1. 1 MHCC Budget Overview Prepared for Board and Staff of MHCC DRAFT 11-2-11 Prepared by Jennifer DeMent, Jeff Forbis, Laurie Miller and Bill Farver MHCC Administrative Services 1

2. 2 Contents 1. Why is Budget Important? (slide 3) 2. What is the current revenue and expenditure forecast indicating? (slide 8) 3. How do we approach this challenge? (slide 12) 4. Role of Budget Review Team (slide 22) 5. What factors are relevant to understanding how we got here? (slide 25) 2

3. 3 Part 1. Why is Budget Important? We value what we spend money on. Our long term revenues do not keep pace with our expenditures. We will face another year of difficult trade offs. We cannot look to the state for more money. Our represented employee costs are fixed through negotiated contracts. We must look at what programs and services we offer, how we deliver them, and how we support them. 3

4. 4 Ongoing, “Structural” Deficit Business model unsustainable State reducing direct funding and not addressing rising fixed costs, such as PERS and health care Up to local jurisdictions to innovate and/or cut services/positions and/or renegotiate labor agreements College has the ability to increase revenue by increasing enrollment Increasing tuition and fees limited by mission and competition 4

5. 5 Causes of the Structural Deficit Declining state revenue support ($1.5 million already planned to be returned to state) Health care costs rising 15% PERS costs rising (every two years) Salaries rising 3% Enrollment projected to decline 2% 5

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7. 7 State Funding Status State funding for all community colleges is based on $410 million for the two years FY11-12 and FY12-13; MHCC budgeted our share at $41 million Variables: the state may seek a 7% hold back in second year (in addition to current 3 ½% holdback, resulting in a lower base for FY13-14 PERS rates for FY11-12 are based on a 2009 valuation; PERS rates for FY13-14 will be based on a 2011 valuation. 7

8. 8 Part 2: Current Revenue/Expenditure Forecast Deficit for FY12-13 currently estimated at $5.5 million Number will likely change, though not dramatically. Requires ongoing reductions of expenditures, or ongoing increased revenues. One time only money does not help this deficit. If we succeed, our current projected deficit for FY13-14 is $1.7 million (plus state reductions which could total as much as $2.8 million) Ongoing issue! 8

9. 9 Major Assumptions Innovation Fund spent with no return on investment. (conservative assumption: “easiest” place to close the gap IF we get good proposals) All contractual obligations met Enrollment declines by 2% (each 1% = $100,000) No change in tuition or fees (pressure from the size of the deficit and other colleges to raise; each $1 = $200,000) “One time only” ending fund balance (for reserve fund at 3% and contingency at 4% meets Board policy (7%?) 9

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11. 11 Contingency Fund Set at 3% to 5% of general fund based on comparable community colleges and public jurisdictions (overall reserves and contingency between 6% and 8%) (Nov. Board meeting) Set criteria for Board access: ▫ Emergency situations that may jeopardize health and safety ▫ Public commitment or contractual mandate ▫ Efficiencies ▫ No funding exists in current budgets ▫ Board may “designate” funds in increased contingency for future decisions 11

12. 12 Part 3: How do we approach this Challenge? Multi year process of change Program review based on completion, overall cost of instruction, employment potential, uniqueness, etc. New or expanded program offerings Different approaches to instruction (e.g. differential tuition; class size; expanded times of instruction) Increase administrative efficiencies Employee salary and benefit costs review, especially health care and PERS (agree on costs for future discussions) Capital improvement plan and identified capital budgets Innovative approaches to expanding enrollment 12

13. 13 A. Innovation Fund Fund approaches that will generate additional revenue above cost and/or increase completion rates Balance the budget through expansion and contraction Use $1,000,000 of under-spending from FY10-11 Carefully monitor progress and verify results Risk awareness – either way!

14. 14 Examples for Innovation Fund Strategies to increase enrollment ▫ New or expanded “profitable” programs ▫ Quicker financial aid turnaround (draft proposal) ▫ Outreach to local high schools ▫ Outreach to veterans seeking education and training Strategies to increase retention / completion ▫ Increased mentoring/advising (e.g. ABS; GED) ▫ Better articulations; better pathways 14

15. 15 Guidance for Developing Proposals If proposals involves new full time faculty, contact Christie Plinski or Rodney Barker. Process will go through Hiring Committee and then to Budget Review Team (BRT). If proposals do not involve full time faculty, contact Jennifer DeMent. Proposals will go through BRT. Iterative process. Feel free to send drafts, seek financial and goal setting advice. Expect rewrites. BRT members available to read and give feedback. 15

16. 16 B. Systematically analyze what we teach 1.Does it cover its costs? Step 1 Analyze courses/academic programs to determine whether they pay for themselves Use Cost of Instruction tool (based on average instruction costs, not specific instructors) If they do, can they be made more efficient? 16

17. 17 2. Can it cover its costs? Step 2: Can the course/program be made more efficient through any of the following: ▫Differential tuition ▫Fees ▫Change of ILCs ▫Change of class size

18. 18 3. If not, should the program be retained? If so, why? Step 3: If course/program still losing money test it against a multi-factor algorithm; for example consider, ▫Uniqueness of program ▫Employability of graduates ▫Wait list ▫Completion rate (being mindful that state will fund more on “completion” in the future) ▫Other facrtors

19. 19 C. Fully develop Issue Papers 40 potentially worthwhile areas to analyze and determine whether they will increase enrollment or reduce expenditures by at least $100,000 (see handout) Examples: ▫Aquatics Center ▫Parking fee ▫Outreach to high schools ▫Reduce uncollectable tuition costs

20. 20 D. Departmental Budget Review Have all departments prepare a narrative with their budgets with outcomes and output measures. Discuss how the budget enables the program to fulfill its goals. Discuss “small” opportunities for investments to save money or expand revenue. Discuss impacts of additional reductions.

21. 21 Personal Challenge for Each of Us Mt. Hood is a “learning institution” ; we can all understand and assist with this. Overreliance on tuition and fees may be self defeating. We need to be flexible and involved. Developing a good issue paper takes time and participation. To the extent we do not fully succeed, the challenge will fall directly on us in future years in discussions of salary and benefits. (That’s 75% of the college’s budget).

22. 22 Part 4: Role of Budget Review Team in Budget Process Membership drawn from all college stakeholders (full and part time faculty; deans; classified/administrative support; students) Wear “college hats” Advises President; October to March; 8:45 to 10 am Fridays; Board Conference Room. Develops and frames policy choices through issue papers 22

23. 23 Role of Budget Review Team (con’t) Identifies policy choices through input from Board and college stakeholders Frames menu of options Seeks agreement among stakeholders on financial impact of different choices Pursues an open, clear process

24. 24 Budget Review Team Timelines October – December: Solicits ideas from stakeholders; develops and discusses issue papers framing policy options; reviews revenue/expenditure forecast Jan. – Feb.: Frames menu of choices March: Delivers options to President for decisions March/April: Budget Office verifies decisions and incorporates into President’s budget April: President presents budget to Board for discussion, amendment, and approval June: Tax Supervising & Conservation Commission (TSCC) reviews and certifies and Board adopts budget 24

25. 25 Questions ? 25