Mott Community College Board of Trustees Committee of the Whole Meeting June 23, 2008

Mott Community College

Board of TrusteesCommittee of the Whole Meeting

June 23, 2008

BUDGET RESOLUTIONS

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

STRATEGIC PLAN

7-0. Budget\Finance 7-1 Focus on controllable revenues and costs

to sustain our current reputation and facilities and provide funding for strategic priorities

7-2 Establish short and long-term budget and finance priorities that provide a balanced approach to the needs of a learning organization with the flexibility to realign resources

7-3 Implement a comprehensive strategy to address the long-term deficit which enables us to continue to provide affordable high quality education

4

FINAL FY07-08 AMENDED BUDGET:

General Fund

5

FINAL FY07-08 General Fund BUDGET

REVENUES:

•Tuition & Fees +$801 thousand, +3.2% adj. –credit-side enrollment up for Winter and Spring 2008

•Property Taxes and State Aid no change

Other Revenue -$121 thousand (rental revenue and indirect cost recovery revenue down slightly)

=Overall upward amendment to revenue is +$.7 million

+.97% change from January 2008 amendment

6


EXPENDITURES:

• Amended upward by $700 thousand, .9% change:

•Salaries & Wages and Fringe Benefits --updated salary projections and closer to actual figures on benefits

•Non-salary related expenses -- lower heating costs, release of contracted services contingencies, offsetting adjustments between categories

•Transfers -- additional contribution to Maintenance & Replacement Fund to help 07-08

7

Transfers are comprised of….

Fund 02 Designated Scholarships $ 423,297 Grant Matching 5,500 Fund 78 Building & Site Reserve 250,000 Fund 02 Rainy Day 200,000 Fund 72 Maintenance & Replacement 4,955,000 Lapeer Site (Capital Outlay) 65,000

Total $ 5,898,797

8


NET RESULTS OF AMENDMENT:NET RESULTS OF AMENDMENT:

FUND BALANCE : $46K or .71% better than January Amended Budget

6/30/08 projected to end with $229,000 surplus, for total of $6.5 million

9


Summary

Target = 5% - 10% of Expenditure budget

06-07 Actual

07-08 Amend #1

07-08 Amend #2

Revenues 64,191,247$ 70,455,169$ 71,135,526$ Expenditures 63,952,477 70,271,468 70,906,155

Excess Revenues OverExpenditures 238,770$ 183,701$ 229,371$

Fund Balance - Beginning 6,050,801 6,289,571 6,289,571 Fund Balance - Ending 6,289,571$ 6,473,272$ 6,518,942$

Fund Balance Percent 9.83% 9.21% 9.19%

10

Reserves as Required by Board Policy #3930

General Operating (01) Reserve Requires 5-10% of annual operating expenses. 07-08 Amend Budget shows reserve of 9.2%

Maintenance & Replacement Fund (72) Requires 1-3% of College depreciated assets or $3 M 07-08 Amended Budget shows $1 M Additional amount needed to fully fund $2 M

Building/Site Fund (78) 1-3% of depreciated assets Requires 1-3% of College depreciated assets or $3 M 07-08 Amended Budget shows $1.4 M Additional amount needed to fully fund $1.6 M

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PROPOSED FY08-09 BUDGET

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No Change in Budget Principles, uncertainty still remains.

1. Budget must support Strategic Plans

2. Minimize/Offset Impact on Students

3. Avoid Overall Reduction in Staffing

4. Maintain Fund Balance/Reserves

13


KEY ASSUMPTIONS - REVENUES

TUITION & FEES

•3.2% (inflation-level) rate increases on credit side included in budget coupled with 2% enrollment decrease netting a 1% overall increase in tuition and fee revenue.

14

Tuition and Fees

$-

$5,000,000

$10,000,000

$15,000,000

$20,000,000

$25,000,000

$30,000,000

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

2006

-200

7

Final B

udge

t 200

7-20

08

Initia

l Bud

get 2

008-

2009

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PROPERTY TAXES

• Down $60 thousand from 07-08 due to property tax value decreases—this trend is expected to worsen.

