1. Mott Community College Board of Trustees Committee of the Whole Meeting June 19, 2006 BUDGET RESOLUTIONS

2. 2 RELEVANT BOARD POLICIES:  3100 Budget Adoption. “Budget revisions will be brought forward for Board action as necessary, but not less than twice per year in January and June.”  3920,3930 Financial Stability, Fiscal Reserves. “The College will designate and set aside appropriate fund reserves to support plans for long-term capital and operating commitments.”  5100 Compensation Philosophy. “The Board has determined based on long-term budget projections, and other related budget data, that total compensation/ benefits should not exceed 77% of the total operating budget.”

3. 3 FINAL FY05-06 AMENDED BUDGET

4. 4 REVENUES: Tuition & Fees -$411 thousand, -1.8% adj. – credit enrollment up; noncredit volume down Property Taxes +127 thousand – actuals to date Ballenger Trust -$65 thousand – market for 2Q 2006 is down Other Revenue +$300 thousand – investment income up due to better interest rates, cash flow management changes =Overall downward amendment to revenue is -$49 thousand -0.1% change from January 2006 amendment

5. 5 FINAL FY05-06 AMENDED BUDGET EXPENDITURES: Amended downward by $86 thousand, -0.1% change: Salaries & Wages, and Fringe Benefits --savings on vacant budgeted positions (salary lag, elimination of Lapeer Corporate Services positions; hold on 50% of vacancies) Contracted Services --savings in several areas, grant offsets, noncredit operations down Rent, Utilities & Insurance --electricity, gas rate increases Operations/Communications --savings in loan & Pell pro-rata refunds, bad debt, legal settlements Transfers--add’l contribution to Maint/Repl. Fund to help 06-07 Capital Outlay --timing of planned capital projects

6. 6 FINAL FY05-06 AMENDED BUDGET NET RESULTS OF AMENDMENT: FUND BALANCE : $37K additional 0.8% Improvement over January Amended Budget

7. 7 FINAL FY05-06 AMENDED BUDGET GENERAL FUND BUDGET (fund 01) Target = 5% - 10% of Expenditure budget

8. 8 PROPOSED FY06-07 BUDGET

9. 9 No Change in Budget Principles: 1.Budget must support Strategic Plans 2.Minimize/Offset Impact on Students 3.Avoid Overall Reduction in Staffing 4.Maintain Fund Balance/Reserves

10. 10 Jan.’06: Initial Forecast for FY06-07 Key Budget Issues: a)Employee Benefits cost increase: ($1.1M) b)Salaries & Wages contracted increases:($1.8M) c)Other expenses projected increase: ($2.1M) d)Projected Total Revenue Increase: +$2.0M = -$3.0M

11. 11 Jan’06 : Initial Forecast for 06-07 This forecast shows -$3.0M projected initially for FY06-07, and -$19M at the end of FY11-12, before steps were taken to balance 06-07 and future budgets. It shows what would happen if current trends were to continue. MCC must implement a balanced budget each year.

12. 12 PROPOSED FY06-07 BUDGET BUDGET BALANCING STEPS- REVENUES Revenue Enhancement will cover 14% of $3 million deficit: Property Tax Revenue – Stronger property value growth is the main difference in revenues from January to June forecast 4.9% Tuition & Fee Rate Increase offset by reduction in non-credit projections Slight improvements in State Aid, Others

13. 13 PROPOSED FY06-07 BUDGET KEY ASSUMPTIONS - REVENUES TUITION & FEES Credit side enrollment expected increase of 1% 4.9% rate increases for credit side Non-credit tuition is budgeted at $2.7 million, increased by 6.6% from expected FY05-06.

