number of students that succeed on the measure
Step 1: Determine Impact Funding
= Total PBF Funding – Quality Allocation
Step 2: Determine Impact Funding per Student
= Impact Funding / Total # of Successful Students
Step 3: Determine College’s Impact Allocation
= Impact Funding per Student * College A’s # of successful students FY

26. Example College’s Total Formula Allotment
Curriculum: $ 5,362,524
Continuing Education: $ 1,817,781
Basic Skills: $ ,945
Institutional Support: $ 4,754,097
Performance-Based Funding: $ ,252
Total Formula Allotment: $12,463,599 FY

27. Budget Flexibility
The General Assembly has allowed colleges to have flexibility in order to meet individual college needs
Formulas are for allocation purposes only
Colleges can spend the money however they choose with the following exceptions:
Basic Skills funding may only be used for basic skills programs
Federal vocational education funding may not be transferred
Customized Training funds may not be transferred
Certain State-supported allocations approved by the State Board outside the budget package
If average faculty salary on a campus is < 85% of national average, they may only transfer 2% out of instruction. 55 colleges fell in this category this year.
The remaining 3 colleges (Central Piedmont, Richmond CC, and Sandhills CC) had average faculty salaries greater than 85%, but less than 90%, and therefore can transfer up to 3% out of instruction.
We’ll talk about this restriction more later, but the reason behind this restriction, in a nutshell, is…. FY

28. On the Horizon: Summer Term FTE
Section 10.4 of S.L amends G.S. 115D-5: “Community colleges may teach technical education, health care, developmental education, and STEM-related courses at any time during the year, including the summer term. Student membership hours from these courses shall be counted when computing full-time equivalent students (FTE) for use in the budget funding formulas at the State level.”
Effective Summer 2014 term FY

29. On the Horizon: Fourth Tier?
Section 10.4A of S.L :
“It is the intent of the General Assembly that, beginning with the fiscal year, the State Board of Community Colleges shall implement a fourth tier….in order to fund curriculum programs leading to immediate employment at the highest available funding level.” FY

30. On the Horizon: NC GAP?
Section of S.L , as amended:“The Joint Legislative Education Oversight Committee…shall study the feasibility of establishing an alternative admission program to be known as NC Guaranteed Admission Program (NC GAP).” The goals of NC GAP shall be :
To encourage and assist students to obtain a baccalaureate degree within a shorter time period;
To provide students with a college education at significantly lower costs for both the student and the State;
To help decrease the amount of debt resulting from loans that a student may owe upon graduation; and
To provide easier access to academic counseling. FY