• Millage Rate is not rolled back by Headlee this year and stays at 1.9896

16

Property Taxes

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

$22,000,000

$24,000,000

$26,000,000

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

2006

-200

7

Final B

udge

t 200

7-20

08

Initia

l Bud

get 2

008-

2009

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•STATE APPROPRIATIONS –

• 2.9% increase approved by House & Senate

•State still faces budget uncertainties for FY08-09

• MCC budget assumes 2.9% increase from adjusted prior year appropriation or $15.1 million

•Mid-year budget adjustments possible

18Data as of June 2008; Source – MCC Audited

Financial Statements and Budgets

MCC State Appropriation Revenue

15,848,900

16,278,400

12,497,749

14,429,785

14,183,727

14,894,743

15,159,600

12,000,000

12,500,000

13,000,000

13,500,000

14,000,000

14,500,000

15,000,000

15,500,000

16,000,000

16,500,000

17,000,0002

002

-200

3

200

3-2

004

200

4-2

005

200

5-2

006

200

6-2

007

Fin

al B

ud

get

200

7-2

008

Init

ial

Bu

dg

et

200

8-2

009

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KEY ASSUMPTIONS - REVENUE

Total Revenues for 08-09 are projected to be $70.3 million, a decrease of 1.2% from the final 07-08 budget


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MCC Total General Fund Revenue

$50,000,000

$55,000,000

$60,000,000

$65,000,000

$70,000,000

$75,000,000

2002

-200

3

2003

-200

4

2004

-200

5

2005

-200

6

2006

-200

7

Final B

udge

t 200

7-20

08

Initia

l Bud

get 2

008-

2009

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MCC General Fund Revenue Trends

$-

$2,000,000

$4,000,000

$6,000,000

$8,000,000

$10,000,000

$12,000,000

$14,000,000

$16,000,000

$18,000,000

$20,000,000

$22,000,000

$24,000,000

$26,000,000

$28,000,000

2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 Final Budget2007-2008

Initial Budget2008-2009

Tuition and Fees Property Taxes State Appropriations Grants and Other

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GENERAL FUND REVENUE SOURCES

General Fund Revenue Proportions

37% 37% 35% 37% 37% 37% 38%

33% 34% 34% 35% 36% 34% 35%

27% 24% 24% 23% 19% 23% 21%

3% 5% 6% 6% 7% 6% 6%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

110%

Grants and Other

State Appropriations

Property Taxes

Tuition and Fees

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KEY ASSUMPTIONS-- EXPENDITURES:

Overall decrease of $.8 million or 1.1% over the final 07-08 budget.

• Salaries & Wages and Fringe Benefits: Only slight increases (.2%) as 4 employee groups are in the process of bargaining and costs are uncertain. Contingencies have been built into the 08-09 budget to account for these expenditures.

•Total compensation = 74%, within Board Policy

•Non-Salary: decrease of 5.2% due to necessary spending restraints to maintain a balanced budget

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Initial General Fund Budget 2008-2009: Expenditures by Activity

Fringe Benefits21%

Contracted Services

6%

Materials and Supplies

3%

Facilities Rent0%

Utilities and Insurance

4%

Operations/ Communications

8% Transfers5%

Capital Outlay0%

Salaries and Wages

53%

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BUDGET BALANCING STEPS=

COST CONTAINMENT

Continued holds on filling vacant positions

Total non-salary related expenses reduced during budgeting process by $1.0M (including transfers)

Contingencies needed for employee group bargaining cost uncertainty

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PROPOSED FY08-09 BUDGET: General

FundSUMMARY

Target = 5% - 10% of Expenditure budget

06-07 Actual

07-08 Amend #2

08-09 Initial

Revenues 64,191,247$ 71,135,526$ 70,296,316$

Expenditures 63,952,477 70,906,155 70,143,266

Excess Revenues Over

Expenditures 238,770$ 229,371$ 153,050$

Fund Balance - Beginning 6,050,801 6,289,571 6,518,942

Fund Balance - Ending 6,289,571$ 6,518,942$ 6,671,992$

Fund Balance Percent 9.83% 9.19% 9.51%

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Planned Results:

Balanced budget, with small surplus in general fund

Continued commitment from General Fund to cover capital needs in maintenance & replacement fund

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

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PROPOSED “OTHER FUNDS” FY08-09 BUDGETS

Main Point is Impact on Operating Budget:

•Designated Fund—$2.4 million revenue budget

(Scholarships, Student Enrichment, Copy Machines, Paid Parking, Designated Technology Fee)•$423,000 funded with General Fund budget (expense)

•Auxiliary Enterprise Fund--$603,000 budget

(Catering, Vending, Bookstore, Computer Lab Printing, Lapeer Campus Auxiliary)

•$312,000 net “profit” supplements General Fund (revenue)

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PROPOSED “OTHER FUNDS” FY08-09

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 = $1.2 Million per year

•$1.6 million per year planned transfer from General Fund.

•$15 million in Series 2008 Bond Proceeds will fund projects through FY09-10

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STRATEGIC INITIATIVES FOR 08-09: LINKED TO

BUDGET PROCESS and to AQIP METHODOLOGY

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STRATEGIC INITIATIVES FOR 08-09

• Allocation for 08-09 is $200,000, including both AQIP and department level projects

•Department/Division level planning produces requests for annual funding

•Top Three AQIP Action 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.