14. 14 PROPOSED FY06-07 BUDGET KEY ASSUMPTIONS - REVENUES PROPERTY TAXES Up $1.1 million from 05-06 due to a 6% property value increase. Millage Rate is rolled back, from 1.9907 to 1.9896

15. 15 PROPOSED FY06-07 BUDGET KEY ASSUMPTIONS - REVENUES STATE AID – (PENDING) Total net +1% increase as headed to Conference Committee (SB1082) Shown by state as +1.8% in base; net increase is less because of a one-time restoration payment in FY05-06. Conference Committee meeting not yet scheduled…

16. 16 Data as of June 2006; Source – MCC Audited Financial Statements and Budgets

17. 17 KEY ASSUMPTIONS - REVENUE OTHER REVENUE Projected decrease of 3.7%, including Ballenger Trust income, unrestricted grants and donations, and facilities rentals.  Overall Revenues for 06-07 are projected to increase by 4% from the final 05-06 budget, better than the 2.8% increase we expect this year. PROPOSED FY06-07 BUDGET

18. 18 GENERAL FUND REVENUE SOURCES

19. 19 PROPOSED FY06-07 BUDGET BUDGET BALANCING STEPS- EXPENDITURES: Cost Reductions of $2.6M will cover 86% of the $3 million deficit Holds on ½ of vacant positions TAP lower by 1.5 FTE 2.4% cut in non-salary line items Early transfer to Maint/Replacement Fund made in 05-06

20. 20 PROPOSED FY06-07 BUDGET KEY ASSUMPTIONS-- EXPENDITURES: Overall increase of $2.4 million or 3.8% over the final 05-06 budget. Salaries & Wages: +5.5% includes step and pay scale increases (compared to +5.2% the prior year) Fringe Benefits: +6.7% to account for health insurance and retirement contribution rate increases Total compensation = 77%, as required by policy Non-Salary: -2.4% due to necessary spending restraint

21. 21

22. 22 PROPOSED FY06-07 BUDGET SUMMARY--BUDGET BALANCING STEPS: 1.4.9% Credit Tuition & Fee Increase 2.6.6% Increase in non-credit training revenue 3.Continue holds on filling ½ of 50 vacant positions 4.TAP lower by 1.5 FTE 5.2% reduction in non-salary lines 6.Fund 06-07 planned contribution for Maintenance/ Replacement with 05-06 savings

23. 23 86% of projected deficit: Cost cuts, $2.6M 14% of projected deficit: Revenue enhancements, $0.4M PROPOSED FY06-07 BUDGET

24. 24 PROPOSED FY06-07 BUDGET GENERAL FUND BUDGET (fund 01) Target = 5% - 10% of Expenditure budget

25. 25 PROPOSED FY06-07 BUDGET Planned Results:  Balanced budget, with small surplus in general fund  Continued commitment from General Fund to cover capital needs in maintenance & replacement fund  No new employee FTEs; No Reduction in Force  Short-term savings achieved through position vacancies  Intentional constraint on non-salary (discretionary) spending base  Strategic Goals (AQIP process) and 7-year impact considered throughout process

26. 26 PROPOSED “OTHER FUNDS” FY06-07 BUDGETS Main Point is Impact on Operating Budget: Designated Fund—$1.8 million budget (Scholarships, Student Enrichment, Copy Machines, Paid Parking, Designated Technology Fee) $ 347,000 funded with General Fund budget (expense) Auxiliary Enterprise Fund--$709,000 budget (Catering, Day Care, Vending, Bookstore, Computer Lab Printing, Lapeer Campus Auxiliary) $351,900 net “profit” supplements General Fund (revenue)

27. 27 PROPOSED “OTHER FUNDS” FY06-07 BUDGETS Main Point is Impact on Operating Budget: Debt Retirement Fund—no General Fund impact Millage Rate stays same, at 0.69 mill; Property taxes restricted Capital Funds—repair, upgrade of buildings, equipment, technology, vehicles ($100 million in net value) Instructional Technology Fee = $1 Million per year $1.8 million per year planned transfer from General Fund still needed ; 06-07 transfer lowered to $1.2 million because of early transfer in 05-06 $15 million in Series 2006 Bond Proceeds will fund projects through FY06-07 and into FY07-08

