Get the facts!Last night (Feb. 23), the SWC Governing Board held a "special" (as in, "emergency") meeting to discuss... the college's accreditation fiasco? Nope! How to best provide an education through these ostensibly lean times? Nope!This "special" meeting was held for the routine task of establishing non-resident fees. So why the emergency? Uh, well, it appears that deadline mandated by the state Education Code is the 1st of February. (Ed Code Section 76140: "(d) The nonresident tuition fee shall be set by the governing board of each community college district not later than February 1 of each year for the succeeding fiscal year.")Oops! Apparently, no one on the Board (despite several being elected for many years) remembered this deadline. And we guess Vice President for Business of Financial Affairs, Nick Alioto, was too busy checking locked and unlocked doors.At any rate, Phil Lopez, president of the faculty union, SCEA, has been paying attention: The SCEA Looks at the Budget
Part of Governing Board members’ fiduciary responsibility to the community is, of course, maintaining the long-term financial integrity of the District. Another part of this fiduciary responsibility is using taxpayer money for the purpose it is intended: Educating our students.
Some History:
Finding a balance between these two conflicting responsibilities—prudent spending vs. prudent savings—is what managing and overseeing a budget is all about. The data below, all of which comes from the CCFS – 311 reports filed annually with the Chancellor’s Office, reveals that the District has been wildly off-base in its budget decisions.
While our community, and perhaps even individual Board members, believe that we’re in the middle of a catastrophic budget crisis, in reality, the District has been putting millions of dollars into an unnecessarily bloated reserve fund.
|
Fiscal Year
| Budgeted Ending Balance
| Actual
Ending Balance |
Difference
|
% Difference
|
| 06 - 07 | $10.114 M | $10.538 M | $0.424 M | 4.2% |
| 07 - 08 | $ 7.078 M | $11.014 M | $3.936 M | 55.6% |
| 08 - 09 | $ 5.420 M | $13.467 M | $8.047 M | 148.4% |
| 09 - 10 | $ 8.133 M | $15.131 M (on 12/31/09)
| $6.998 M | 86.0% |
Look above at the columns labeled “Actual Ending Balance.” You’ll see that during a series of bad budget years, the District has consistently increased its yearly ending balance. On June 30, 2007, the end of the 06 - 07 fiscal year, it was $10.538 million. Only two and a half years later, at the end of December, 2009, the ending balance is $15.131 million. That’s $4.593 million more, an increase of 43.6%.
Chicken Little:
Every year, the District claims that (1.) we’re facing a deficit, and the sky is about to fall. In fact, (2.) we haven’t been losing money; we’ve turned a hefty profit each and very year.
(1.) If you look at the “Actual Ending Balance” for 07 – 08, you’ll see it was $11.014 million. Next, if you look at the “Budgeted Ending Balance” for the next year, 08 – 09, you’ll find it was $5.420 million. In other words, these budget numbers indicate that the District would lose $5.594 million during the 08 - 09 fiscal year.
(2.) However, when you look at the “Actual Ending Balance” for 08 – 09, you’ll see what really happened: Instead of losing $5.594 million, the District made $2.453 million.
The same thing happens every year: Budgeted numbers predict a loss, but actual numbers show a gain.
The 09 – 10 Budget:
Nothing is different this year. The District’s budget predicted that our ending balance would decline from $13.467 million to $8.133 million; in other words, the budget said we would lose $5.334 million. We’re halfway through this fiscal year, and the most recent “General Cash Fund Analysis” presented to the Governing Board indicates that the District’s ending balance as of December 31, 2009 was $15.131 million. We’ve made $1.664 million so far this year.
How much money the District will have in the bank on June 30, 2010, the end of this fiscal year is an open question. Monthly cash flow reports show balances that fluctuate up and down, but the general trend is up. It is certainly arguable that if the District has made $1.6 million in the first six months of this fiscal year, then it should make another $1.6 million in the remaining six months of the same fiscal year—especially since there have been no mid-year cuts to California community college budgets. Furthermore, the District cut 400+ classes for the Spring semester. Cutting classes means cutting adjunct faculty members’ salaries which means saving even more money—from $1.3 - $1.7 million. It is possible that the ending balance at the end of this fiscal year could be as much as $18 million. One thing is a virtual certainty: The District will not lose money this year.
A Prudent Minimum Reserve:
The Chancellor’s Office recommends a prudent minimum reserve of 5 percent. The Governing Board requires a 7 percent reserve at SWC. However, our reserves are much higher than this.
The balance at the beginning of this fiscal year was $13.467 million. Of this amount $2.127 million is restricted money, which can’t be counted. The remaining $5.5 million in unrestricted money in the budget is called the “Uncommitted Reserve.” This entire amount was budgeted as a loss, but it has not been spent—and will not be spent—this year. In reality, the 7 percent Governing Board reserve of $6.006 million plus the unspent “Uncommitted Reserve” of $5.334 million represents a reserve of 13.4 percent. The reserves as of December 31, 2009 amount to 15.1 percent. If the ending balance at the end of this fiscal year increases even more, the District could have as much as 17 percent in reserve.
Bottom line: The District’s reserves are about three times greater than is recommended by the Chancellor’s Office as a prudent minimum. District reserves are intended to be used as a “rainy day fund” to get us through lean budget years. Instead of spending these reserves, the District has increased them—at the same time it has laid off employees and cut classes.
A Solution:
The recent Accreditation Report from ACCJC criticizes the top-down decision making processes at SWC. The Budget Committee as it currently exists is a prime example of top-down decision making: It meets about once a month and decides nothing. It has operated under the assumption that the District is spending more money than it is taking in when the opposite is true. A direct result of these faulty assumptions was the layoff of employees during the last academic year and deep class cuts this year. It appears that neither of these decisions was necessary or prudent.
Because the Accreditation Report from ACCJC requires shared governance, shared decision making, and integrated planning, and because budget decisions drive nearly all other decisions at SWC, building a budget must include all stakeholders—students, classified professionals, faculty, and administrators—in our campus community.
We need an interest-based budgeting process, similar to the process used successfully at Big Table committees in the past, to put together a yearly budget at SWC. We need trained facilitators to keep the committee on track and to move the process along. Finally, the Governing Board should realize that any decisions or recommendations from such a committee would be based on the most important interest we all share—the long-term financial integrity of the District.
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