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7-YEAR FORECAST

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Key Assumptions – Revenue

Tuition and fee revenue increases between 2.4% and 4% each year (impact of rates and enrollment)

Property tax revenue decreases for 3 years with slight increases thereafter

0.6410 Mill Voted Operating Millage is renewed for 10 years starting with FY08-09

State appropriations increase by 1.5% each year Other revenues increase by 2% each year

Total revenue increases by avg. of 1.7% each year

7-YEAR FORECAST

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Key Assumptions - Expenses Salaries and wages increase by avg. of 2.5% each

year Fringe benefits increase by avg. of 5.5% each year Other expenses increase by avg. of 4.5% each year Total expenses increase by avg. of 3.7% each year

7-YEAR FORECAST

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Summary

Projected General Fund Deficit would be $31 Million at end of FY14-15, if current trends continued (Revenue growth of 1.7% vs. expenditure growth of 3.7%)

Based on an average projected gap of $6.3 million per year to be filled with budget-balancing solutions

Short-term savings and flexibility continues to be key

Long-term strategy of reducing compensation costs continues as focus has to be on controllables

7-YEAR FORECAST

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7-YEAR OPERATING FORECAST

(in millions), as of June 2008

Note: the forecast illustrates pro forma data if current trends were to continue. The college is obligated to balance its budget each year and will take necessary steps to do so.

Forecasts>>>>>>>>>>>>>>>>>>>>>>>>>>

Amended Budget 07-

08

Proposed Budget 08-09 09-10 10-11 11-12 12-13 13-14 14-15

RevenuesTuition and Fees 26.2 26.4 27.0 27.7 28.8 30.0 31.2 32.4

Property Taxes 24.5 24.4 23.6 23.0 22.8 23.2 23.7 24.2

State Appropriations 16.3 15.2 15.4 15.6 15.9 16.1 16.3 16.6

All Others 4.1 4.3 4.4 4.5 4.5 4.6 4.7 4.8Total Revenue: 71.1 70.3 70.4 70.8 72.0 73.9 75.9 78.0

Revenue Increases:>>> -1.2% 0.1% 0.5% 1.7% 2.7% 2.7% 2.7%

ExpendituresSalaries 36.4 36.8 37.7 38.7 39.6 40.6 41.6 42.7

Fringe Benefits 15.0 14.8 15.6 16.5 17.4 18.4 19.4 20.4

All Others 19.5 18.5 19.3 20.1 21.1 22.0 23.0 24.1Total Expend.: 70.9 70.1 72.6 75.3 78.1 81.0 84.0 87.2

Expend. Increases:>>> -1.1% 3.6% 3.7% 3.7% 3.7% 3.7% 3.7%Surplus/(Deficit): 0.2 0.2 (2.2) (4.5) (6.1) (7.1) (8.1) (9.2)

Fund Balance - End: 6.5 6.7 4.2 (0.4) (6.6) (13.7) (21.8) (31.0)

CAPITAL FUNDING

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Capital Funding Funding Sources :

$45 M Voted Bond Authority Passed June 2004 -$15 M Series 2004 was spent from 2004-2006 -$15 M Series 2006 was spent by April 2008 $15 M Series 2008 to be spent by April 2010

+$18 M Commitment of Operating Funds +$ 8 M projected from Student Tech. Fees =$41M Secured from now through 2011 $4 M pending approval from State Capital Outlay

Future needs will require ongoing deferral and continued requests for voted bond authority and state capital outlay assistance

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FUTURE OUTLOOK:

Next Steps and Key Issues for Consideration

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FUTURE OUTLOOK:Key Issues

1. Containing Compensation costs – Long-term budget challenge remains to control rising expenditure levels

2. Property Tax values have decreased and are expected to decline over the next several years

3. Maintaining Sufficient reserves – Supporting the Strategic Plan and ensuring financial health

4. State’s budget – continues to be uncertain at this point

5. 2007-2012 Strategic Planning through AQIP requires continuous improvement methods

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FY07-08 Audit Acceptance: Oct/Nov’08

FY08-09 Budget Amendment: Winter’09

FY08-09 BUDGET

Next Board Actions…

MCC Board of Trustees Committee of the Whole

MeetingJune 23, 2008

Larry Gawthrop, Interim Chief Financial Officer

810-762-0525, Larry [email protected]

Questions or Comments?For More Information:Details and Provided

with Board Resolutions 1.54 and 1.56

Mott Community College Board of Trustees Committee of the Whole Meeting June 23, 2008

Documents

Transcript of Mott Community College Board of Trustees Committee of the Whole Meeting June 23, 2008