28. 28 STRATEGIC INITIATIVES FOR 06-07: LINKED TO BUDGET PROCESS and to new AQIP METHODOLOGY

29. 29 STRATEGIC INITIATIVES FOR 06-07 Allocation for 06-07 is $650,000, including both AQIP and department level projects Department/Division level planning produces requests for annual funding Top Three AQIPAction Projects : 1) Provide on-going, cross-functional training to develop all employees' professional skills. 2) Cooperative education and experiential learning. 3) Advising for degree completion and transfer students.

30. 30 7-YEAR FORECAST

31. 31 What changed from January 2006 to Now? Property Taxes -- Higher property values for 05-06 and 06-07 added $2.5 million over 7 years State Aid – Added $0.9 million over 7 years, based on 05-06 supplemental restoration and 1% increase for 06- 07 not expected Tuition, Fees, Other Revenues –Subtracted $0.7 million from forecast over 7 years based on 05-06 and 06-07 projections, mainly noncredit impact =REVENUES: $2.7 M higher than Jan’06 forecast 7-YEAR FORECAST

32. 32 What changed from January 2006 to Now? Salaries & Fringes –$9.3 million (2.4%) higher over 7 years: MPSERS rate increase expected to be higher than previously forecast; assumes all vacant positions filled in future years Non-Salary Lines –Decrease of $3.3 million (0.6%) over 7 years: 05-06 and 06-07 cuts factored in EXPENDITURES = $6.0 million higher over 7 years than Jan’06 forecast 7-YEAR FORECAST

33. 33 Bottom Line –Current Forecast is -$22 Million at end of FY11-12 –This is $3 Million worse than Jan’06 Forecast –The Forecast still assumes 0.65 Mill Voted Operating Millage is renewed for FY08-09 and beyond –Property Value growth continues to makes significant improvement in revenue base –Short-term savings and flexibility continues to be key –Long-term strategy of reducing compensation costs continues as focus on expense side 7-YEAR FORECAST

34. 34 7-YEAR FORECAST Employee “Pro Rata” Contributions to date: 6 Groups have met “pro rata” request with 3-year contracts; Faculty met over half of request with 2-year agreement expiring August 2006.

35. 35 7-YEAR OPERATING FORECAST (in millions)

36. CAPITAL FUNDING

37. 37 Capital Funding Funding Sources : $45 M Voted Bond Authority Passed June 2004 $15 M Series 2004 spent by June 30, 2006 $15 M Series 2006 proceeds $15 M Remaining voted authority $13 M Commitment of Operating Funds $ 7 M projected from Student Tech. Fees  $50 M Secured from now through 2011  $4 M pending approval from State Capital Outlay  Future needs will require ongoing deferral and continued requests for state capital outlay assistance

38. 38 FUTURE OUTLOOK: Next Steps and Key Issues for Consideration

39. 39 FUTURE OUTLOOK: Key Issues 1. 0.65 Operating Millage will need to be renewed/increased before expiration at end of 2007- 08 2.Reducing Compensation costs – Long-term budget challenge remains to control rising expenditure levels 3.Academic and Service Operations continue to be studied for strategic fit; efficiency; feasibility 4.State’s budget – diminishing proportionate support 5.2007-2012 Strategic Planning through AQIP requires continuous improvement methods

40. 40 Next Board Actions— FY05-06 Audit Acceptance: –Oct’06 FY06-07 Budget Amendment: – Winter`07 FY06-07 BUDGET

41. Questions or Comments? For More Information: Details are Provided with Board Resolutions 1.65 and 1.67 MCC Board of Trustees Committee of the Whole Meeting June 19, 2006 Kelli Sproule, Chief Financial Officer 810-762-0525, Kelli.Sproule@mcc.edu